What Is the ETF Rule?

The “ETF Rule” is a rule adopted by the U.S. Securities and Exchange Commission (SEC) that allows 澳洲幸运5官方开奖结果体彩网:exchange-traded funds (ETFs) that meet certain conditions to go to market without the delay of obtaining an exemptive order. Passed in 2019, the rule also made custom 澳洲幸运5官方开奖结果体彩网:creation/redemption baskets available for all ETFs.

Understanding the ETF Rule

The first exchange-traded fund was approved by the SEC in 1992. Since then, these products have grown in popularity and use due to their accessibility and low-cost nature. However, the Investment Company Act of 1940 required that the Commission issue an exemptive order to approve ETFs because of how it was worded regarding reissuing securities.

Exꦗemptive orders were necessary before the rule because the act prevented the approval of ETFs, so the SEC was required to issue exempti♚ons to specific requirements. Each fund was required to file for an exemption—once filed, the application was placed in a queue for review, a process that could take months.

Initially proposed in 2018, the “ETF Rule” was passed by the Securities and Exchange Commission in September 2019. The rule and its amendments went into effect 60 days after its publication in the Federal Register.

The ETF rule, 6c-11, allowed the SEC to eliminate certain regulatory requirements that created these ETF speedbumps. This became known as "exemptive relief" because funds could get their products onto the market much quicker and cheaper.

Impact on Exemptive Orders

Designed to improve ETF regulation, the rule also൩ aimed to streamline ETF approval because it removed the conditions that required exemption orde♑rs, making it easier for companies to bring ETFs of all types to market by removing certain funds from the lengthy process.

According to SEC Commissioner Hester M. Peirce, this helped codify regulations that began when ETFs were first launched in 1992. Commissioner Peirce said in her remarks at an ETF Global Markets Roundtable that “a level playing field without long approval queues makes for better competition, which is good for investors, capital formation, and the health of our markets.”

Allows for Custom Baskets

One of the other key attributes of the “ETF Rule” is the fact that it made custom creation/redemption baskets available for all of the ETFs it covers. This allowed for potential tax benefits for companies issuing ETFs and made it easier for companies and investors alike to understand transaction costs associated with those funds.

The Bottom Line

The ETF rule is a measure taken by the Securities and Exchange Commission 🉐that provides relief for funds waiting in line for approval. The rule creates a faster track for funds by removing certain previous requirement♋s.