Van Eck Granted Exemptive Relief, JP Morgan Removes Derivatives

Van Eck, the company behind the Market Vectors line of ETFs, has been granted exemptive relief by the SEC for the actively-managed ETFs which the company first filed for in November, 2008. The application to request exemptive relief from the SEC is one of the first steps to launching an Active ETFs in the US. Van Eck had made several amendments to its application since the first filing.

Van Eck’s application was for two actively-managed ETFs, the first being the Market Vectors – Active Africa ETF and the second being the Market Vectors – Active Short Municipal ETF. According to the latest amendment of the application, the Active Africa ETF will be investing in equity securities of companies domiciled in Africa, listed on an African exchange or those that derive at least 50% of their revenues from Africa. The security selection would be based on both quantitative and qualitative measures. If launched, this would be the first actively-managed ETF to focus on the African market. The Active Short Municipal ETF will try to exceed the total return of the Barclays Capital AMT-Free Short Continuous Municipal Index, by investing in investment-grade municipal bonds that provide interest exempt from federal income tax. At the same time, the fund is allowed to invest up to 20% of its assets in junk bonds or noninvestment-grade securities.

In other news, JP Morgan has filed an amendment to its application to launch actively-managed ETFs, stating explicitly that the funds will not utilize options, futures or swaps. JP Morgan had first filed for exmeptive relief from the SEC back in March, when a lot of major financial firms in the US were lining up to file applications to launch Active ETFs. The number of new firms entering the space has since slowed, many likely being deterred by the stance that the SEC has taken with regards to ETFs. In March, the SEC officially announced that it is investigating the usage of derivatives in ETFs and until it is satisfied, all applications for new ETFs that utilize derivatives will be put on hold. The SEC has since not provided any clear indication of its final opinion and the regulatory uncertainty has come to discourage many issuers planning to enter the Active ETF space.

JP Morgan’s initial actively-managed ETF would invest in large cap US equities, holding up to 300 stocks across various sectors, selected based on valuation and fundamental qualitative measures.

Written By Shishir Nigam from ActiveETFs | InFocus  Disclosure: No positions in above-mentioned names.

Shishir Nigam is the founder of ActiveETFs | InFocus (, which provides extensive coverage and analysis of actively-managed ETFs in US and Canada, including debates on major industry trends, insights on the latest product launches from issuers in the Active ETF space as well as in-depth interviews with industry executives and thought leaders.

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