SEC Seeks Comment on Actively Managed Exchange Traded Funds

Washington, DC, November 13, 2001 - The Securities and Exchange Commission recently issued a concept release seeking comment on various issues relating to actively managed exchange traded funds (ETFs). The SEC is interested in public comment on the concept of actively managed ETFs to help it in its consideration of any proposals concerning these products. Comments are due to the SEC on the release on or before 60 days after date of publication in the Federal Register.

After discussing how current ETFs operate and their reported benefits and uses, the release notes that, though actively managed ETFs may share some general similarities with index-based ETFs, there may be significant structural and operational differences between the two types of products. For example, the potential for less transparency in the portfolio of an actively managed ETF may make the process of creating and redeeming creation units more difficult or present greater investment risk for arbitrageurs, which could result in a less efficient arbitrage mechanism and lead to more significant premiums or discounts in the market price for the ETF's shares.

The Institute offers answers to frequently asked questions about ETFs.