The agency invited public comment on whether illiquidity would be problem in the case of such ETFs. Open-end funds cannot hold more than 15% of their portfolio in illiquid securities. The SEC raised the issue for public discussion, asking whether in the case of certain ETFs the percentage should be less.
In seeking comments, the proposal asks what liquidity requirements might be needed and why. “Should the chance (or likelihood) that substantial discounts or premiums may occur if an ETF portfolio contains less liquid securities or assets be a regulatory concern for the Commission, or should it be treated as a material risk?” it asks.
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