Since the swap counterparty is typically the bank also acting as ETF provider, investors may be exposed if the bank defaults 6 . Therefore, problems at those banks that are most active in swap-based ETFs may constitute a powerful source of contagion and systemic risk. In addition, the incentives behind the creation of synthetic ETFs may not be aligned along the ETF chain, especially as conflicts of interest can arise from the dual role of some banks as ETF provider and derivative counterparty7 . As there is no requirement for the collateral composition to match the assets of the tracked index8 , the.
