Natural Gas ETF Clock Ticking

Unusual regulatory activity in funds such as UNG reflects the challenges presented by new "non-traditional ETFs." UNG should not be alone in the lineup, however, and regulators should address concerns about the leveraged funds offered by Direxion, ProShares and Rydex while they're at it. These funds have complex methodologies that are not appropriate for most investors, and the CFTC, FINRA and SEC should communicate on the future availability of these strategies.

Whether regulation causes an ETF to trade at a premium or at a discount, investors should be primarily concerned about why the fund would deviate from NAV in the first place. ETFs were designed to be transparent investment vehicles that would trade for the price they were worth. While traditional equity-based ETFs accomplish this task quite well with healthy investor interest, a new generation of more complex funds are being introduced and, in some cases, misunderstood.

Regulators should focus on the categorization and appearance of new more complex, ETF products. As ETFs vie with mutual funds for retirement assets, there is no time to waste.

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