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SEC Approves New ETF Listing Rules of Cboe, Nasdaq

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The ability of fund companies to bring ETFs to market under a new relaxed rule from the Securities and Exchange Commission was enhanced this week by SEC approval of a request from the Chicago Board Options Exchange to list such ETFs. The commission previously approved a similar request from Nasdaq.

“This will accelerate approval of Exchange-Traded Fund shares and series of ETF shares that are permitted to operate in reliance on Rule 6c-11 under the Investment Company Act of 1940,” according to analysis by Dechert LLP, a global law firm that works with financial institutions and other industries. The firm expects the NYSE Arca will obtain similar approval in short order.

Rule 6c-11 allows asset managers to bring ETFs to market without filing for exemptive relief for each new fund under the Investment Company Act of 1940 that explains why they are different from mutual funds. They will instead be able to bring new ETFs to market under a single rule so long as the funds satisfy conditions set by the SEC that are intended to promote investor protection. 

(Related: New SEC Rule on ETFs Is a Win-Win: Analysts)

Under the Cboe and Nasdaq rule changes approved by the SEC, the exchanges, similarly, can list ETFs that meet the Rule 6c-11 requirements without having to first obtain SEC approval under another rule, Rule 19b-4 under the Securities Exchange Act of 1934.

“These new rules accordingly remove a potential obstacle to listing for many ETFs and further the SEC’s stated goal of harmonizing regulatory requirements applicable to ETFs,” according to Dechert LLP.

— Check out What Does 2020 Hold for ETFs? on ThinkAdvisor.


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