The SEC proposed a new rule that would allow exchange-traded funds to launch without obtaining an individualized exemptive order, a discretionary process that can take several months. Proposed rule 6c-11 would allow ETFs structured as open-end funds to operate so long as they provide daily portfolio transparency on their websites, disclose historical premium, discount and bid-ask spread information, and adopt policies and procedures about the use of custom baskets. Other conditions may be included in the full proposal once it is released. The proposed rule would rescind current exemptive relief granted to ETFs that could rely on the new rule. Since 1992, the SEC has issued more than 300 ETF exemptive orders, creating a $3.4 trillion market that includes over 1,900 ETFs representing nearly 15% of total investment company assets.
OUR TAKE: The SEC already went down this road back in 2008. Let’s hope that the Commission adopts a rule and ends the costs and delay associated with requiring formulaic exemptive orders.