SEC approves new continued listing standards for ETFs

Abstract

Purpose

To introduce and analyze recent amendments to the rules of three US securities exchanges to add specific continued listing standards applicable to exchange-traded funds (ETFs).

Design/methodology/approach

Provides an introduction and summary overview of the topic, summarizes the scope of the rule changes, discusses the industry reaction to the proposed rule changes and the regulator’s response, notes the applicability of the rule changes to ETFs relying on their own fund-specific regulatory relief, and identifies compliance dates.

Findings

Each of three US securities exchanges filed separate proposals to amend their listing standards to add specific continued listing standards for ETFs. Notwithstanding various concerns expressed in comment letters from key industry participants, by March 2017 the Securities and Exchange Commission (SEC) approved all three proposals in substantially the form proposed.

Practical implications

ETF sponsors should note that significant compliance enhancements may be required to ensure proper and continuous testing of securities in an ETF’s underlying index and/or portfolio in lieu of testing for compliance solely at the time of initial listing or at the time of an investment decision. The rule changes are scheduled to take effect by October 1, 2017.

Originality/value

Practical analysis from a premier financial services law firm on the issues presented by the ETF rule changes.

Citation

Teufel, A. and Geissler, C.J. (2017), "SEC approves new continued listing standards for ETFs", Journal of Investment Compliance, Vol. 18 No. 3, pp. 21-25. https://doi.org/10.1108/JOIC-06-2017-0037