The Central Bank of Ireland has published a discussion paper on the exchange-traded funds industry to facilitate engagement between the central bank and industry participants on issues related to ETFs.

Assets in globally listed ETFs have recently passed $4 trillion.

Implicit in the discussion paper is an invitation to domestic and international stakeholders to enhance global and European discussions on ETFs.

The central bank is hoping to promote conversation about its role in maintaining stability and protecting consumers.

The paper deals with three main themes: investor expectations – what it means to be an end investor in an ETF and whether such investors understand the investment they are making; liquidity – examining the secondary market and the role of authorised participants and market makers in supporting the liquidity of ETF shares; and increasing popularity – questioning whether the growth in ETF adoption raises questions which should be considered by regulators.

Gerry Cross, director of policy and risk at the bank, said “ETFs are the most important product development the investment funds industry has seen in the last 20 years – this is evident from their exponential growth. This discussion paper sets out the results of substantial research conducted within the Central Bank of Ireland on the growth of ETFs. We encourage both industry and investor representatives and other regulators to enter into dialogue with us.”

The paper outlines the distinctive design features of ETFs and how they operate to deliver a product that has become highly valued by investors. It also considers how those features operate in good times and bad, and seeks input on investor expectations.

Stakeholders are requested to provide responses to the questions posed in the paper along with any general observations on these topics; however, the central bank has stated it hopes the paper will generate discussions above and beyond the aspects covered in this initial document.

Ireland is the largest European centre for ETFs.