Request for Comment on Novel ETFs (SIFMA and SIFMA AMG)

Summary

SIFMA and SIFMA AMG provided comments to the U.S. Securities and Exchange Commission (SEC) on its Request for Comment on Novel ETFs, which seeks public input on exchange-traded funds that invest in innovative asset classes or engage in novel investment strategies.

Excerpt

SIFMA AMG generally supports the Commission’s efforts to address the challenges highlighted in the Request for Comment. SIFMA joins this letter from the capital markets perspective of market makers and authorized participants, which is discussed in section V below. SIFMA is also submitting a separate comment letter to the Commission from the perspective of broker-dealers and investment advisers involved in the private client/wealth management/distribution activities.

Exchange-traded funds registered under the Investment Company Act of 1940 (“ETFs”) have grown in popularity over time and become the preferred vehicle through which many investors achieve their investment goals, such as saving for retirement or college education. As highlighted by the Commission, the total net assets of ETFs have grown from over $4 trillion to over $12 trillion and the number of ETFs from almost 1,900 to over 4,600 from 2019 to 2025.4 ETF sponsors have responded to investor demand for ETF products by offering ETFs with a broad array of investment strategies and investment exposures, causing ETFs to be “a major driver of innovation in the securities markets.”5 We encourage the Commission to facilitate the continued growth of ETFs, which help investors achieve their investment goals while subject to the robust protections of the existing federal securities laws. SIFMA AMG offers its guidance on how to facilitate such growth in the comments below.

Executive Summary

• SIFMA AMG strongly supports the Commission’s objective of facilitating ETF innovation while protecting investors, maintaining efficient markets, and facilitating capital formation.
• We believe that the current ETF regulatory regime, built upon the robust protections of the Securities Act of 1933 and the Investment Company Act of 1940, has created a strong foundation upon which ETFs and ETF investors can flourish.
• As a result, we do not believe that the ETF regulatory regime necessitates significant modifications to address “novel” ETFs at this time.
• SIFMA AMG encourages the Commission to fully utilize its existing tools, subject all ETFs to the same transparent regulatory process, and continue to favor automatic effectiveness of post-effective amendments within a reasonable timeframe.