Stock exchange funds are growing ̵
On Thursday, the Securities Commission adopted a long-awaited ruling that gave ETFs their own set of rules, a move that will swell available funds for investors by making it easier for issuers to launch funds.
"This is a mature industry," said J. Garrett Stevens, CEO of Exchange Traded Concepts, a company that offers services such as marketing, compliance and portfolio management to fund issuers. "ETFs have been around long enough for regulators to realize that they need their own regulations."
Since the first ETF
launched, 27 years ago, all ETFs have had to step into the framework of rules created in 1940 for mutual funds, even though they is a very different type of product. “Exchange traded” means that ETFs take rough principles that define mutual funds – aggregate aggregate assets – and make them more accessible. ETFs can be bought and sold, and their prices are updated to reflect the activity, all day, as stocks.
Now over $ 3.3 trillion in assets is in approx. 2000 ETFs.
Related: More evidence that passive fund management is active
For years, the SEC has offered ETFs a job called "dispensing relief" but applying for such relief – in fact, the agency explains why all the rules meant for mutual funds should not apply to a new ETF – often adding as much as six months and tens of thousands of dollars to the launch process.
Some of the more exotic ETFs will still need relief: relief
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or those who take a reverse approach to investment.
But analysts say that the vast majority of funds that have launched in recent years would not do so, which means they will accelerate the market faster. Stevens said a new fund working with his company can expect to trade in as little as 90 to 100 days under the new regime.
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The rule also makes the ongoing management of portfolios less active for actively managed funds, which currently have fiscal implications when changing inventory. It may make it more attractive to start an actively managed fund, rather than one that is passively tracking an index.
"By treating ETFs as an investment product different from mutual funds, the SEC has taken steps to improve ETF investor education and make it easier for asset managers to operate and launch products," said Todd Rosenbluth, head of ETF and mutual fund research by CFRA, in a note to clients after the rule was issued.
"We believe that small asset managers will expand their product lineup and new entrants will seek to join the ETF industry, especially with thematic offerings."
Is more necessarily better? Stevens says yes. There are far fewer ETFs than mutual funds, he pointed out. "It's great for consumer choice, and it's no different than innovations in any industry. If a new fund launches and doesn't get traction, it will disappear."
However, it is not always so good when an ETF closes. A CFRA analysis of 1,662 funds during the five-year period 2014-2019 found that 24% of them closed, and a few dozen completely changed their original investment intention.  See: How to invest in – or avoid – what makes China China