Happy New Year! As we settle into a busy January, I’m pleased to share the NYSE ETF Team’s wrap-up for 4Q 2019. Overall, it was another banner year for growth in the ETF industry and 2019 closed on a high note with several significant regulatory developments.
Notably, the SEC approved the NYSE application for 1940 Act exemptive relief for ETFs licensing our actively managed, non-transparent ETF proxy solution, as well as exemptive relief applications from Fidelity Investments, T. Rowe Price and Blue Tractor Group. This development added a number of new choices for asset managers to consider alongside the Precidian ActiveShares model approved earlier in 2019. We understand that active, non-transparent strategies are top-of-mind for many asset managers heading into 2020, and I encourage you to contact my team to learn how we at the NYSE can support your business goals for the year.
Throughout 2019 we saw 253 new ETFs with $11.9 billion in assets under management (AUM) come to market. We also welcomed 18 new ETF issuers to the ever-expanding NYSE ETF community, and my team supported launches for a number of unique and original products.
In 2020, we remain committed to offering the number one global ETF marketplace, with the greatest depth of liquidity and best market quality across the industry. As the Home of ETFs, our goal is to help your businesses grow and succeed. We will continue to enhance our market participant and liquidity programs throughout this year as well as work to broaden listing capabilities in light of evolving regulation, especially with Rule 6c-11 now in place. My team looks forward to seeing many of you at Inside ETFs later this month, as well as here at the corner of Wall and Broad Streets throughout the year.
On behalf of the New York Stock Exchange I wish you and your families a healthy and prosperous year.
Douglas M. Yones, ChFC®
Head of Exchange Traded Products
New York Stock Exchange
"ANTs" Are Marching In - SEC Approval for Active, Non-transparent ETF Solution
The NYSE is thrilled with the SEC approval of our joint application with Natixis Investment Managers for exemptive relief under the Investment Company Act of 1940 for a proxy portfolio methodology to be licensed for the development of actively managed, non-transparent ETFs. We’re working with Axioma to operate a best-in-class proxy portfolio creation tool and have already engaged with many new and current ETF issuers to build product strategies."ANTs", as Bloomberg has dubbed them, are poised to make a splash in 2020 as asset managers explore licensing options and prepare product filings. Approvals for Fidelity Investments, T. Rowe Price and Blue Tractor Group mean that, including Precidian ActiveShares, there are now five active, non-transparent solutions for issuers to work with. Whichever methodology your firm chooses, as the Home of ETFs, the NYSE looks forward to helping you come to market and accessing the highest quality marketplace for trading and investing in ETFs.
Enhancements to the NYSE Arca Lead Market Maker Program
NYSE Arca remains the number one ETF listing and trading marketplace, with the lowest spreads, greatest depth, and best liquidity for trading ETFs globally. After working closely with ETF issuers and market liquidity providers, we are excited to announce further advancement of our Lead Market Maker (LMM) and ETF liquidity programs. As of the start of the year, we have introduced two new exciting features designed to further supplement additional liquidity for less active ETFs. The first program incentivizes LMMs to execute high quality auctions every trading day. The second supports the tightening of quoted spreads while increasing size at the National Best Bid and Offer (NBBO). These new incentives will continue to drive ETF liquidity in support of product development and distribution.
ICE ETF Hub: Advancing the ETF Industry
This past quarter, NYSE’s parent company Intercontinental Exchange (ICE) launched the ICE ETF Hub, a platform that brings efficiencies to the primary trading workflows for ETFs. Originally launched with U.S.-listed Domestic Equity ETFs in October, ICE ETF Hub has already expanded and added functionality to support U.S.-fixed income ETFs. To learn about the long term strategy for ICE ETF Hub, watch ICE Data Service’s President & COO Lynn Martin’s recent segment on CNBC.
ETF Rule in Effect
In December, the SEC Rule 6c-11 - known commonly as the ETF Rule - went into effect, which over time will greatly simplify the process for launching new ETFs by, among other things, removing the individual firm exemptive relief requirement. In conjunction with the ETF Rule approval, the NYSE filed for 6c-11 generic listing standards which upon approval will further reduce the launch timeline and expand the capabilities under which asset managers can offer funds in an ETF wrapper. Our filing proposes decreasing the required minimum of shares outstanding as well as allowing exposure to asset classes such as derivatives and leverage. Pending approval from the SEC, we expect these standards to encourage a significant number of new asset managers to enter the ETF space and look forward to helping new products come to market. Please reach out to me or my team to support your launch and fund management under this new rule.
Generic Listing Standards Approval for Muni Bond ETFs
In October, the SEC approved the NYSE’s proposal for generic listing standards for muni bond ETFs - an initiative the NYSE and SEC had been working closely on for over a year. As a result of the new standards , time-to-market and associated costs for launching muni bond ETFs have been greatly reduced. While the muni bond ETF sector has been growing in popularity over recent years, the NYSE had heard consistent issuer feedback that the regulatory hurdles for new products made it difficult to meet demand.