Exchange traded funds (ETFs) sit at the center of the COVID-19 crisis selloff. This isn’t surprising, since ETFs are a low-cost highly liquid vehicle for trading entire sectors, asset classes, and even global economies. Yet the use of ETFs as a preferred crisis trading tool, and the Federal Reserve’s unprecedented mid-crisis purchasing of bond ETFs, reinvigorates a long-standing debate on the systemic importance of ETF sponsors.
In a new article, I argue that the largest ETF sponsors are becoming systemically important due to interconnectedness – a material factor in the 2008 global financial crisis (GFC). Although large … Read more