The sticking point for the SEC with the Precidian and BlackRock products was the proposed fashion in which those would have traded, if they had come to life. Eaton Vance’s ETMFs would allow for a scenario where market makers would buy or sell shares based on the so-called proxy price that represents the fund’s end-of-day net asset value or NAV-based trading. [Eaton Vance Wins Active Non-Transparent Approval]
The SEC has previously said that active non-transparent ETFs would not afford investors a similar economic experience to what they receive with traditional ETF. The Commission also highlighted the potential dangers non-transparent ETFs could face in times of market duress, saying “The lack of portfolio transparency or an adequate substitute for portfolio transparency coupled with a potential deficient back-up mechanism presents a significant risk that the market prices of ETFs may material deviate from the NAV per share of the ETF – particularly in times of market stress when the need for verifiable pricing information becomes more acute.”
There are actively managed equity-based ETFs that do disclose their holdings daily, including Calamos Focus Growth ETF (NasdaqGM: CFGE) and the new ValueShares U.S. Quantitative Value ETF (BATS: QVAL).
ETF Trends editorial team contributed to this post.