Redwood: Keeping things simple

Regulators have rightly been puzzling over what could go wrong from here. They are spoilt for choice, as they seek to distinguish between the risks that can be well managed, and the risks that might in bad circumstances bring the system down again.

The UK regulators are worrying over exchange traded funds (ETFs) and products. They have queried the impact of too many people dealing in ETFs, and wondered if they could get overexposed or if they might short too many. This is but a part of a wider issue. Is there too much programme trading? Do some banks, hedge funds and investors take too much risk. Could this get out of control? Many ETFs try to give you the performance of an underlying index. They might do this simply  by buying all the shares in the index in the same proportions as the market. Or they might do it by buying ...