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Futures-Based Exchange-Traded Funds - What are They, How are They Structured and Who Regulates Them?

Futures & Derivatives Law Report
October 2011

The popularity of exchange traded funds (“ETFs”) has led to almost constant innovation in this relatively young market. Many newer ETF offerings are more tailored in their investment objectives, creating greater diversity within the ETF space. This evolution includes the introduction in 2006 of the first futures-based ETFs (“Futures-Based ETFs”). This subset of the ETF industry differs from its predecessors principally because of the type of investments it makes (e.g., futures contracts), its fund structure, and the cocktail of futures regulations and securities and broker-dealer regulations that apply. As the title indicates, this outline focuses on Futures-Based ETFs and attempts to shed some light on a segment of the market that has amassed substantial assets under management in a relatively short time.

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