ETFs to Join the Collateral Party?

Institutions, faced with an increasing need to find diversified forms of collateral against securities loans and other trades, are turning their attention to exchange-traded funds (ETFs).

The market for exchange-traded funds (ETFs) has skyrocketed over the past quarter-century, thanks to the trillions of dollars investors are putting to work in passive, index-tracking strategies. What hasn’t yet exploded is the use of ETFs backing securities-financing arrangements and loans.