Who may be interested: Exchange-Traded Funds

Quick Take: The staff of the SEC’s Division of Investment Management (Staff) issued a statement (Statement) providing its views on how ETFs holding foreign currency should disclose such holdings on their website to comply with the daily portfolio holdings disclosure requirements of Rule 6c-11 under the Investment Company Act.

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Under Rule 6c-11(c)(1), ETFs must disclose their portfolio holdings daily. Prior to the open of trading on its listing exchange, an ETF must disclose information for each portfolio holding that will form the basis of the next calculation of the ETF’s current NAV per share. Such disclosure facilitates the ability of authorized participants to value an ETF’s portfolio on an intraday basis and to identify arbitrage opportunities, which helps to keep ETF share prices trading at or close to the ETF’s underlying NAV. 

The Statement noted that the Staff had observed some ETFs identifying foreign currency positions as “cash” for purposes of compliance with Rule 6c-11(c)(1)(i). The Staff stated it does not believe this approach provides an appropriate description of an ETF's foreign currency holdings as it does not provide investors or market participants with enough information to understand the foreign currency holdings or distinguish between an ETF’s holdings of U.S. dollars and other currencies. The Staff stated that an ETF holding any currency other than U.S. Dollars should identify the specific currency to satisfy the requirement in Rule 6c-11(c)(1)(i)(C) to provide an adequate description of the holding. 

The Statement can be found here.