SEC allows ETFs 200% leverage and derivatives transactions

The US Securities and Exchange Commission (SEC) approved the derivatives risk management rule which is designed to provide a comprehensive approach to the regulation of funds’ use of derivatives   The new rule 18f-4, permits mutual funds (other than money market funds), exchange-traded funds (“ETFs”), registered closed-end funds, and business development companies (collectively, “funds”) to enter into derivatives transactions.  The SEC amended rule 6c-11 “the ETF rule”  to allow leveraged or inverse ETFs to operate without obtaining an exemptive order.

Kevin Gustafson, general counsel and CCO and Graham Day, head of product & strategy at Innovator ETFs discuss the background to the rule, what the rule means and how it will impact ETF issuers and investors. 

Published on November 2, 2020

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