When it comes to the future of ETF product development, as well as maintaining the status quo, certainly no other regulatory body is more important to the ETF industry than the Securities and Exchange Commission.
Mary Jo White
In turn, there is no more important regulatory leader for the ETF industry than SEC Commissioner Mary Jo White when it comes to being the industry gatekeeper.
Front and center for the SEC is whether it will approve what many see as the next big leg up in ETF expansion: nontransparent, active ETFs.
The playing field for nontransparent active ETFs has already begun to take shape, with Eaton Vance's "ETMF" structure approved by the SEC in November, although there's no update on when the first funds using their structure might launch. However, when it comes to nontransparent, active management in an ETF wrapper, the door remains closed.
The most recent development saw Precidian Investment's filing for nontransparent, active ETFs get rejected in October by the SEC. In December, the firm refiled with some significant changes that seem tailor-made to address SEC concerns about the nontransparent, active structure.
If the new Precidian filing is sufficient to address the SEC's previous concerns, that will be good news to a significant portion of the industry: To date, BlackRock, State Street, Invesco PowerShares, Cohen & Steers and American Funds are all waiting in the wings, having licensed the Precidian intellectual property for its future active ETF filings.
As for now, White's SEC team has given no indication of when it will decide. In fact, a common theme in many of White's public speeches has focused on transparency. "Transparency is one of the primary tools used by investors to protect their own interests," she said in a speech last June in New York.
White has also expressed concerns about illiquid assets like bank loans in ETFs as well as mutual funds, which could potentially lead to a clampdown on those products.
In addition, the SEC began this year working on a white paper about the extent to which ETFs "exacerbate financial volatility," which will primarily cover leveraged and synthetic ETFs. The SEC is also expected this year to approve or reject the proposal for a bitcoin ETF.
With the U.S. ETF industry topping $2 trillion in assets in its 22nd year of existence, the industry is now maturing and looking for new growth and products. No one is more critical for what will and won't be allowed than SEC Commissioner Mary Jo White.