SEC Proposes Modernizing Cross‑Trading Rule for Registered Funds
The SEC announced a proposal to expand and update the cross‑trading rule, aiming to lower costs for funds and improve transparency for investors.

Photo: Rafael Minguet Delgado / Pexels
Proposal Overview
The Securities and Exchange Commission said it is proposing amendments to the Investment Company Act cross‑trading rule, which governs transactions in securities between a registered fund and its affiliates. The agency explained that the changes are intended to modernize the rule and allow cross trades that can reduce a fund’s trading costs, while adding stronger investor‑protection measures.
Why the Rule Is Being Updated
The SEC noted that the original rule, adopted in the mid‑1960s, has long permitted funds to trade both equity and fixed‑income securities through cross trades. However, a later valuation rule introduced in 2020 effectively limited cross trading of most fixed‑income securities. The commission indicated that market developments have since produced pricing that is more verifiable and transparent, creating an opportunity to restore broader cross‑trading capabilities.
Key Elements of the Proposed Amendments
According to the SEC, the proposal would restore the ability to cross trade most fixed‑income securities and would update the rule’s conditions related to pricing and oversight. The agency highlighted that the modernized framework would recognize current market practices, making pricing more transparent and verifiable. Additionally, the commission said the rule would require aggregated reporting of trading activity and cross trades by registered funds that engage in such transactions, thereby enhancing transparency for investors.
Impact and Next Steps
The SEC indicated that the proposed changes could help registered funds lower transaction costs, which the agency expects could be passed on to shareholders. The agency also emphasized that the enhanced reporting requirements are designed to give investors clearer insight into fund trading activities. The proposal will be posted on the SEC’s website and in the Federal Register, and the commission said the comment period will remain open for a two‑month window after publication, inviting public input on the amendments.
General information only, not personal financial, legal or career advice.
Source: SEC release



