New SEC Move A Boon To ProShares, Others – Blog – IndexUniverse.com – ETFs, Index Funds, Indexes
The SEC’s decision to freeze all applications for new ETF issuers that want to use swaps and derivatives is a boon for ProShares, Direxion, Rydex, iShares and even ETN issuers.
As reported here, the SEC has temporarily stopped issuing OKs for new ETF firms to develop ETFs that rely on swaps and other derivatives. That primarily impacts leveraged and inverse ETFs, but also applies to certain actively managed strategies.
The reason for the freeze is simple: There was a lot of bad publicity (and some bad investor experiences) surrounding existing swap-based ETFs and derivatives in general, and the SEC wants to step back and slow new filings while it gets a handle on those issues.
via New SEC Move A Boon To ProShares, Others – Blog – IndexUniverse.com – ETFs, Index Funds, Indexes.
The other unsung winners in this are ETNs. As structured notes, they can package together the kind of returns you gain from derivatives without (I believe) falling under the purview of the SEC’s new review. So look for more new products from ETN issuers as well.
In the end, the SEC review is probably a good thing. The issues the SEC has outlined, including whether firms have adequate risk management techniques and adequate portfolio disclosures, are real ones.
I would add to the SEC’s list looking at whether companies should be forced to disclose their counterparties on a real-time basis. That strikes me as critical information that all investors should know.