Proposed ETF council gets mixed early reviews

Exchange-traded-fund providers said today they are willing to consider joining a proposed ETF trade organization, but only if it could prove its value.
JAN 18, 2010
Exchange-traded-fund providers said today they are willing to consider joining a proposed ETF trade organization, but only if it could prove its value. “The bottom line is, we're interested in having an entity represent the ETF industry as strongly as it can be represented,” said William H. Belden III, managing director of exchange-traded funds at Claymore Securities Inc. “The question is: How best do we get there?” Irving L. Straus, chairman of Straus Corporate Communications, believes that the best course is through the creation of a non-profit ETF council, which he hopes to announce next month. “At this juncture, the ETF industry needs to have its own home base,” the founder of the No-Load Mutual Fund Association (now the Mutual Fund Education Alliance), said yesterday. A number of leading ETF providers have agreed to become members of organization, although Mr. Straus declined to name them, because he said they have not given him permission to reveal their names. It's an interesting idea, said Mr. Belden, who added that he has not been contacted by Mr. Straus. “I think we're willing to talk and learn a little bit more about it,” he said. But he was skeptical that such an organization would add much value. Currently, ETF providers are represented by the Investment Company Institute. “I think that the ICI has done a good job,” said Mr. Belden, a member of the ICI's ETF committee. “It remains to be seen whether a different entity is necessary.” The ICI, however, focuses primarily on mutual funds, Mr. Straus said. “They aren't going to be proactive marketers of the ETF business,” he said. Andy O'Rourke, a senior vice president and marketing director of Direxion Funds, responded: “I think to some degree, that's fair.” But Mr. O'Rourke, whose firm specializes in leveraged and inverse ETFs, said the ICI was quick to say the Financial Industry Regulatory Authority Inc. had overstepped its authority when it warned brokers last year that such ETFs “typically are unsuitable for retail investors.” As a result, Mr. O'Rourke, who also said he has not been contacted by Mr. Straus, is unsure of the need for an ETF-only trade organization. “I'd say there's a lot more we needed to know,” he said.

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