1/ Ever wonder why there’s been such an explosion in options-based ETFs over the last few years? Look no further than SEC Rule 18f-4.
2/ This rule essentially made it easier for mutual funds and ETFs to leverage derivatives strategies by replacing outdated coverage requirements with a modernized risk-management framework. 👇 https://www.sec.gov/resources-...
3/ Since then, options-based ETFs have grown to well over $100 billion in AUM, covering a broad spectrum of strategies including systematic call overwriting/ cash-secured puts for income generation, defined outcome funds, and leveraged products.
4/ In most cases, market structure is defined by regulation. From QDIA rules guiding retirement flows, to Dodd-Frank and the Volcker Rule reshaping risk-taking and market-making, and even modest changes like SEC 18f-4, regulations are the key to understanding structural flows.