The Securities and Exchange Commission said Friday that it wants public feedback to help inform its review of the listing and trading of new, novel or complex exchange-traded products.
The SEC wants to hear during the 60-day comment period about the key issues that arise when exemptions are sought by a market participant to trade a new ETP or when a securities exchange seeks to establish standards for listing new ETPs.
“Exchange-traded products have become an increasingly important investment vehicle to market participants ranging from individuals to large institutional investors,” said SEC Chairwoman 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.”
The SEC notes that the expansion of ETP investment strategies in recent years has led to a “significant increase in the number and complexity” of these requests, with the agency wanting feedback on arbitrage mechanisms and market pricing for ETPs, legal exemptions and other regulatory positions related to the trading of ETPs, and securities exchange listing standards for ETPs.
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Active equity managers have been seeking to take advantage of the ETF structure while modifying the daily transparency rules to shield their strategies from competitors. Once such “nontransparent” product is Eaton Vance’s NextShares exchange-traded managed fund structure, which was approved by the SEC in late 2014.
The SEC’s request also seeks comment on how market professionals sell ETPs, especially to retail investors, and on investors’ understanding of the nature and use of ETPs.