Today, the Commission took another step toward modernizing our regulatory frameworks to meet the realities of today’s markets by proposing amendments to Rule 17a-7 under the Investment Company Act of 1940, which permits trades in securities between registered funds and certain affiliates. When executed appropriately, cross trades allow registered funds to avoid costs associated with open market trades and to then pass those savings on to investors. The amendments we are proposing today would modernize and expand the cross-trading rule, helping to deliver additional cost savings to those investors.
Since 1966, registered funds have been able to engage in cross trading in a variety of circumstances, but the 2020 adoption of the “fund valuation rule” effectively prohibited cross trading in most fixed-income securities. In other words, registered funds and their shareholders lost the benefits of this cost-saving option. The Commission recognized this issue in 2020 and intended to revisit the issue at some time in the future. That time is now.
If adopted, the amendments would restore the ability of affiliates and registered funds to cross trade most fixed-income securities and would modernize the rule’s conditions (which have not been substantively updated since the 1980s). The proposal also would require registered funds to provide aggregated reporting of cross trades and related trading activity to produce additional transparency.
I am pleased to support a proposal that provides clear rules of the road, is grounded in how markets functionally operate, and is focused on delivering savings to the investors we serve.
Today’s proposal was developed by the Division of Investment Management, with support from the Division of Economic and Risk Analysis. Thank you to the following members of the Commission staff for their work on the proposal:
In the Division of Investment Management: Brian Daly, Sarah ten Siethoff, Brian McLaughlin Johnson, Angela Mokodean, Bradley Gude, Rachel Kuo, and Alexis Hassell.
In the Division of Economic and Risk Analysis: Joshua White, Oliver Richard, Alexander Schiller, Ricardo Lopez Rago, James McLoughlin, and Timothy Dodd.
In the Office of the General Counsel: Elise Bruntel, Natalie Shioji, Cynthia Bien, Rebecca Orban, and Bob Bagnall.
Last Reviewed or Updated: Oct. 9, 2026