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Vedder Thinking | Articles SEC Staff Issues Statement Regarding ETFs' Disclosure of Foreign Currency Holdings

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On January 19, 2024, the staff of the SEC’s Division of Investment Management issued a statement regarding the disclosure by ETFs of foreign currency holdings pursuant to Rule 6c-11 under the 1940 Act. Rule 6c-11(c)(1) requires an ETF to disclose its portfolio holdings on its website each business day before the opening of regular trading in order to facilitate the arbitrage mechanism that generally keeps the market prices of an ETF’s shares at or near the net asset value of those shares. The portfolio holdings information required to be disclosed consists of the ticker symbol, CUSIP or other identifier, description of the holding, quantity held, and percentage weight of the holding in the portfolio.

The staff observed that some ETFs describe their holdings of foreign currency positions simply as “cash” for purposes of their daily portfolio holdings disclosure on their websites. The staff stated its view that describing foreign currency positions as cash does not provide market participants with enough information to distinguish between an ETF’s holdings of U.S. dollars and holdings of other currencies for purposes of assessing the values of the ETF’s holdings throughout the day for arbitrage purposes. The staff indicated that ETFs should identify the specific non- U.S. currencies it holds in order to comply with the daily portfolio holdings disclosure requirement.

The SEC staff’s statement is available here.



Professionals



Nathaniel Segal

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Jacob C. Tiedt

Shareholder



Mark Quade

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Jake W. Wiesen

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Christina V. West

Associate