Investors can trade ETFs throughout the day, and now, a number of Wall Street industry groups are backing a Securities and Exchange Commission plan to remove a feature of the ETF trade.
The SEC wants to remove the practice of ETFs updating their net asset value in 15 second intervals, which some industry observers argue is cumbersome and often inaccurate, CNBC reports.
Alternatively, regulators are proposing ETFs should report their value once a day at the close of trading.
The intra-day NAV has been seen as a way for investors to compare an ETF’s price compared to the value of its underlying securities. The frequently updated NAV would allow investors to determine if the price they are getting at for an ETF is trading at a discount or premium to underlying assets, which is especially notable during volatile market conditions.
However, some critics argued that the figure is not precise.
“While the idea of a contemporaneous measure of fair value is enticing, in practice, it is inaccurate for 80 percent of all ETFs,” Dave Nadig, the managing director of ETF.com, said in a letter to the SEC.
The Investment Company Institute also argued in its own later that the intraday value could fall behind the actual value or show inaccuracies if the underlying securities do not trade often in fast-moving market conditions.
“We strongly support the Commission’s decision not to require the dissemination of an intraday estimate,” Susan Olson, the ICI’s general counsel, said in a letter to the SEC.
The comment period for the SEC’s proposal is due on October 1. Separately, several comments also urged the SEC to take action and finally allow a bitcoin ETF to move forward.
For more information on the ETF industry, visit our current affairs category.