The U.S. Securities and Exchange Commission approved the addition of exchange-traded share classes to mutual funds, starting with Dimensional Fund Advisors. This move is expected to open the door for more ETFs, making them more accessible to retail investors.

This change allows mutual funds to offer ETF share classes, giving investors the ability to buy and sell throughout the day at market prices. This innovation aims to reduce expenses, increase tax efficiency, and make ETFs more accessible to the average retail investor.

The SEC’s approval is seen as a key milestone for the industry, leading the way for other asset managers to follow suit. This change will blur the line between ETFs and traditional mutual funds, sparking a surge in new exchange-traded products competing for investor dollars.

Asset managers that want to offer an ETF no longer have to start from scratch. They can now add ETF share classes to their existing mutual funds, eliminating the need to wait for a track record to build slowly over time. This simplifies the process and levels the playing field between mutual funds and ETFs.

The approval came sooner than expected, with about 80 similar applications waiting in the wings. Dimensional Fund Advisors was the first to file after Vanguard’s patent expired, setting the stage for others to follow suit. The SEC’s order includes safeguards to reduce conflicts of interest and ensure proper disclosures to investors.

Read more at Yahoo Finance: US SEC readies relief for asset managers to add ETFs to mutual funds