Eaton Vance’s (NYSE: EV) Eaton Vance Asset Management Thursday gained approval from the Securities and Exchange Commission for exchange-traded managed funds (ETMFs), a type of exchange traded product that does not disclose its holdings on a daily basis as most passively managed ETFs do.
The SEC’s decision to allow Eaton Vance to proceed with ETMFs is a reversal from the Commission’s October rejection of applications by Precidian ETFs Trust and Spruce ETF Trust, a unit of BlackRock (NYSE: BLK), to offer active non-transparent ETFs. [SEC Rebukes Active Non-Transparent ETFs]
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. “The difference in Eaton Vance’s fund structure appears to be in the way fund shares will trade, which was a concern in the other company filings,” reports Kirsten Grind for the Wall Street Journal, citing Eaton Vance.
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.
The Eaton Vance ETMFs will trade under the NextShares brand.
“Today’s action by the SEC is a major milestone in the development of NextShares,” said Thomas E. Faust Jr., chairman and CEO of Eaton Vance, in a statement. “With the introduction of NextShares, investors will, for the first time, be able to access active strategies through a structure that provides the cost and tax efficiencies of an exchange-traded fund, while protecting the confidentiality of fund trading information.”
ETMFs are a new concept that looks to marry the liquidity and tax efficiencies that have attracted investors to ETFs with active investment strategies, while maintaining the confidentiality of current portfolio trading information. [Eaton Vance Amends ETMFs Application]
“As a further condition for the introduction of NextShares, the SEC must approve the listing and trading of NextShares on a national securities exchange. As previously announced, the NASDAQ Stock Market LLC has filed for approval of a rule governing the listing and trading of NextShares, which request the SEC is expected to act upon by Friday, November 7, 2014,” said Eaton Vance in the statement.
Eaton Vance has plans to introduce 18 ETMFs in the coming months, according to the Journal. Eaton Vance originally filed its exemptive relief for ETMFs in March 2013 and the application has been amended at several times since then.
In addition to BlackRock, Eaton Vance and Precidian, State Street (NYSE: STT) and T. Rowe Price (NasdaqGS: TROW) have also filed for active non-transparent active offerings.