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U.S. ETF Issuers Say “No” to Inclusion in SEC Fee Examination

Traders Magazine Online News, May 22, 2018

John D'Antona Jr.

Don’t fence us in.

That’s what leading issuers of exchange traded funds are saying about their possible inclusion into theU.S. Securities and Exchange Commission fee pilot, according to a report by Reuters. The pilot, which is reported to be either a one-to-two-year program, is designed to test in part whether the way stock exchanges charge fees and pay out rebates prompts brokers to send customer orders to exchanges with the biggest rebates rather than those that would get the best result for clients.

Industry executives, speaking to Reuters, said the regulator’s plan to study how stock exchange pricing affects the market by creating different fee levels for different stocks and exchange-traded funds could stifle competition among ETF providers.

The problem is that the SEC plans to group most stocks and exchange-traded products (ETPs), such as ETFs, into four categories, each with different pricing schemes.

But including ETFs in the pilot is a mistake because, unlike stocks, many ETFs have similar or even identical underlying components, with providers competing more on things like having the lowest management fees, said Eric Pollackov, global head of ETF capital markets at Invesco’s (IVZ.N) PowerShares.

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