Exchange Pushes for Fancy Multi-Class ETFs—More Choices, Same Confusion
Published Date: 6/10/2025
Notice
Summary
Cboe BZX Exchange wants to make it easier to list and trade Multi-Class ETFs, which are special funds with different types of shares. This change helps fund managers offer more options on the exchange, starting once the SEC approves it. Investors and fund companies will benefit from more flexible and diverse ETF choices without extra costs right away.
Analyzed Economic Effects
6 provisions identified: 3 benefits, 2 costs, 1 mixed.
Faster Generic Listing for Multi‑Class ETFs
The Exchange proposes Rule 14.11(n) to allow Multi‑Class ETF share classes that comply with Rule 6c-11 and have applicable exemptive relief to be listed and traded on Cboe BZX without a separate Section 19(b) filing. This would let eligible Multi‑Class ETF series begin trading on the Exchange immediately upon the Commission granting the applicable exemptive relief.
Issuer Governance Exemptions and Alignment
The Exchange proposes to treat Multi‑Class ETF Shares as derivative securities for certain Exchange rules, exempting them from Independent Director, Compensation Committee, Director Nomination, Code of Conduct, and Shareholder Meeting requirements under Rule 14.10, and from most Audit Committee requirements except SEC Rule 10A-3. The Exchange also proposes an exemption from Rule 14.10(i)(1) in certain affiliated acquisition transactions that comply with Rule 17a-8.
Listing, Minimums, and 50‑Holder Delisting Rule
A series of Multi‑Class ETF Shares must satisfy initial and continued listing criteria, including a minimum number of shares outstanding at commencement and a continued‑listing trigger that may commence delisting if, after the first 12 months, there are fewer than 50 beneficial holders for 30 or more consecutive trading days. The Exchange may also delist if the issuer is no longer compliant with Rule 6c-11 or applicable exemptive relief.
Surveillance, Disclosure, and Trading Halt Protections
The Exchange will implement and maintain written surveillance procedures for Multi‑Class ETF Shares, use intraday alerts, and may halt trading under Rule 11.18 or other conditions. Examples include halting trading if net asset value or daily portfolio disclosures are not available to all market participants at the same time, or if an index/reference value interruption persists beyond the trading day.
Exchange and Data Provider No‑Liability Clause
Proposed Rule 14.11(n) states that neither the Exchange, the designated Reporting Authority, nor their agents will have liability for damages, claims, losses, or expenses caused by errors, omissions, or delays in calculating or disseminating index values, NAVs, creation basket values, dividend-equivalent payments, or other information, including causes beyond their reasonable control.
Investors Gain More ETF Share-Class Options
If you own investments, the proposal would allow funds that already issue non‑exchange-traded classes to offer an exchange‑traded ETF class of the same fund once the Commission grants exemptive relief and the series meets Rule 6c-11. That could give investors additional ways to access established fund strategies through an ETF class.
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