SEC moves closer to decision on “nontransparent” active ETFs

The Securities and Exchange Commission appears to be deciding whether to allow a new type of actively managed ETF to trade that does not regularly disclose its underlying holdings. Kevin M. O'Neill, a deputy secretary at the SEC, set a deadline of Nov. 7 as the date by which the agency will decide whether to approve a NASDAQ rule change that would allow exchange-traded managed fund shares to trade, according to a regulatory notice. That deadline has already been extended and could be extended further. The so-called ETMF is one of several plans that currently exist for “nontransparent” exchange-traded products. Plans were originally filed March 2013 and an update was announced Monday. The ETMF concept is patented by Navigate Fund Solutions, now an affiliate of Eaton Vance Corp., a prominent active manager that would use the ETMFs itself and license it to other fund companies. Officials from Eaton Vance were not available for comment. If the product gains approval from regulators and market-makers, the ability of exchange-traded products to maintain the confidentiality of their underlying holdings might eventually lead to a deluge of active fund managers offering ETF-like products at lower prices. Many active managers fret that the daily disclosure of holdings in ETFs currently required by regulators creates a drag on their strategies and could lead to front-running by other traders.