SEC Proposes Rule 17a-7 Fix to Restore Fixed-Income Cross Trading for Funds
The SEC on October 9, 2026 proposed amendments to Rule 17a-7 under the Investment Company Act that would once again let registered funds cross trade fixed-income securities with each other.
On October 9, 2026, the SEC proposed amendments to Rule 17a-7 under the Investment Company Act of 1940 that would again permit registered funds to cross trade, reversing the 2020 amendments that eliminated fixed-income cross trading while leaving equity cross trading permitted. Why sophisticated counsel and clients care: cross trading has historically been a core tool for managing portfolio transition costs, internalizing trades and reducing transaction costs for fund portfolios. Its removal in 2020 reshaped fixed-income trading workflows across asset managers and their service providers; a proposal to restore it signals a reversal in the Commission's policy stance, but it remains a proposal, not a rule, and the adopted text, transition mechanics and any conditions could differ materially from what is proposed. Advisers should treat nothing as operative today. Action and what to watch: the comment record and rulemaking docket, including how any restored framework addresses valuation discipline, conflicts review, fund-level governance and operational controls built in the absence of fixed-income cross trading. Firms should map client exposure now — which funds and strategies were most affected, and what portfolio-management, compliance and trading-vendor changes a final rule would require — and confirm whether the approach would apply to ETFs and other vehicles uniformly.