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Continued Listing Standards are Coming for ETFs

September 29, 2017 |

Time is running out! Before continued listing standards roll out across exchanges in Q1 2018, BBH's Ryan Sullivan breaks down what ETF managers can and should be doing now to prepare.


While many managers are focused on the SEC liquidity and modernization rules, ETF managers should also be aware of the continued listing standards that are being rolled out by the three exchanges: the New York Stock Exchange, NASDAQ, and Bats. Basically, the SEC came to the exchanges and asked that they begin to test ETFs for adherence to their listing standards on an ongoing basis. Now, that's a little bit different than the current practice, which is really to monitor the ETFs at the time of initial listing. So, ETF managers should be working with their respective listing exchanges to understand how the exchange is interpreting the rule and what they might do to test and monitor ETFs on an ongoing basis.

What adds to the complication a little bit for passive ETFs, is that the rule make look through the fund to its underlying index, meaning the ETF manager and their index providers need to ensure that the index is in compliance with the fund's listing standards as well. And for funds that may be deemed to be in noncompliance, their tickers could be flagged and eventually the fund could be de-listed from the exchange. So, ETF managers should also be reviewing their trade monitoring procedures to ensure appropriate testing is in place against the listing standards on an ongoing basis. Now keep in mind, implementation is on the horizon, with all three exchanges scheduled to implement the rule in Q1 2018.

The positions expressed in this material are those of the author as of September 29, 2017, and may or may not be consistent with the views of Brown Brothers Harriman & Co. and its subsidiaries and affiliates (“BBH”), and are intended for informational purposes only. Furthermore, these positions are not intended to predict or guarantee the future performance of any currencies or markets. This material should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision.