New rules are in the making by the Securities and Exchange Commission (SEC), which will allow for easier, more accessible ETF creation. Rule 6c-11, known throughout the industry as “The ETF Rule,” would permit prospective ETF issuers to organize and operate without the expense or delay associated with obtaining an exemptive order from the SEC.
“This proposal would basically streamline launching ETFs,” said Yones. “If you’re an asset manager, or say even a small manager of funds for your portfolios of clients, but yet you think, ‘Hey, I can make some efficiency here by putting it in an ETF wrapper,’ today that could cost a lot of money.”
With the new SEC law, ETF creators can bypass much of the bureaucratic red tape by following a proposed set of rules without the typical costs associated with a fund’s creation. According to Yones, this would allow for lesser fees to the investor, more product offerings and tax advantages.
For much of its life, ETFs have been the exemptions to rules by financial regulators, but 6c-11 now caters specifically to ETFs—a move that has been a long time coming.
“It makes sense,” said Yones. “This is now an investment vehicle that people know, they love them, they understand them. It doesn’t matter if you’re in the baby boomer generation or a millennial, people are adopting them more and more. So it makes easier for investment managers who have great product ideas to bring them to the market in the wrapper of an ETF.”
More Accurate Price Measures
At the New York Stock Exchange, the focus is on more transparency and expediency, such as the publishing of closing prices. The NYSE is using the help of mathematical algorithms so that investors and issuers alike know the exact price of an ETF at a specific time.
“Any ETF that’s listed here (at the New York Stock Exchange), we now run a calculated value at the end of the day—it an intelligent calculation where we say, ‘Here’s the rough estimate of the price –we look at the bid, we look at the offer, we take the midpoint and we say, ‘That’s the actual value of your ETF.’ It fixes the problem downstream for the investors.”
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