Regulators clash over 'shadow banking' behind ETFs - Citywire - 0 views
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Regulators are in direct conflict over how exchange traded funds (ETFs) take in ‘short-term money’ and promise instant liquidity, but can invest in long-term and less liquid assets.
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offering immediate liquidity but are potentially raising short-term money to fund longer-term investments.
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This concern began when regulators started worrying about money market funds…it's just deposit taking but called something different. It's taking short-term money but investing in longer-term securities.
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This article looks at how exchange traded funds (ETFs) take short term cash, very liquid capital, and use the funds to make long term investments. It is all well and good until the fact that ETFs are marketed as vehicles offering immediate liquidity is considered. The liquidity of ETFs is dependent on the underlying assets in which the money is invested. Therefore, regulations might be set forward ensuring that ETFs invest only in liquid assets.