Get ready for a shakeup in the investment world! Cboe Global Markets has filed a groundbreaking request with the SEC, proposing a rule change that could forever alter how we invest. Their vision? Merging the familiar world of mutual funds with the fast-paced realm of ETFs – creating a revolutionary "combo fund."

Imagine a single investment vehicle offering the best of both worlds: the affordability and diversification of a mutual fund, alongside the real-time trading flexibility of an ETF. That's the essence of Cboe's proposal. If approved, issuers would be able to add an ETF share class to existing mutual funds, essentially combining them under one roof.

Analysts like Todd Sohn at Strategas are optimistic, predicting a potential surge in both the number of ETFs and total ETF assets. This innovation has the potential to streamline investing, making it more accessible and efficient for a wider range of investors.

Breaking Down the Barriers: How Would it Work?

Traditionally, mutual funds operate at a slower pace, with purchases and redemptions occurring at the end of the trading day. ETFs, on the other hand, trade throughout the day like stocks, offering real-time price fluctuations. Cboe's proposal aims to bridge this gap, potentially allowing, for instance, the inclusion of Bitcoin ETF shares within a mutual fund's portfolio, granting investors exposure to the digital asset without the need for a separate purchase.

A Pioneering Spirit: Who's on Board?

Cboe isn't the first to explore this concept. Vanguard's clever "share class" structure, patented until May 2023, paved the way. This structure allowed them to offer ETFs as an extension of their existing mutual funds, essentially sharing the same underlying assets.

Following Vanguard's lead, a wave of asset managers – including Dimensional Fund Advisors, Morgan Stanley, and Fidelity – have expressed interest in replicating this model. This growing appetite for "combo funds" underscores the potential impact of Cboe's proposal.

The Road Ahead: Will the SEC Approve?

The SEC has 240 days to make a decision on Cboe's application. Analysts suggest this filing could force the SEC's hand, compelling them to address the growing interest in hybrid investment vehicles.

With the North American ETF market projected to reach a staggering $8 trillion in 2024 and continue its exponential growth, Cboe's proposal arrives at a pivotal moment. Will they usher in a new era of investing with "combo funds"? Only time will tell, but one thing's for sure: the future of investing might be getting a whole lot more flexible.