The New ETF Rule approved today by the SEC is a huge win for all investors, according to Luke Oliver, DWS Managing Director, Head of Index Investing, Americas.
“Non-pro rata baskets for all, will revolutionize the fixed income ETF market,” Oliver told ETF Trends. “We expect to see innovation and further efficiencies to fixed income markets.”
Oliver said the SEC will keep permission for prior day, or T-1, ETF orders.
“This is a huge win for investors as it allows the industry to continue providing efficient ETF pricing for international funds,” he said. “A critical change to the final rule, from the proposal, is the ability to continue prior day, or T-1, creation/redemptions, this will maintain efficient pricing for investors.”
All issuers will now have the ability to use custom baskets on creation/redemptions which levels the playing field for tax efficiency and optimizing portfolios.
In Oliver’s opinion, there will be an increase in innovation in fixed income products.
“This could be a huge change for the fixed income industry beyond ETFs,” he said.
Oliver noted the SEC also removed certain unhelpful and disruptive proposals following feedback.
“I’m most excited to report that they removed the proposed restriction on T-1 creations/redemptions,” Oliver said. “This was a key issue for our investors and I was very involved in the comment letters of the ICI and Dechert that were both cited in the rule. I also discussed directly with the SEC earlier this year. This is a big win for investors in international ETFs.”
Oliver said the SEC also removed the spread calculator and hypothetical trade estimates from websites and prospectus, which the industry unanimously pushed back on as unnecessary and of no value to investors. Some additional disclosures will still be needed.
Click to read more about the New ETF Rule approval.