WASHINGTON D.C. — The Securities and Exchange Commission proposed amendments to Rule 17a-7 under the Investment Company Act of 1940 on Friday. The proposed amendments would expand the securities eligible for cross trading by registered funds.

The proposed amendments would restore the ability to cross trade most fixed-income securities. The adoption of the fund valuation rule in 2020 effectively restricted cross trading of most fixed-income securities.

Rule 17a-7 was initially adopted in 1966. "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," SEC Chairman Paul S. Atkins said.

"The amendments we are proposing today would modernize and expand the cross-trading rule, helping to deliver additional cost savings to those investors."

"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 proposal requires aggregated reporting of trading activity and cross trades by registered funds. The comment period for the proposal will remain open for 60 days after publication in the Federal Register.