The Securities and Exchange Commission (SEC) voted unanimously in late June to propose the long-expected "ETF Rule.” If adopted, it would reduce the time and costs for potential ETF issuers to bring products to launch.
“These rules could result in more participants in the ETF market,” David Dziekanski, portfolio manager at Toroso Investments, told FOX Business, commenting on the potential adoption of the new rule, adding that, “Overall the change is meaningful, but not significant.”
Until now, ETFs have essentially existed as an exception to the rules. When someone wants to issue their own ETF, they have to apply to the SEC to be exempted from certain provisions of the 1940 Act that sets rules on how fund shares can be bought and sold. The proposed “ETF Rule” (6c-11) would allow potential ETF issuers to launch funds without having to obtain exemptive relief.
The problem with exemptive relief is that it takes time – and it comes at a cost and with uncertainty. Cost, time and uncertainty are deterrents to some issuers.
"The new rules provide an advantage in clarity. The unknown time frame of launching a new ETF can make listing difficult and costly. This clarity is the smoother path to a first launch,” according to Dziekanski. He added that currently, for a mutual fund shop or a potential partner, that the first ETF filing can take three to 18 months.