Nasdaq submitted a regulatory change proposal on April 7 to expand its definition of Exchange-Traded Product (ETP) to include Class ETF Shares, a hybrid product that combines features from traditional funds and ETF structures.

The change in Equity 1, Section 1(a)(15) allows issuers of these products to use the exchange's optional Initial ETP Open process on the first trading day.

What the regulatory change means for ETF issuers

Class ETF Shares are publicly traded shares issued by open-end funds that also offer traditional share classes for fund shares.

The SEC approved Nasdaq's general listing standards for these products in November 2025 under Rule 5703.

Separately, the SEC also approved Nasdaq's Initial ETP Open in May 2025. This process allows issuers of ETPs to postpone a security opening from pre-market hours at 04:00 ET to regular market hours at 09:30 ET.

The postponement allows Nasdaq Halt Cross to establish an opening price, which provides for a more orderly price discovery.

Until now, only ETPs listed under existing Nasdaq rules have had access to this functionality. The new filing adds Rule 5703 to the list and extends the same opportunity to Class ETF Shares.

A growing portfolio of dual-class funds

The submission comes at the same time as asset managers compete to launch dual-class funds. The SEC has approved around 48 companies for exemptive relief for multi-class ETFs out of approximately 100 applications as of March 2026.

Major names like BlackRock, Fidelity, JPMorgan, and Morgan Stanley have all submitted applications.

Operational infrastructure, however, still lags behind regulatory developments. DTCC's automated solution for processing the exchange of fund shares for ETF shares is not expected to go live until May 18, 2026.

Full rollout of custodial and market maker functions is unlikely to occur until late 2026 or in 2027.

Nasdaq's rule took effect immediately under Section 19(b)(3)(A)(iii) of the Securities Exchange Act.

The exchange has also asked the SEC to waive the standard operational delay of 30 days, arguing that the change is a non-controversial, definitional adjustment that does not alter existing listing standards or the process of Initial ETP Open.

The SEC retains the authority to temporarily suspend the rule within 60 days if it considers that the change raises concerns regarding investor protection.