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Investor Education and Data

Summary Findings and Recommendations of the FIMSAC Subcommittee on 

ETFs and Bond Funds

Executive Summary

The FIMSAC Subcommittee on ETFs and Bond Funds “Fund Subcommittee” has reached 

several conclusions and recommendations regarding education and data. The recommendations 

are summarized briefly as follows:

• The FIMSAC subcommittee recommends that the Commission encourage the 

formation of an industry-wide group to promote investor education. The group 

should address the following:

o Education of Financial advisors: Create robust and detailed trading module 

within existing required certifications for financial advisors, and emphasize 

continuing education.

o Communication with Retail: Adapt financial advisor education content to suit 

retail audience. Improve disclosures along the lines as proposed Rule 6c-11for 

consistent disclosures and improve investor awareness.

o Identification of Standard Information Concerning ETFs: Identify key data 

elements, common definitions for such data elements, and where such data 

elements may be procured or found that are necessary for analyzing and 

comparing ETFs across the market. This effort should also focus on common data 

and formatting standards and should include key information regarding ETF 

portfolio and trading data.

• The FIMSAC subcommittee recommends the creation of a centralized and widely 

accessible database hosting the key data elements noted above. Identified data that is 

needed to support and further investor education, should be made readily accessible to all 

industry stakeholders, on a non-discriminatory basis. Sensitive data should be delayed 

but available for academic and industry research.

Broad Observations

The FIMSAC Subcommittee on ETFs and Bond Funds wishes to acknowledge and commend the 

strong and ongoing efforts by FINRA and other regulatory and industry bodies such as the 

Investment Company Institute (ICI) to improve investor education. ETF education and data 

standardization will become increasingly important upon implementation of the proposed SEC 

Rule 6c-11, and the sub-committee has summarized our findings and recommendations herein.

Numerous industry participants have commented on the importance of investor education work, 

and the need for ongoing regulatory efforts to strengthen the ecosystem and improve the outcome 

for investors, particularly retail investors. In addition to our recommendations surrounding 

various standardized disclosures for ETFs, we believe the intermediary community plays an 

important role in proper dissemination of relevant information surrounding bond funds and 

ETFs. The Bond Funds Subcommittee is in favor of continuing these efforts and recommends the 
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Commission to continue to play a role in consolidating and coordinating educational efforts 

where possible.

Education: Delivery and Level

Educational needs of retail investors differ from those of institutional investors. As such, we 

recommend that information aimed at retail investors should be delivered in a different manner 

and with distinct, plain language. 

a. There is a general view among industry participants that education content would be 

more likely to be impactful if it was provided from a cross-section of academics and 

industry groups/participants. We recommend formation of an industry wide group 

that includes ETF issuers, academics and others to further education as described 

below.

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b. Most ETF issuers post a wide variety of data on their websites, and many provide 

separate data feeds to individual data vendors such as Bloomberg and FactSet. 

However, information may vary substantially across these issuers (e.g., some, but not 

all exclude negative earnings from reported PE ratios?). We recommend that the 

Commission, in conjunction with a group of industry representatives, specify a 

common standard that includes both definitions (e.g., Are bid-ask spreads timeweighted, and over what duration?) and formatting standards/conventions (e.g., CSV, 

XML, etc.). It is worth noting a similar precedent was set when the industry agreed on 

standards for fixed income portfolio aggregated cash flow data (ACF) reporting. Such 

standards would simplify the task of gathering and comparing data for all levels of 

investors, especially retail investors. 

c. The Fund Subcommittee recognizes the special need to place greater emphasis on 

investor trading knowledge, particularly around ETFs. ETFs trade on exchanges and 

hence investments in these products requires a minimum understanding of trading, 

including order types (e.g., market/limit etc.) and transaction costs (commissions/bidask spreads etc.). We support the Commission’s proposal to expand disclosure of 

historical bid/ask spreads associated with ETFs, and have recommended 

consideration of additional historical information which would enhance investor 

education in this area.2

d. The Bond Funds Subcommittee also noted the significant structural differences 

between bond mutual funds and ETFs, including liquidity. These important 

differences may be relevant to investors in times of stress (and among other times)

and the Bond Funds Subcommittee intends to continue our work in this area in the 

coming months. 

In addition, the structural differences between ETFs and mutual funds may have 

important tax implications which may not be apparent to investors but which may be 

particularly relevant to certain retail investors.

 1 See David Nadig (“The ETF Rule: ETF.com’s Comment Letter” August 30, 2018) available at 

https://www.etf.com/sections/blog/etf-rule-etfcoms-comment-letter?nopaging=1

2 Reference comment letter to SEC.
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e. Some education must be completed at the platform level, as well as through 

certification programs. 

• The Bond Funds Subcommittee recommends that the Commission and 

industry work towards a robust and detailed trading module within existing 

required certifications for financial advisors. Items that would be covered 

include:

o Appropriate use of order types (e.g., limit/stop/market, and education 

on why an unlimited buy order should not be placed at 5PM for the 

next day’s trading);

o Recognition that ETF premiums/discounts can be misleading when

NAV is stale, perhaps because of non-synchronous trading or

exchange-hours;

o Understanding of market impact for larger trades;

o Awareness that transactions may occur at prices different from 

intraday intrinsic value depending on market volatility, liquidity, and 

time of day, including after-hours trading; and

o Correct usage of terms such as “ETF” as specified by our 

recommended classification schema.

• In addition, because of the ongoing evolution of market structure generally, 

we recommend that continuing education surrounding the trading of ETFs 

should be emphasized broadly, in addition to certification programs.

• Language used in content development should be modified for a retail 

audience. Improved disclosure of risks and management of expectations are 

key components of this concept. The Commission’s Proposed Rule 6c-11 

Request for Comment outlined specific potential areas for consistent 

disclosures, which we believe will be effective in improving investor 

awareness.

Data: Availability and Standardization

f. The Bond Funds Subcommittee will be drafting (for FIMSAC’s consideration at the 

full January 2019 meeting) a report considering our findings on bond funds in 

stressed markets, as per our charter. While this report will be specific to this topic

and refer to technical/academic research, the Bond Funds Subcommittee also believes 

that investor education would be enhanced with more general materials, particularly 

those that clearly highlight the differences between open-end mutual funds and ETFs.

g. We believe it is important to improve the availability, quality and quantity of data 

related to this market. As we believe that Fixed Income ETFs and Bond Funds will 

continue to grow, it will be critical for regulators to have consistent, readily available 

data to analyze. Feedback received from academics highlighted that data on ETFs is 

hard to find and not centralized or standardized. This comment also applies to 

advisors and others – including sophisticated investors – who note the difficulty in 

comparing even basic data (such as bid-offer spreads) across asset managers. Other 
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important data, such as the ratio of primary to secondary market volumes or number 

of authorized participants) is difficult to find.

• We would recommend the industry committee create a primer (presenting 

the most basic elements) on analyzing ETFs, focusing on identifying key 

data aspects along with common definitions for the use of investors, 

regulators and academics. 

• This primer should specify where to get key information and how to utilize 

it. Identifying what is available and where to find it will start us in the right 

direction of increased engagement and involvement from academics in the 

ETF space, which should help further analyze this increasingly important 

area. 

h. Data and interface standardization is a first step – i.e., we encourage the formation of 

an industry group to identify a set of data and interfaces that are standardized and 

consistent, as noted earlier. Items would be very specific and well-defined in order to 

facilitate standardization and comparability. The Fund Subcommittee recommends 

that these data include the following:

• Portfolio Data

o ETF characteristics such as security name, unique identifier (ticker, 

SEDOL/CUSIP/ISIN), price (or assessed value), ETF benchmark

declaration (i.e. “self-declared” or “third party”) and high-level

information describing the attributes of the ETF or Fund (e.g. 

representative sampling approach for an index-based ETF/Fund, 

expense ratio, etc.)

o Intraday indicative values (IIV) adjusted for staleness based on a 

generally agreed upon approach. We also recommend that 

premiums/discounts be appropriately described in situations where 

they may be less meaningful because of stale pricing and nonsynchronous trading;

o Key fund statistics (e.g. yield, duration, etc.) and distributions (e.g. by 

sector, rating, ten largest issuers, etc.);

o ETF daily creation and redemption baskets (T+1), and information on 

unit size and fees. 

• Trading Data

o Bid-offer spreads under standard, time-weighted methodology (see 

above);

o Primary and secondary market volumes; and

o ETF Holding data (T+1) including underlying security identifiers and 

weight (%), cash balance, accrued interest (bond funds), shorts, 

futures, swaps, etc. that are needed to estimate portfolio NAV;

o Number of APs; Participation measures to track active APs; 
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i. Centralized availability and access to data is important. We recommend that data 

should be made readily accessible to all industry stakeholders, on a nondiscriminatory basis. Ideally this data should be made available using commonly 

adopted protocols, such as APIs to ensure that similarly situated market participants 

receive data using a common mechanism.

• Market makers play an important role in the smooth functioning of the ETF 

market via their participation in the create/redeem process and the provision 

of secondary market liquidity. However, the lack of suitable data and 

common technology standards makes it difficult to assess whether the 

process works well, particularly under stress conditions, and to identify 

potential problems that need to be addressed. To this end, we recommend 

that intraday transactions data that identifies market maker trades and

create/redeem order information be collected in a centralized fashion. We 

recognize the sensitive nature of the data and recommend that the 

information be made available with a delay (say one year or 18 months) for 

academic and industry research (similar to the TRACE dataset with masked 

AP/MM identity that is made available with a delay).