Cboe seeks SEC approval for mutual fund ETF share class

According to Mars Finance news, Cboe Global markets said on Thursday that it has sought approval from the U.S. SEC for a rule change that would allow issuers to add an exchange-traded fund (ETF) share class to existing mutual funds. If approved, asset managers could offer exposure to existing mutual fund portfolios through ETFs, similar to how they currently roll out mutual fund share classes with varying fees and other features.

"Adding an ETF share class gives investors more options," said Rob Marrocco, global head of ETP listings at Cboe. Analysts said the SEC's approval will allow issuers to more easily add ETFs with the same track record as existing mutual funds products without having to launch new funds. If the SEC approves Cboe's application, "both the number of ETFs and ETF assets could increase significantly," said Todd Sohn, an ETF analyst at Strategas LLC. Vanguard Group's patent on the share class concept expires in May 2023. Since then, eight other asset managers have applied to the SEC for permission to replicate the model, including Dimensional Fund Advisors, Morgan Stanley, opennew tab and Fidelity. Other firms, including T. Rowe Price and JP Morgan, have also expressed interest in the approach.

Bryan Armor, ETF strategist at Morningstar, said Cboe's filing "provides an avenue for issuers to force the SEC to respond and engage" with its filings. The SEC must approve or deny Cboe's application within 240 days. It is important to note that there is no guarantee that the SEC will approve the application. Armor noted that the SEC has already made a high-profile decision approving a spot Bitcoin ETF and believes that Cboe’s filing has a “just under 50% chance” of approval this year. (Reuters)