Update to the Naming Convention for Exchange Traded Products
By: Matthew Watts, Lisa Lautier and Dhivya Kalyanakumar
Since 2017, the Australian Securities and Investments Commission (ASIC) has provided guidance to licensed exchanges on exchange traded products (ETP) naming conventions under Information Sheet 230 (INFO 230). This policy is designed to help ensure that admission and monitoring standards for ETP’s support fair, orderly and transparent markets.
Following a two-year consultation period on ETP naming conventions, the ASX has confirmed that certain proposed amendments to the ASX Operating Rules, ASX Operating Rules Procedures and ASX Settlement Operating Rules (together, the ASX Rules) will become effective on and from Monday, 15 April 2024.
This will impact all ETPs that are traded on the ASX, which includes exchange traded funds (ETFs) and structured products.
What are the changes to the naming conventions?
Under the amendments to the ASX Rules, the name given to an ETP will need to comply with the updated INFO 230. There are two levels of labelling:
- Primary label: ‘Exchange Traded Fund’ or ‘ETF’ and ‘Structured Product’ or ‘Structured’ based on product type; and
- Secondary label: ‘Active’ and ‘Complex’ for products with specific risks or strategies.
An ETP must apply one primary label and if required, should apply one secondary label at the end of the product trading name. If a secondary label is applied, it should appear immediately before the primary label.
How are these naming conventions to be applied to existing ETFs?
Existing ETPs will have a 12 month window ending on 15 April 2025 to comply. These updates will mean that the names of existing ETFs will need to change. For example:
- An ETF that is structured and marketed as employing an active investment objective where underlying investments are held or traded in a way that does not track or replicate the returns or a robust and transparent index or benchmark:
| Current name | New naming option |
| ABC Fund (Managed Fund) | ABC Fund (Active) ETF |
- An ETF that meets the hedge fund criteria in ASIC RG 240 Hedge funds – Improving disclosure:
| Current name | New naming option |
| ABC Fund (Hedge Fund) | ABC Fund (Complex) ETF |
- An ETF that uses derivatives, other than disclosed hedging of exchange rate or interest rate risks, to gain non-temporary material economic exposure to implement the underlying investment strategy or to create a net leverage or net inverse position for the portfolio:
| Current name | New naming option |
| ABC Fund (Synthetic) | ABC Fund (Complex) ETF |
What action is required now?
Issuers of existing ETPs will need to consider how these proposed amendments will impact the naming and marketing of their products. Importantly, issuers will be required to update product disclosure statements, target market determinations and other marketing collateral used to promote the ETF (and possibly the scheme constitution) prior to 15 April 2025.
What if the ETP is quoted on Cboe?
We expect that Cboe will also adopt ASIC’s guidance under INFO 230 such that all ETPs quoted on Cboe will be impacted by these changes as well. We expect that Cboe’s updates will be released soon.