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ETF Mischief

I came across an article highlighting the mischief lurking in the ETF arena. ETF is an Exchange Traded Fund.  It is an investment funds traded on exchanges like stocks.  It usually holds an underlying asset (e.g. Gold) and therefore provides investors with a convenient avenue for exposure to a particular asset, which is also supposedly very liquid.   Initially these started out in very simple formats and eventually became more and more complex - as with most good ideas in finance. The main point of concern to me was the example of a fund manager assigning an Emerging Market ETF to an investment bank to manage (where it promises to deliver the underlying returns) in exchange for collateral.  The collateral, unbelievably, consisted of Japanese equities and unrated US and European corporate bonds! This raises two obvious risks that the ETF is not subject to the risks of Emerging markets but rather, to the solvency of the investment bank and that the resulting collateral provides risk