Custom baskets could help re-align ETF market

Author: Amélie Labbé | Published: 19 Jul 2018

Recent proposed changes by the Securities and Exchange Commission (SEC) as to how exchange-traded fund (ETF) portfolios can be structured could close the gap between early entrants in the market and those funds that arrived only a few years ago.

In particular, the possible re-introduction of the custom basket method of ETF portfolio composition could be one solution.According to Phil Bak, chief executive of Exponential ETFs, this means newer firms will have the ability to better compete with market participants that have been there for longer.  This revised portfolio structuring method is part of a recent SEC proposed rule that would streamline the ETF process, notably by doing away with the so-called exemptive order each individual ETF has to apply for before being able to operate. This would in theory help reduce the costs and time associated with a fund launch. Cboe’s global head of exchange traded products,...