SEC seeks comments on proposed ETF rules

Posted at 07/06/2012 8:04 PM | Updated as of 07/06/2012 8:04 PM

MANILA, Philippines - The Securities and Exchange Commission en banc has received the proposed rules and regulations on Exchange Traded Funds (ETF). 

The SEC invited market participants to submit comments on the proposal.

ETFs are funds that track an index, a commodity, or a basket of assets but trade like a stock on a stock exchange.

Under the proposed rules, the ETF is classified as a "new investment product which is similar to mutual fund but has distinct characteristics."

The proposed rules are issued pursuant to the Investment Company Act (ICA). The ETFs would be required to be incorporated in accordance to the ICA and to register its shares under the Securities and Regulation Code.

"The proposed rules provide for pertinent requirements on the different aspects of operation of ETF such as ensuring liquidity of ETF shares by requiring the appointment of a market maker and listing of ETF shares in an exchange," the SEC said.

The rules also provide for in-kind issuance and redemption of ETF shares as well as issuance of ETF shares in exchange for cash in exceptional cases.

"There shall be transparency in the identities and weighting of the securities comprising the index, ETF’s portfolio holdings as well as its net asset value (NAV) by posting these information daily on ETF’s website," the SEC said.

The full text of the proposed rules and regulations on ETFs will be posted on the SEC website.