On July 22, 2025, the staff of the SEC issued no-action relief providing that broker-dealers acting as authorized participants for ETFs holding foreign securities do not have to take a net capital charge under Rule 15c3-1 under the Securities Exchange Act of 1934 (net capital requirements for broker-dealers) to account for unsecured receivables that arise from creation and redemption transactions when the ETF holds foreign securities that are not cleared through an SEC-registered clearing agency.  These unsecured receivables for the broker-dealer arise due to a timing mismatch between the settlement of the creation or redemption transaction and the settlement of the underlying foreign securities, such that (1) the broker-dealer cannot deliver the ETF portfolio securities for a creation transaction prior to the settlement of the creation transaction, or (2) a broker-dealer cannot deliver the ETF shares for a redemption transaction before the ETF must instruct the relevant foreign clearing system to transfer the portfolio securities. This guidance would allow broker-dealers in these circumstances to avoid deducting these receivables from their net capital, thereby removing an impediment to broker-dealers participating as authorized participants in this segment of the ETF market.

As set forth in the SEC staff’s no-action letter, the staff’s position would apply only under the following circumstances:

• For an ETF creation transaction, the broker-dealer receives the return of its collateral by the fourth business day after the day on which the broker-dealer initially delivered the collateral in respect of the ETF portfolio securities;
• For an ETF redemption transaction, the broker-dealer receives both the ETF portfolio securities and the return of its collateral by the fourth business day after the day on which the broker-dealer initially delivered the collateral in respect of the ETF shares;
• During any ETF creation or redemption transaction and until completion of the transaction, the ETF’s U.S. bank custodian continues to hold any collateral of the broker-dealer; and
• The amount of the unsecured receivable does not exceed (1) 10% of the broker-dealer’s tentative net capital with respect to any single ETF creation or redemption transaction, and (2) 25% of the broker-dealer’s tentative net capital in the aggregate across all ETF creation and redemption transactions.

The SEC staff’s no-action letter, along with the incoming letter, is available here.