ETF Store President Nate Geraci said his initial reading of the U.S. Treasury Department’s latest notice on 351 exchanges is less optimistic than some voices in the industry have suggested. In his view, problems could arise when a basket of assets transferred into an ETF differs materially from the ETF’s own investment strategy. He pointed in particular to cases where those assets are then quickly reduced or fully sold through in-kind redemptions. Geraci also said the Treasury’s guidance does not clearly define the boundaries of what transactions are covered, making it difficult at this stage to determine which structures or operations may be permitted. He expects additional guidance to follow as the issue develops.
According to Odaily, ETF Store President Nate Geraci said his initial reading of the U.S. Treasury Department’s latest notice regarding 351 exchanges is not as optimistic as some industry participants have suggested.
Geraci said issues may emerge if the basket of assets moved into an ETF differs materially from the ETF’s own investment strategy. He flagged a particular concern when those assets are later quickly reduced or fully sold through in-kind redemptions.
He also said the Treasury’s latest guidance does not clearly spell out the boundaries of its application. For now, he said, it is difficult to judge which actions may be allowed, and he expects more guidance later on.
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