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SEC drops swing pricing proposal for mutual funds

edited August 28 in Fund Discussions
What is swing pricing?

Bloomberg Media is reporting today that the proposal has been abandoned by the SEC.

Excerpt from Bloomberg Media August 28, 2024:

”The US Securities and Exchange Commission has retreated from a plan that would have forced many mutual funds to overhaul their pricing models. The original proposal would have imposed so-called swing pricing during periods of high redemptions, making it costlier for investors to cash out when markets are roiled. It drew strong opposition not only from the industry but also from Democratic lawmakers who warned the measure could impose heavy burdens on investors saving for their retirements.”

Comments

  • Time to retire Gary Gensler.
  • More info on swing pricing for anyone interested from NAPA - Article
  • edited August 28
    They also approved new rule changes today mandating that OEFs/ETFs report holdings monthly, replacing the previous quarterly requirement. I think this is a *long* overdue change and one that I particularly welcome.
  • rforno said:

    They also approved new rule changes today mandating that OEFs/ETFs report holdings monthly, replacing the previous quarterly requirement. I think this is a *long* overdue change and one that I particularly welcome.

    I agree - this is a welcome change!
  • New Rules Press Release,
    https://www.sec.gov/newsroom/press-releases/2024-110

    New Rules Fact Sheet,
    https://www.sec.gov/files/ic-35308-fact-sheet.pdf

    My reading is that N-PORT filing of month-end holdings will be within 30 days, but those filings will be made public after 60 days of the month-end. So, there will be 2 month lag in public reporting of month-end holdings.
  • YBB, yeah when I read the official fact sheet I was less enthused than I sounded in my earlier post. Still a move in the right direction, though.

    I am impressed with (voluntary) daily-disclosure ETFs from CG and TRP that launched in the past few years, though.
  • edited August 28
    I could be imagining but I thought the new holdings are available to us after 60 days (30 for the fund + 30 after for the SEC) of month end. If so, that is pretty useless information. I would want the info to be made available within 15 days after the month end. Makes no sense to make it more difficult for retails clients to gain info than accredited investors through Forms 13Fs.

    To manage the SEC load, and make the info available more timely for all other ETFs and OEFs investors, SEC should not have imposed the changes on transparent ETFs.

    This SEC's desire for power grab always seems to override the need to advocate for retail investors.
  • @BaluBalu we both know who the SEC caters to ... and it's not usually us.
  • edited August 29
    @BaluBalu, currently, mutual funds report only quarterly after 60 days. You may be seeing lots of N-PORT now, but all those are for holdings as of 6/30/24.

    This rule change will require N-PORTs every month & those would be release with some delay to public. So, the N-PORTs would be available to the public every month with 2-mo lag. Right now, they cluster in May-end, August-end, November-end, February-end.

    ETFs are different. Passive ETFs require daily holding disclosures. Most active bond ETFs also have daily disclosures (so, transparent) - hard to front-run bonds. Active equity ETFs are of several varieties - nontransparent (early, but failed?), semi-transparent (some success), and transparent (gaining popularity recently, especially for out-of-favor value strategies). With active managers lagging indexes, the fears of a lot of front-running haven't materialized. Who wants to front-run horses that may lose?
  • msf
    edited August 29
    Passive ETFs require daily holding disclosures

    A common conception but the rule is actually the opposite. Based on the premise that investors already have a very good if not exact idea of what's in a fund that passively tracks an index, disclosure of such a fund's daily holdings is generally not required.

    From NASDAQ, under passive ETF listing requirements is this requirement, applicable only to leveraged ETFs. "Regular" passive ETFs need not comply.
    Passive ETFs which seek a return based upon a multiple (positive or inverse) of the underlying index performance, must disclose the following information regarding the portfolio on their website daily:
    • The identity and number of shares held of each specific equity security
    • The identity and amount held for each specific fixed income security
    • The specific types of financial instruments and characteristics of such financial instruments
    • Cash equivalents and the amount of cash held in the portfolio
    https://listingcenter.nasdaq.com/assets/ETP_Listing_Guide.pdf

    It's true that the vast majority of passively managed non-leveraged ETFs disclose portfolios daily. Vanguard is the notorious exception that proves the rule.

    While it discloses daily the holdings of its standalone ETFs, it discloses only monthly holdings of those ETFs that are share classes of its OEFs. For example, VYM (a share class of VHYAX) currently shows holdings as of July 31.
    Each Vanguard fund relying on Rule 6c-11 under the 1940 Act (e.g., standalone ETFs) generally will seek to disclose complete portfolio holdings, including other investment positions, at the beginning of each business day. These portfolio holdings, including other investment positions, will be disclosed online at vanguard.com. ... Each Vanguard index fund, other than those Vanguard index funds relying on Rule 6c-11 under the 1940 Act (e.g., standalone ETFs), generally will seek to disclose the fund’s complete portfolio holdings as of the end of the most recent month online at vanguard.com, 15 calendar days after the end of the month.
    Vanguard SAI supplement, July 19, 2024
  • I will love the 8 extra window dressings each year - its like Christmas every month.
  • rforno said:

    They also approved new rule changes today mandating that OEFs/ETFs report holdings monthly, replacing the previous quarterly requirement. I think this is a *long* overdue change and one that I particularly welcome.

    Have to say that I agree.
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