Suzanne McGee
(Reuters) – Cboe Global Markets (NYSE:) has filed with the SEC for regulatory approval to change its rules to allow issuers to add a share class of exchange-traded funds (ETFs) to existing mutual funds, the exchange said on Thursday.
If approved, it would allow established asset management firms to more easily expand strategies that currently exist only as mutual funds by simply adding an ETF share class, opening the door to thousands of new funds.
“Both the number of ETFs and ETF assets could increase dramatically” if the SEC approves Cboe’s request, said Todd Sohn, ETF analyst at Strategas LLC.
The Vanguard group’s patent on the share class concept expired in May 2023, and a slow but steady stream of other asset managers sought SEC approval to replicate the model, including Dimensional Fund Advisors, Morgan Stanley and Fidelity.
Others, including T. Rowe Price and JP Morgan, have expressed interest in this approach to launching new ETFs, a lower-cost alternative to converting or replicating existing mutual fund strategies.
Cboe’s own filing is the first to be filed by the exchange and meets a deadline set by regulators. This will push the SEC to actively pursue an issue it has sidelined for the past 11 months.
“We are committed to supporting issuers in obtaining benefits,” said Rob Marrocco, global head of ETP listings at Cboe. If approved, he said in a statement it would provide maximum efficiency in cost and portfolio management for investors and enhance liquidity.