The Australian Securities Exchange's (ASX) second incarnation of its Aqua rules framework allows for the listing of active exchange-traded funds (ETF) without fund managers having to disclose their underlying holdings.
Aqua II will enable managed funds to list their application and redemption prices for units on a price display board, but because they are not priced by the market, the underlying holdings will not have to be disclosed.
The threat of disclosure has been a significant obstacle to the introduciton of active ETFs in Australia.
"I think Aqua II is about bringing active funds into the listed operating space," Tria Investment Partners managing partner Andrew Baker said.
"The idea is that you will be able to trade managed funds on CommSec screens. That is fantastic from the fund managers' point of view: it gives them much more potential to access the direct channels in the self-managed super fund (SMSF) market.
"The SMSF space clearly has a preference to use that listed space as their market. They are not real keen on prospectuses and paperwork and checks and all that kind of stuff, which managed funds still have to work with."
Although the prices of managed funds will not be in real time, the framework will make the trading of units much more user friendly, while trustees are also not dependent on dealer group platforms.
But ASX general manager Richard Murphy said the framework did not only enable listed managed funds to function as active ETFs, it would also allow real active ETFs to be listed without the obligation of disclosing underlying holdings.
"We are making changes to our rules to allow that to happen; that active ETFs don't have to disclose the constituents of the fund, because otherwise they will give away the intellectual property of the fund manager," Murphy said.
"[Brokers] would probably look at the application and redemption prices as a price signal, saying: 'Well that is the price around which we should trade the ETF.'
"It wouldn't replace an active ETF; it would encourage it."
The Aqua II framework is likely to be implemented in March 2012.
Baker said the impact of Aqua II on the funds management industry could have far-reaching implications as it had the potential to challenge the relevance of investment platforms in the long term.
By using a trading system in combination with a reporting and consolidation system, such as those provided by IRESS and Macquarie's Coin, financial planners will be able to bypass investment platforms.
"We just think that what is happening in technology at the moment is really underrated," Baker said.
"The Future of Financial Advice (FOFA) is definitely out there, but we think FOFA is less important than some of the overarching themes out there, particularly the direct investment theme and the technology theme."
He said the move by financial planners towards a listed environment, partly driven by SMSF trustees, was likely to continue and Aqua II would help accelerate that trend because it would bring managed funds back into a planner's investable universe.
"I was talking to a financial planner and he wasn't really aware of Aqua II. He is one of these planners who have already moved away from platforms, so he is using essentially the ASX and Xplan as a platform for clients," he said.
"I asked if he realised that in Aqua II you can essentially use that infrastructure, because you can treat these [managed funds] essentially as a share to how you buy and sell them.
"And he said: 'Where do I sign?'"
