United States: The Last Leg: SEC Extends Trading Relief to Share Class ETFs

By: Thoreau A. Bartmann, Jessica D. Cohn, and Kevin R. Gustafson

With this fourth SEC approval, share class ETFs are now ready to go live.

Since late 2025, the SEC has provided exemptive relief to dozens of managers under Section 18(f), among other provisions, for mutual funds to issue a share class listed separately as an ETF. In addition to these orders, the SEC has approved generic listing standards of these ETFs on the exchanges and, more recently, registration statements for these ETFs are now effective. Recently, the SEC has also expressly extended certain exemptive relief to the share class ETFs addressing how the ETFs can trade in the primary markets, clarifying for the industry that these ETFs are to be treated the same as stand-alone ETFs regarding the trading markets.

In connection with adoption of Rule 6c-11 (the Rule) in 2019, the SEC had also issued a companion order (Order) codifying for brokers certain key exemptive relief as to the Securities Exchange Act of 1934. These provisions include critical functions for the ETF, such as effecting in-kind creations and redemptions as an Authorized Participant. For a broker-dealer to rely on this relief to transact directly with an ETF, that ETF must fit within the “exchange-traded fund” definition under the Rule. However, the Rule had explicitly excluded share class ETFs from its definition of an ETF, resulting in the relief under that Order not applying to brokers for the new share class ETFs.

With the issuance of this latest regulatory relief, new share class ETFs can move forward with listing and trading once their exemptive order is received and registration statement is effective, subject to ongoing compliance with the Rule and RIC requirements. With it, brokers may also now trade with these ETFs with the ability to rely on the broad trading relief already available to other ETFs.