The Canadian Securities Administrators (CSA) on August 10 announced that it intends to assess whether regulations currently applicable to exchange-traded funds (ETFs) remain appropriate, given growth and innovation occurring related to the products in Canada.
“The CSA’s review of ETFs will also consider whether the Good Practices Relating to the Implementation of IOSCO Principles for Exchange-Traded Funds, published by the International Organization of Securities Commissions in May 2023, are appropriate for the Canadian market,” they state.
The review of ETFs will also look at secondary market activity and factors which may affect ETF liquidity and trading. Year-to-date, net sales of ETFs have reached $18.432-billion, according to the Investment Funds Institute of Canada’s most recent investment fund statistics. As of the end of June 2023, ETF net assets were $348.4-billion, up from $288.9-billion reported at the end of June in 2022.
“ETFs are an increasingly popular investment vehicle, offering exposure to a variety of underlying assets and investment strategies, with intraday liquidity on the secondary market. ETFs comprise approximately 15 per cent of total publicly offered investment fund assets in Canada and are expected to continue to grow,” the CSA states in its announcement about the review.
Stan Magidson, chair of the CSA and chair and CEO of the Alberta Securities Commission adds that “Canada is a pioneer in ETFs, launching the first ETF in the world over three decades ago. ETFs are an increasingly important investment vehicle for Canadian investors and the CSA’s review of ETFs will provide us with important insight into the functioning of the ETF market,” he says. “A regulatory framework that is appropriately tailored to the unique ETF structure will foster competition and facilitate more investment choices for investors.”
They conclude saying the information obtained by the CSA during its review of ETFs will help determine if consultation or regulatory changes are needed to enhance the rules applicable to the funds.