The SEC’s Exchange-Traded Investment Fund Rule

Abstract

On September 26, 2019, the Securities and Exchange Commission (SEC) adopted final Rule 6c-11, which replaces the previous regulatory regime for many exchange-traded investment funds (ETFs). This article details the background of the new rule, its provisions, and its benefits for the ETF industry. The rule became effective on December 23, 2019.

TOPICS: Exchanges/markets/clearinghouses, exchange-traded funds and applications

Key Findings

• • The Rule covers both standard transparent active ETFs and index ETFs, allowing issuers to quickly launch and operate new products without the significant delay of first obtaining an exemption order from the Securities and Exchange Commission.

• • The Rule incorporates most of the important terms, conditions, and relief granted in existing standard ETF exemption orders and is expected to aid future innovation and competition by lowering the cost barriers to entry.

• • The Rule expands the circumstances under which custom ETF creation and redemption portfolio baskets can be used, providing flexibility in portfolio management and operations.