Cinthia Murphy, Managing Editor, ETF.com
The Securities and Exchange Commission has approved a much-anticipated piece of regulation pertaining to ETFs: Rule 6c-11, known as the "ETF Rule."
The “ETF Rule”—possibly the most important since Dodd-Frank—impacts all parts of the ETF ecosystem, from product launch to trading to disclosures, possibly clearing the path for more innovation, better efficiency and lower costs across the board.
Among its key provisions, the proposed rule makes it easier and cheaper for ETF issuers to bring new strategies to market by eliminating the costly, time-consuming "exemptive relief" requirement for ETFs structured as open-ended funds.
The case-by-case process of obtaining exemptive relief to launch ETFs cost tens or even hundreds of thousands of dollars to issuers, and it delayed launch time by as much as six months. The new “ETF Rule” replaces the existing system of individualized orders with a single, applicable rule.
The new rule also standardizes custom creation/redemption baskets to all ETFs and improves disclosure and transparency requirements.
“The ETF rule is the single most important regulatory action being taken on ETFs since 1993,” ETF.com Managing Director Dave Nadig said. “It levels the playing field on custom baskets, and provides clarity on a variety of issues like how to report transaction costs.”
“Overall, this is great for investors, and good for the ETF industry,” he added, “particularly smaller issuers who haven't been able to use custom baskets to manage their portfolios optimally.”
The “ETF Rule” goes into effect 60 days after it’s published in the Federal Register, and issuers will have 12 months to fully implement all its provisions.
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