ETF Store President Nate Geraci said his initial reading of the latest U.S. Treasury notice involving 351 exchanges is not as optimistic as some people in the industry have suggested. In his view, problems could arise if the basket of assets moved into an exchange-traded fund differs materially from the fund’s own investment strategy. He said the risk becomes more acute if those assets are then quickly reduced or fully sold through in-kind redemptions. Geraci also said the Treasury’s guidance does not clearly define its practical boundaries, making it difficult at this stage to tell which transactions would be allowed. He expects additional guidance to follow as the scope of the notice is clarified.
ChainCatcher reported that ETF Store President Nate Geraci offered a cautious take on the latest U.S. Treasury notice concerning 351 exchanges, saying his initial reading is not as optimistic as that of some industry participants.
Geraci said issues could emerge if the asset basket transferred into an exchange-traded fund differs materially from the ETF’s own investment strategy. He pointed in particular to cases where those assets are later quickly trimmed or entirely sold through in-kind redemptions.
He also said the Treasury’s latest guidance does not clearly spell out its operational boundaries. For now, he said, it is difficult to determine which actions may be permitted, and he expects further guidance to be issued later.
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