Overview
This article details how to include Exchange-Traded Funds (ETFs) in United States (US) Schedule 13G and Schedule 13D threshold calculations. It outlines the Securities and Exchange Commission (SEC) regulatory background, eligibility criteria, and instructions for configuring both the global settings and instrument-level properties.
By default, ETFs are not assessed against US Schedule 13G and Schedule 13D reporting thresholds. Users can choose to optionally include voting ETFs to capture edge cases where trading prices deviate materially from the Net Asset Value (NAV).
Regulatory Background
US beneficial ownership reporting applies to equity securities with voting rights registered under Section 12 of the Exchange Act. The SEC explicitly includes ETFs within this definition, and some US-listed ETFs are registered under Section 12 and carry voting rights.
Per the aosphere memo section 3.5(r), SEC no-action letters excuse beneficial ownership disclosures for an investment in the ETF when the ETF trades at prices that do not materially deviate from its NAV. Although what constitutes a "material" deviation is not precisely defined by the regulator.
Current Functionality and Updates
Historically, ETFs have not been assessed against the US 13G and 13D thresholds. This release adds the option to include voting ETFs for clients who want to capture the edge case where an ETF doesn't qualify for the no-action relief above (e.g. it trades at a material premium/discount to NAV).
If the updated rule versions are approved while leaving the global setting untouched, system behaviour remains unchanged.
Please take note of the following operational conditions:
The global setting must be actively switched on for behaviour to change.
Look-throughs to the underlying securities held by an ETF are out of scope; only the ETF position itself is ever assessed.
The ETF inclusion setup described here is designed for open-ended ETFs. Closed-ended ETFs are generally best modelled as Equities rather than as ETFs.
Enabling ETF Inclusion
Set the global setting IsETFInclusionEnabledUS13GAnd13D to "true" (found in the US 13G group). When enabled, ETFs that meet all of the following criteria will be included in 13G and 13D calculations:
The instrument is in the ETFs data view (
IsETF="true").The ETF has voting rights (
IsVoting="true").The ETF is listed on a US market or has an alternate US Section 12 registration.
Opting Out Specific ETFs
If the IsETFInclusionEnabledUS13GAnd13D global setting is enabled but you want to exclude a particular ETF, set the IsETFEligibleForUS13GAnd13D property to "false" on that instrument either directly in the positions file or via a Data Override. This overrides the global setting for that ETF only.
Affected Rules
Enabling the IsETFInclusionEnabledUS13GAnd13D global setting impacts the following rules:
Rule 1816 (Major: US - 13G - Qualified Institutional Investor)
Rule 1808 (Major: US - 13G - Passive Investor)
Rule 1801 (Major: US - 13G - 1% Non-QII)
Rule 1800 (Major: US - 13G - Manual Trigger)
Rule 1810 (Major: US - 13D)