STT State Street Corporation

WASHINGTON—The Securities and Exchange Commission is moving to expedite the approval of exchange-traded funds run by human stock and bond pickers, according to people familiar with the matter, a boost for the fast-expanding ETF industry.

The SEC on Friday was set to approve "generic" listing standards for actively managed ETFs, guidelines that aim to cut months off the process of bringing these funds to market.

The move is a win for Bats Global Markets Inc. and the New York Stock Exchange, which asked the SEC to approve such standards last year. Bats and the NYSE, a unit of Intercontinental Exchange Inc., compete for the listing of such funds.

At present, obtaining regulatory approval for such products includes a time-consuming fund-by-fund evaluation by the SEC that can take months. Friday's expected change will allow for regulatory approval in a matter of weeks, said Chris Concannon, president and chief executive officer of Bats.

Exchange-traded funds hold baskets of stocks, bonds or other assets and trade on an exchange like a stock. Most are passive, with holdings dictated by the rules and weightings of the index they are designed to track. Generic listing standards already exist for passive ETFs.

Active ETFs, in which a fund manager can change the holdings at their discretion, represent a small portion of the more than $2 trillion invested in U.S. ETFs, with about $26 billion in assets, according to Morningstar Inc. Still, the number of such funds sold has mushroomed to 154 this year from 40 five years ago and just 14 in 2008.

Pacific Investment Management Co. manages some of the largest such funds, including its $4.5 billion Pimco Enhanced Short Maturity Active ETF and its $2.6 billion Pimco Total Return Active ETF.

Some fund firms that focus on stock and bond picking have teamed up with money managers that run large passive businesses to launch actively managed ETFs in recent years with varying degrees of success.

The SPDR DoubleLine Total Return Tactical ETF, a partnership between West Coast money manager DoubleLine and Boston-based State Street Global Advisors, was started early last year and now has $2.7 billion in assets, according to its most recent fact sheet. It is the second largest active ETF tracked by Morningstar.

However, three actively managed ETFs established in 2014 through a partnership between State Street Global Advisors and MFS Investment Management have only about $21 million in combined assets.

Sponsors of active ETFs say they are more attractive than actively managed mutual funds because they typically have lower management fees and feature a tax structure that makes them less costly than mutual funds.

Under Friday's expected guidelines, SEC staff would still have to approve new actively managed ETFs. But the funds could skip a separate process under which the SEC must sign off on their exchange listings.

To qualify for expedited listing approval, the assets in a fund's portfolio would have to fit certain characteristics, such as limited use of over-the-counter derivatives.

Write to Andrew Ackerman at andrew.ackerman@wsj.com and Sarah Krouse at sarah.krouse@wsj.com

(END) Dow Jones Newswires

July 22, 2016 14:05 ET (18:05 GMT)

State Street (NYSE:STT)
Historical Stock Chart
From Mar 2024 to Apr 2024

State Street (NYSE:STT)
Historical Stock Chart
From Apr 2023 to Apr 2024