While the Securities and Exchange Commission has lifted its ban on derivatives use in actively managed exchange traded funds, we may not see a deluge of new active ETFs strategies anytime soon.
The SEC’s Division of Trading and Markets has made sponsors and exchanges wait six to 18 months and even longer in some cases to approve the 19b-4 application – a requirement to gain approval to list an actively managed ETF, reports Yakob Peterseil for Risk.
“Any provider that does active ETFs is well aware of the lengthy process you have to overcome with the Division of Trading and Markets,” Jeremy Senderowicz, counsel at law firm Dechert, said in the article.
Senderowicz points out that regular applications have to go through “nine to 12 months” of SEC review.
“If you want to use more than a de minimis amount of OTC derivatives, start adding time on to that,” Senderowicz added.