WASHINGTON ( TheStreet) -- SEC Chairwoman Mary Schapiro, dogged by agency miscues, isn't about to take chances in letting the $1 trillion exchange traded fund industry expand into derivatives -- no matter what Nasdaq and other ETF providers request.Her cautious, bottom-up approach isn't a bad thing in light of derivatives' explosive role in the 2008 financial crisis. And it's likely to result in improvements both for investors and ETF providers. One result will certainly be SEC rules requiring increased disclosure about ETFs' complex derivative holdings and collateral, and more transparency on complicated fund fees. ETFs' derivatives exposure also could be limited. The rules, which could be a year or two off, also are likely to improve competition in the rapidly growing ETF market by streamlining reviews of fund applications and providing more consistent standards. Although the SEC hasn't yet stated its intent, Schapiro has hinted that changes may be in store. "The controls in place to address fund investments in traditional securities can lose their effectiveness when applied to derivatives," she said in August. "This is particularly the case because a relatively small investment in a derivative instrument can expose a fund to a potentially substantial gain or loss." The Securities and Exchange Commission is in no hurry to unfreeze its March 2010 deferral on allowing new ETFs to make significant investments in derivatives, which make up less than 5% of exchange traded fund assets in the U.S. Instead, the commission has tied any loosening of the policy to a comprehensive decision whether to change the way ETFs are regulated, a rule-making process that began in August. The SEC has invited public comments until Nov. 7 on whether it should change its regulatory regime for ETFs and mutual funds using derivatives. The agency will then decide whether to propose a new rule, and again invite public comment on more specific provisions before making a final decision. Nasdaq OMX, whose QQQ is one of the largest and most actively traded ETFs in the world, is arguing that the only change needed is to improve investors' understanding of these funds.