Cboe Global Markets is seeking approval from the U.S. Securities and Exchange Commission (SEC) to launch a revolutionary product that combines exchange-traded funds (ETFs) and mutual funds. If the request is approved, experts predict a significant increase in the number of ETFs and ETF assets. Currently, ETFs and mutual funds operate under different rules and regulatory frameworks.
Mutual funds are bought and sold at the end of the trading day at a predetermined price based on the fund’s net asset value (NAV), which is calculated after the market closes. Conversely, ETFs trade like stocks on exchanges throughout the day, meaning their prices can fluctuate at any time.
CBOE has filed a 19b-4 request to allow mutual funds to add ETF share classes. This move is significant because it introduces a timeframe of 240 days for the SEC to make a decision. Other companies like MS, Fidelity, and DFA have also filed similar requests, but without a specific timetable.
Cboe’s goal is to introduce ETF shares into mutual funds, creating a hybrid product that would attract a larger investor pool. Bloomberg ETF analyst Eric Balchunas revealed that the SEC now has 240 days to approve or reject the proposal. Considering that Bitcoin ETFs were approved earlier this year and have attracted significant investment, it is expected that there will be little resistance to this new product.
It’s worth noting that this is not the first of its kind. Vanguard previously held a patent for a unique way to structure ETFs, allowing them to create ETF share classes that mirrored existing mutual funds. This meant that both the ETF and mutual fund could have the same underlying investments. However, Vanguard’s patent expired in May 2023, opening the door for other companies to adopt a similar approach.
Following the expiration of the patent, eight asset managers, including industry giants like Dimensional Fund Advisors, Morgan Stanley, and Fidelity, have filed for approval to use a similar share class structure for their ETFs. T. Rowe Price and JPMorgan have also shown interest in this approach, suggesting a potential surge in new ETFs based on this model.
In an interview, ETF analyst Todd Sohn pointed out that if the SEC approves Cboe’s recent filing, it could lead to an increase in the number of ETFs and ETF assets. Morgan Stanley and UBS have recently entered the race with Bitcoin ETF filings, indicating the continued popularity of ETFs.
The launch of Bitcoin ETFs has had a significant impact on the price of BTC since their introduction. As trading volume increases, BTC prices tend to fluctuate. The entry of more Bitcoin ETFs would expose traditional investors to digital assets and potentially fuel price changes.
At the time of writing, BTC is trading at $69,443 with a 1.5% change in the last 24 hours. Investors are hoping to surpass the $70,000 mark and reach the all-time high of $75,000 achieved a few weeks ago.
