SEC Seeks Public Comment on ETF Regulation
The SEC seeks public comment on the rules that govern the listing, trading, and sales of ETFs and other exchange-traded investment products (ETPs). The SEC intends the public comments to “help inform its review of the listing and trading of new, novel, or complex ETPs, including request for exemptive and no-action relief” and review “the ways in which broker-dealers…market these products.” In particular, the SEC would like comment on arbitrage and market pricing including the spread from NAV, whether it should change its exemptive and no-action conditions, whether it should review exchange listing standards, and how broker-dealers sell ETFs to the retail public. The SEC cites the tremendous growth in ETF products and investing, noting that there were 1,664 U.S.-listed ETPs with an aggregate market capitalization of just over $2 trillion as of December 31, 2014.
OUR TAKE: This type of request for comment generally precedes rulemaking, although this could take some time. As a side note, this Release is a great primer on how ETFs work and the applicable regulatory regime.