The American Stock Exchange
seems intent on keeping abreast of the other exchanges when it comes to exchange-traded funds (ETFs). And according to a statement an AMEX executive made in June, they may have found the holy grail of the ETF world. Tony Baker
, managing director of the American Stock Exchange's ETF Marketplace, announced at an ETF roundtable in New York that the exchange had found a solution to the actively-managed ETF problem.
"We are very excited about the potential for active ETFs wherein the manager does not have to disclose holdings on a daily basis," Baker said. "Whether as a share class of an existing fund or a stand-alone fund, we believe the AMEX solution will allow the benefits of the ETF structure to be enjoyed on a much wider basis among the mutual fund industry. This should result in a much broader and diverse ETF marketplace
If the AMEX does indeed have the solution, it appears that they have been selective with who they are shopping the idea with. According to Tom Taggart, spokesman for ETF giant Barclays Global Investors
, the firm has not seen "exactly what they've done."
Regardless, it does not sound like BGI is keen to jump in the pool first. "We don't see a huge first mover advantage…while we continually look at this area, the regulatory delays to get it out the door are enormous," said Taggart. Taggart estimates that a cookie-cutter index-based ETF takes at least six months from the time of filing with the SEC to when the product is approved, while foreign ETFs take between ten and 14 months. He guessed that an actively-managed ETF may take six months or longer.
As the far-and-away dominant ETF issuer, it may not make sense for a firm like BGI to lead the rallying cry for the product, despite their regulatory savvy and deep pockets. A smaller ETF player likely stands more to gain, especially from the "hyper distribution" available via the exchange itself, comments Tim Meyer, ETF product manager at Rydex Investments
Rydex was aware that the solution was available, said Meyer. He declined to comment further.
Just who the AMEX is targeting is unclear. Although Baker said that fund firms often come to the exchange with passively managed ideas, the exchange started approaching firms about the actively managed product late last year. He declined to name which firms the AMEX had approached. Although the exchange is in talks with companies, Baker added that he did not know if the exchange would release the methodology to the public.
"We're making good progress [with fund issuers], in getting to the point where they can make a decision to file an exemptive application with their methodology," said Baker.
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