According to government shutdown rules, SEC personnel fall into the “non-essential” category. ETF issuers probably disagree.
The SEC stopped processing ETF filings last week when the government shut down, halting the approval process of dozens of dual-share-class exemption applications. The shutdown has also put certain crypto products, including those holding Solana, XRP and others, on hold. Still, EDGAR — the SEC’s database for submitting all company forms, including ETF applications and rule changes — remains fully functional, and experts don’t expect the shutdown will slow the tide of filings.
“We anticipate filings to continue to build up, especially given current market conditions,” said Grant Engelbart, an investment strategist at Carson Group. “The government shutdown has seemed to do nothing to slow down the recent surge in animal spirits we have seen across risk assets, including cryptocurrency.”
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The shutdown comes at a particularly strange time, slowing SEC operations down just as they were picking up speed. Last week, the agency issued a long-awaited update regarding Dimensional Fund Advisors’ request for dual-share-class exemptions, indicating that approval is probably just around the corner. Now, however, nearly 100 such applications are on pause, said Alex Morris, CEO of F/m Investments, which also has pending filings. While Morris estimates that one in five such applications are “serious,” with the rest being “FOMO filers,” all issuers can do now is wait.
The agency does have staff available to deal with emergency requests, but standard filings and exemptive relief filings — including dual-share-class relief — are on hold until the shutdown is done, Morris added. The SEC will be working under its lapse operations plan, a spokesperson told The Daily Upside.
The shutdown, however, doesn’t seem to have dampened issuers’ or investors’ appetite:
There were 14 new ETF filings in October as of Friday, despite the shutdown starting on Wednesday, according to AdvizorPro data.
Litecoin — whose new ETF, Canary Capital’s Litecoin ETF, has been delayed due to the shutdown — continued to climb higher last week, its price rising 13%.
Spotted. The shutdown also comes shortly after the agency adopted generic listings standards for spot crypto products, keeping issuers from having to file for a rule change every time and shortening the approval timeline from 240 days to just a couple of months. The change in timelines, combined with the halted processing of new applications, creates uncertainty about approval timelines, said Roxanna Islam, VettaFi’s head of sector and industry research. “There was some progress that was supposed to be made this week, but obviously, there’s not going to be any new ETFs approved right now,” Islam said. “It’s a little bit up in the air.”
This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter.
