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ETF News, Fixed Income

New Rules: SEC Set to Level Playing Field for ETF Issuers

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Are you beginning to wonder why there is an avalanche of news stories profiling corporate bond ETFs? As we’ve posted here at MarketsMuse.com, one good reason might be rising concerns that when interest rates tick up and bond prices tick down, there could be a rush to the exits on the part of investment managers seeking to sell their corporate bond ETFs (or looking to sell select ETFs so as to hedge portfolio exposure in underlying issues held by these managers). Reuters’ Jessica Toonkel and Ashley Lau touch on that topic in recent story profiling a plan on the part of the SEC to “level the playing field” for newer firms entering the ETF Issuer club.

Here’s the extract:

By Jessica Toonkel and Ashley Lau

Reuters – The U.S. Securities and Exchange Commission may strip Vanguard Group, BlackRock Inc and State Street Corp, the oldest and biggest providers of exchange-traded funds, of an advantage they hold over newer rivals in how they assemble the shares of their funds, said sources familiar with the SEC.

etf-issuer-sec-level-playing-fieldsBut BlackRock, Vanguard and a few others, who were among the first to apply with the SEC to create ETFs, are allowed greater leeway: if they need a difficult-to-find security to create shares of their funds, they are permitted to use a similar security – not necessarily the same one – in the fund. This greater flexibility makes it easier and cheaper to run the older funds, and harder for newer entrants into the market such as Northern Trust, Van Eck Global and Charles Schwab Corp to compete.

The agency’s tentative plan – still in its early stages – would affect how companies manage their portfolios in illiquid markets, such as bonds. It may result in allowing the likes of Schwab to compete better with their older rivals, as well as manage their existing bond products at a lower cost.

The agency’s tentative plan – still in its early stages – would affect how companies manage their portfolios in illiquid markets, such as bonds. It may result in allowing the likes of Schwab to compete better with their older rivals, as well as manage their existing bond products at a lower cost.

For the full story from Reuters’ Jessica Toonkel and Ashley Lau, please click here

ETF News

State Street Slashes SPDR ETF Fees; Issuers In A Race to Zero? Nah..

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MarketsMuse blog update courtesy of extract from news report by Reuters’ Ashley Lau

State Street Corp said on Tuesday it has slashed management fees on 41 of its SPDR exchange-traded funds, joining major ETF providers BlackRock Inc and Vanguard in their efforts to lower fees as price competition heats up.

The price cuts at State Street, which affect a range of international and domestic equity and bond funds, come at a time when cost has become an increasingly important factor for ETF providers. Vanguard, which recently surpassed State Street to become the No. 2 U.S. ETF provider, has been winning assets with its razor-thin fees.

With the new price reductions, State Street’s SPDR Barclays Aggregate Bond ETF, for example, now has an expense ratio of 0.1 percent, down from 0.21 percent. That brings the fund closer to the range of the Vanguard Total Bond Market ETF and the iShares Core U.S. Aggregate Bond ETF, which both have an expense ratio of 0.08 percent.

State Street said the fee reductions are part of an ongoing review process “to identify improvements that are beneficial to investors.”

“Competitive pricing is a core benefit to the SPDR ETF value proposition,” said James Ross, global head of SPDR ETFs at State Street Global Advisors, the company’s asset management business.

ETF assets have been flowing into Vanguard, long a leader in low fees. It increased its U.S. market share to 21.3 percent at the end of 2014, more than doubling its market share since 2008.

BlackRock, the largest ETF provider, has also been expanding its “iShares Core” lineup of low-cost ETFs, a program it started in October 2012 to compete with cheaper funds offered by other providers. The company said on Monday it would extend a partial fee waiver of annual management fees on certain iShares funds in Canada. (Reporting by Ashley Lau; Editing by Dan Grebler)