Legitimizing an Ambiguous Financial Innovation: The Case of Exchange-Traded Funds in France

The capacity of financial engineers to develop new products is apparently limitless. After a very fertile period from the mid-1960s to the mid-1980s that saw development of a huge number of innovations, including the advent of index futures and options, Miller (1986) argued that this extraordinary age had finally come to an end. As shown by Tufano (2003) in his review of financial innovation, the next 30 years were about to prove him wrong. New forms of financial products appeared regularly in the form of simple or exotic derivatives, and equity-like products trading on exchanges or in OTC markets. Tufano defines financial innovation as ‘the act of creating and then popularizing new financial instruments as well as new financial technologies, institutions and markets’. It is thus not only a matter of inventing products paying new types of cash flow, the way products spread is also of importance.