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SEC Proposes Streamlining ETF Approval Rules-rules
Traders Magazine Online News, June 29, 2018
The Securities and Exchange Commission might have just juiced the exchange traded fund sector.
How?
The nation’s foremost regulator just voted 5-0 in committee to ease rules for companies to sell low-risk ETFs without seeking its approval. The SEC hopes the move will lower costs of entry into the space and promote innovation.
While not set in stone, the proposed change still must pass muster with the industry via a comment period. Many ETF issuers operate under myriad different standards to bring issues to market and given the complexity involved, some argue that the current system favors some over others.
In its monthly commentary, ITG analysts wrote that changing the rule will indeed put smaller ETF providers on the same footing as larger ones and will likely lower the cost of creating new products.
Currently, ETF issuers must get SEC permission or “exemptive relief,” before selling funds.
According to the most recent State Street Global Advisors report, equity funds experienced their second-best month of the year in May with $23.3 billion in inflows, trailing only January’s $40.5 billion haul. Conversely, fixed income flows slowed in May, as the asset class only attracted $7 billion for the month.
“After a modest $12 billion in inflows in April, equity funds took in $27 billion – far from a sell in May and walk away attitude,” Matthew Bartolini, Head of SPDR Americas Research at SSGA told Traders Magazine. “The segment’s trailing twelve month total is now over $280 billion, equating to more than 70% of all US-listed ETF inflows in this period.”
Breaking with recent flow trends, however, Bartolini added that sentiment was decidedly negative on international exposures, which saw monthly outflows for the first time since November 2016 – the same month as the US election.
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