SEC has a new status quo for ETFs.
The Securities and Exchange Commission has adopted a new rule meant to "modernize regulation of exchange-traded funds" in an attempt to facilitate more competition and innovation, provide investors with more choice and give ETFs a speedier path to the public market. The rule will also require issuers to publish their daily portfolio holdings.
In short, the SEC is trying to improve how it regulates ETFs, standardizing the way they come to market by simplifying a long-standing "exemptive relief" rule that extended the process for many issuers.
"I think it's a win for the ETF industry and for ETF investors," Will Rhind, founder and CEO of GraniteShares, said Monday on CNBC's "ETF Edge." "Exemptive relief has gone away, so everybody has the same rules."
When Rhind came to New York a decade ago, securing exemptive relief — which refers to getting a key clearance from the SEC from certain conditions in the Investment Company Act of 1940 — could have cost an issuer upward of $1 million, the CEO said.
"Now you don't need it at all. So, think about how much that cost has come down," said Rhind, who founded GraniteShares in 2016.
That means investors' already numerous options in the ETF space are set to grow, Jay Jacobs, senior vice president and head of research and strategy at Global X ETFs, said in the same "ETF Edge" interview.
"I think we could see more products from more issuers. It lowers the bar for a new issuer to come into the space and launch an ETF," Jacobs said. "To be fair, over the last 10 years, that bar has been getting lower and lower and lower as more people have become ETF issuers and gone through the process. But there was still a bar there. Now that bar has effectively been taken away, so it's much more streamlined for someone to become an ETF issuer."
That, in turn, will lead to more competition in an already competitive area of the stock market, Tim Seymour, Seymour Asset Management's founder and chief investment officer, said in the same interview.
"Competition in the ETF space is not lacking," he said Monday, noting that it has largely become more transparent and less expensive. "I would say it's ridiculously competitive, and I don't think investors are lacking for seeing innovative new products come to market."
On the whole, though, more competition isn't necessarily "a bad thing for people [who are] investing thematically and actively," said Seymour, who recently launched his own cannabis-themed ETF in partnership with Amplify ETFs.
"To be able to trade a basket of securities and be thematic and be efficient, as a former hedge fund manager running a long-short hedge fund, that didn't exist 10 years ago in the same way it does today," he said. "That's good for everybody."
Disclosure: Tim Seymour is portfolio manager of the Amplify Seymour Cannabis ETF (CNBS) and is on the advisory board of The Green Organic Dutchman, Heaven, KushCo Holdings, Dionymed, Tikun Olam, CCTV, and Canndescent. Stocks in CNBS must be legal in the countries in which they operate. All of the ETF's holdings are listed here.