It seems like exchange traded funds (ETFs) are having their chops busted a little these days.
Charles Jaffe for MarketWatch says the recent Securities and Exchange Commission’s (SEC) ruling on the ETF approval process is bound to bring more funds to the market if it goes through.
The problem, Jaffe feels, is that most of those funds won’t be worthy of investors’ attention. The rules changes will lead to fund providers essentially throwing ETFs up and seeing what sticks in an already-crowded field of more than 600 ETFs. Many observers think that the number of ETFs could be doubled within a year.
It’s a legitimate concern, sure, but we think it’s an ultimately unfounded one. First, while the new rules would ease the exemptive relief requirements, new funds will still undergo scrutiny as they move through the process of registration, according to John McGuire, partner at Morgan, Lewis & Bockius LLP.
Yes, while the SEC may in some ways step aside, leaving investors to do their research – what else is new? It’s what investors should be doing anyway, regardless of how much or little the SEC is involved.