SEC introduces new rule to boost ETF competition
The Securities and Exchange Commission (SEC) has voted to adopt a new rule designed to modernise the regulation of exchange-traded funds (ETFs) by establishing a “clear and consistent framework.”
Rule 6c-11 – also known as the “ETF Rule” – does away with exemptive relief requirements that prospective ETFs have to file with regulators to circumnavigate rules laid down in the Investment Company Act 1940, under which ETFs were not allowed.
The US regulator hopes the industry will experience greater competition and innovation and create more choice for investors
Since 1992, the SEC has issued more than 300 exemptive orders allowing ETFs to operate under the Investment Company Act. According to the regulator, there are approximately 2,000 ETFs with over $3.3 trillion in total net assets on the market today.
The US regulator hopes that with the amendments’ adoption the industry will experience greater competition and innovation and create more choice for investors. The five largest ETF providers – BlackRock, Vanguard, State Street Corporation, Invesco and Charles Schwab – own around 89% of the ETF market.
“Since ETFs were first developed over 27 years ago, they have provided investors with a number of benefits, including access to a wide array of investment strategies, in many cases at a low cost,” says SEC chairman Jay Clayton.
“As the ETF industry continues to grow in size and importance, particularly to Main Street investors, it is important to have a consistent, transparent, and efficient regulatory framework that eliminates regulatory hurdles while maintaining appropriate investor protections.”
