Nate Geraci says Treasury notice on 351 exchanges may be less favorable for ETFs than some expect

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.