The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Nature Of Custody Makes SEC ETF Plan Thorny

The nature of the custody system makes part of a proposal from the Securities and Exchange Commission on exchange-traded fund redemptions thorny, according to a group of global broker/dealers. Morgan Stanley, JPMorgan Chase, Merrill Lynch and Goldman Sachs last month wrote a joint letter to the regulator expressing concern over the proposal that would require brokers to confirm that a redemption from an ETF by an institutional investor does not make up more than 3% of the ETF's shares.

The B/Ds state that the fund itself would know more about holdings than they would, considering shares are typically custodied at third-party custodial banks. "Requiring broker/dealers, who have far less information about a fund's portfolio than the fund itself, to know each fund's ownership status before submitting a redemption order and to obtain representations from each fund imposes an unfair regulatory burden on the authorized participants and could potentially frustrate otherwise legitimate redemption activity," they stated in the filing.

More from Operations management

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree