Regulators Worry Some ETFs Fail To Track Market Prices [Market Vector Russia ETF Trust(NYSEARCA:RSX), iShares iBoxx $ High Yid Corp Bond (ETF)(NYSEARCA:HYG)]

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December 29, 2014 12:56pm NYSE:HYG NYSE:RSX

ETFsEven a truly innovative “killer app” can be dangerous if used in the wrong way. Exchange-traded funds have been the most successful new mainstream investment product of the past couple of decades, going from a quirky novelty in the late ‘90s to more than $2 trillion in assets today covering nearly


every corner of the markets.

Yet the rush to create ETF vehicles to access illiquid or hard-to-value asset classes has prompted concerns that the pricing of ETF shares in some cases can diverge sharply from the value of the underlying investments.

The Financial Times reports that the Federal Reserve Bank of New York is looking into how ETF portfolios of less-liquid instruments such as high-yield bonds, commodities and emerging-market stocks perform in turbulent market conditions.  The paper cited recent swings both above and below “net asset value” in the Market Vector Russia ETF Trust(NYSEARCA:RSX) and the iShares iBoxx $ High Yid Corp Bond (ETF)(NYSEARCA:HYG) as possible evidence of stripped gears in the fund-pricing machinery.

You can see the full “Yahoo Finance” segment below:


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