Unpacking ETFs for regulatory compliance

September 22, 2021

blog banner

Exchange-Traded Funds (ETFs) continue to grow in popularity right across the buy-side. This inclu...

Exchange-Traded Funds (ETFs) continue to grow in popularity right across the buy-side. This includes for financial institutions such as banks and insurers, which increasingly use ETFs to gain efficient and cost-effective exposure.

However, while ETFs deliver significant benefits to financial institutions, they also present a compliance challenge. Regulations such as The Fundamental Review of the Trading Book (FRTB) and Solvency II require that regulated entities analyze the risk exposures resulting from the funds they use for transparency and better risk management.

Banks and insurers therefore need to be able to model fund exposures using look-through data, which is derived by decomposing an ETF to analyze its underlying fund holdings. Look-throughs enable financial institutions to measure the true economic exposure of the funds in their portfolios and trading desks, providing a complete view of risk.

Constantinos Demetriou, VP Product Manager at RIMES comments: “Fund look-throughs deliver the granular detail needed for financial institutions to really understand what’s in their ETFs. However, sourcing, normalizing, validating and deploying composition data to achieve look-throughs is a significant data management challenge. There are thousands of ETFs on the market and no standardized data formats or delivery channels, meaning firms have to spend considerable time and resource onboarding and processing data before it can be used.

“Managed data services providers like RIMES offer an alternative. Our ETF Data Management service delivers market leading look-through views and benchmark compositions, as well as options to enrich ETF data with reference data, credit ratings, prices and sector classifications. Working with RIMES frees financial institutions of time-consuming data management tasks with a ready-to-use and enriched breakdown of composition data.”

RIMES Managed Data Services is a proven data operating platform that helps firms of all sizes and in all regions align their data consumption closely with business needs. Contact us to learn more https://www.rimes.com/contact-us/

The content provided in these articles is intended solely for general information purposes, and is provided with the understanding that the authors and publishers are not herein engaged in rendering regulatory or other professional advice or services. Consequently, any use of this information should be done only in consultation with qualified legal counsel. The information in these articles was posted with reasonable care and attention. However, it is possible that some information in these articles is incomplete, incorrect, or inapplicable to particular circumstances or conditions. We do not accept liability for direct or indirect losses resulting from using, relying or acting upon information in these articles.

< Back to blog posts
handshake between two business personnel

Learn more about
our solutions.

Contact us