Money managers could bring their strategies to market more quickly through an active exchange traded fund as the New York Stock Exchange’s Arca proposes a rule change on how funds are listed.
Laura Morrison, head of global index and exchange-traded products at NYSE, said the Securities and Exchange Commission formally recognized a February filing and a March 4 regulatory notice from the SEC was the final step before the proposal will be put up for public review, reports Katy Burne for the Wall Street Journal.
In February, the exchange petitioned the SEC to amend its generic listing standards in an attempt to allow certain active exchange traded products to list without receiving permission from the regulator’s Division of Trading and Markets under Form 19b-4. The Form essentially conducts a secondary review of an ETF, which can add months to a year in the approval process. [Proposed Rule Change Could Expedite Active ETF Launches]
If the SEC allows the rule change, NYSE Arca would adopt listing standards for so-called managed fund shares like the ETFs, creating uniform standards for listing timeframes to two to three months. The amended rules would help expedite the approval process for over 100 actively managed ETFs still waiting to be listed, including those from BlackRock Inc.’s iShares unit, State Street Global Advisors and WisdomTree Investments Inc., among others, Morrison added.
Actively managed ETFs trade like stocks on an exchange throughout the day. Unlike traditional beta-index ETFs, active ETFs do not track an underlying index but are backed by an active manager or team. Additionally, active ETFs disclose their portfolio holdings on a daily basis, unlike traditional open-end funds.
Active ETFs were first introduced in 2008. Active ETFs, though, have been slow to gain traction. There are 119 U.S.-listed actively managed ETFs on the market, with $18.8 billion in assets under management, according to XTF data. In contrast, there are currently 1,668 U.S.-listed ETFs with $2.01 trillion in assets under management.
For more information on active ETFs, visit our actively managed ETFs category.
Max Chen contributed to this article.