SEC Seeking Public Input On Complex New ETFs


The U.S. Securities and Exchange Commission announced on Friday, June 12th that it is seeking public comment to help inform its review of the listing and trading of new or complex exchange-traded products (ETPs). [ETP is a general term for all types of ETFs.]

The request for comment from the SEC focuses on issues that come up when exemptions are sought by a market participant to trade a new ETP or when a securities exchange is setting up standards for listing new ETPs. The expansion of ETF investment strategies in recent years has led to a significant increase in the number and complexity of exemption requests, so the SEC has decided to solicit public input on these issues.

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In specific, the request for comment is seeking input on arbitrage mechanisms and market pricing for ETPs, legal exemptions related to the trading of ETPs, and securities exchange listing standards for the same. The request is also looking for public input on how market professionals market and sell ETFs, especially to retail investors, and how to improve the understanding of ETFs among investors.

Of note, the public comment period is open for 60 days after the official publication of the comment request in the Federal Register.

Statement from SEC Chair Mary Jo White

“Exchange-traded products have become an increasingly important investment vehicle to market participants ranging from individuals to large institutional investors,” noted SEC Chair Mary Jo White in a statement.  “As new products are developed and their complexity grows, it is critical that we have broad public input to inform our evaluation of how they should be listed, traded, and marketed to investors, especially retail investors.”

More on ETFs

According to the SEC, ETPs (including traditional ETFs) are a broad class of financial products designed to provide investors with exposure to financial instruments, financial benchmarks or investment strategies in various asset classes. ETFs have been the fastest-growing investment product for more than two years now. Trading of ETPs/ETFs is undertaken on major stock exchanges and other approved secondary markets.

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