The Canadian Securities Administrators (CSA) is launching a review of exchange-traded funds (ETFs). 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. According to CSA staff, ETFs comprise approximately 15% of total publicly offered investment fund assets in Canada and are expected to continue to grow.

CSA staff will assess whether the current regulations applicable to ETFs remain appropriate, focusing on the unique features of ETFs, such as the creation and redemption of ETF units by authorized dealers, trading on the secondary market, and the arbitrage mechanism that allows the ETF’s market price to remain close to the underlying value of its portfolio.

The regulator’s analysis will also include a review of the secondary market activity and factors that may affect ETF liquidity and trading. It will also consider whether the Good Practices Relating to the Implementation of the IOSCO Principles for Exchange Traded Funds published by the International Organization of Securities Commissions in May 2023 are appropriate for the Canadian market.

The information obtained from the CSA’s review of ETFs will help inform any future consultations or regulatory responses applicable to ETFs.

For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.

This publication is not intended to constitute legal advice. No one should act on it or refrain from acting on it without consulting with a lawyer. BAX does not warrant or guarantee the accuracy or currency or completeness of the publication. No part of this publication may be reproduced without the prior written permission of BAX Securities Law.