SEC Announces Rule Changes to Ease the Approval of Exchange Traded Funds (ETFs)
After years of waiting, the U.S Securities and Exchange Commission (SEC) may finally be moving towards approving crypto-related exchange traded funds (ETFs). In an official announcement on Sept 26, the commission voted on new rules and form amendments that will modernize the process of listing ETFs. The new rules are aiming to establish “a clear and consistent framework” for most of the operating and upcoming ETFs such as the crypto-based ETFs.
The report confirms the commission is looking forward to boosting the competitive stance and innovation in the financial field to add more ETFs to the existing 2000 funds trading. Since the formation of ETFs back in 1992, the industry has grown to provide a number of investment solutions to retail traders. SEC Chairman, Jay Clayton looks forward to the new rules and regulations offering a better service for traders and institutions offering ETFs.
“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.”
A new “Rule 6c-11”
The current system allows ETF to start trading in the US markets only if the SEC gives the go ahead. However, under the proposed rule change, Rule 6c-11, allows ETFs to start trading if certain conditions are met. The conditions are stipulated within the scope of the “Investment Company Act of 1940 (the “Act”).
The previous process, whereby the SEC was left with the absolute final decision, causes the process to get approval to be slow and expensive while increasing the barriers to entry to most institutions. The new rules will replace the hundreds of exemptive orders from the SEC with a single defined rule.
“The rule’s standardized conditions are designed to level the playing field among most ETFs and protect ETF investors.”
According to the report, there are some special cases excluded from the new proposed rule;
“ETFs organized as unit investment trusts (UITs), leveraged or inverse ETFs, ETFs structured as a share class of a multi-class fund, and non-transparent ETFs will not be able to rely on the rule.”
Developments on the SEC held Bitcoin ETF
Earlier in the month, SEC published a proposal by Bitwise, a crypto index fund, on ETFs. The recommended proposal is pushing the acceptance of Bitcoin ETFs nearer as explained by the team from Bitwise. However, on Sep 20, VanEck/Solid X withdrew their Bitcoin ETF proposal from the SEC under unexplained circumstances.