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ETF.com Live!
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Dave Nadig
2:59
Howdy folks, welcome to ETF.com Live!
3:00
I can see we have some BIG MEATY questions this week, so lets jump right in.  I will type as fast as I can.
420Investor
3:00
Is MJ safe from an operational perspective? Is US Bank and NYSE standing behind it? I dont want a big tax bill if it has to liquidate early.
Dave Nadig
3:01
SO for those playing the home game:  MJ was MJX and before that it was something entirely unrelated, and the issuer just morphed it into a cannabis ETF on the fly, which took a lot of its service providers (and investors!) by surprise
So, I believe that IF U.S. Bank wanted out of the fund, they would have to give 90 days notice – which, given the fund became a Cannabis ETF in January, puts is in the “any day now” zone.
3:02
Of course, we dont have all the contracts, it could be 120 days, which would be more like this summer.  But certainly the more time that passes, the less likely there's an issue.
The reality is nobody knows for certain what the regulatory status of this thing is. The custodian could get cold feet.  Heck the exchange could get cold feet.
But honestly my bigger concern here is just the holdings profile – you get this somewhat odd mix of licensed Canadian firms, and some tobacco and biotech.
3:03
I suspect what people really want to invest in is “hey, pot’s going to be sort of legal in half the country (by population) – how do I profit” and I’m not convinced any of the listed products are the answer - here or in Canada.
Sean R
3:03
Do you think market makers should be compensated directly by ETF issuers to be more active in smaller ETFs?
Dave Nadig
3:04
This is a bit of a thorny subject, and since Cboe Global Markets is the parent company of ETF.com, I don’t want to get into the weeds of the market maker rebate system and the recent SEC action there.  But ...
in general, the “small ETF problem” is a real thing.  If you’re an upstart ETF, getting enough attention to have a decent advertised spread is a genuine, real problem, and one that issuers and exchanges have really worked to try and solve.
3:05
The reality is that the ETF ecosystem depends – enormously – on a system and players they have essentially no control over, which is the willingness of big market makers to actually facilitate buys and sells.  If you can’t incentivize them – somehow – with dollars, I’m not sure what the solution is.
Curious and Confused
3:06
Are there any advantages to having ETFs in a retirement account? ETF growth seems to be lagging behind in the retirement savings space.
Dave Nadig
3:06
Awesome question
In your 401(k), a few key advantages of ETFs go away.
You don’t probably care about intraday liquidity, and you certainly don’t care much about tax efficiency.  However, ETFs are still generally cheaper in most cases than a comparable traditional mutual fund, and I think the baked-in transparency is always a boon.
3:07
The big reason you don’t see more ETF-centric 401(k)s – although they exist, ask Schwab – is that mutual funds actually have two big advantages.
The first is fractional shares.  You can buy an odd dollar amount of a mutual fund, but you have to buy a whole share of an ETF.  That makes dollar cost averaging in your 500 bucks a paycheck into 4 funds much tricker in ETFs.
3:08
The second is that mutual funds generally have 12B1 fees, which can be used to offset the costs of running the plan.
That’s money you’re paying, but since it comes out of performance, most employees don’t know, or complain. 99.99% of etfs don’t have 12b1 fees, and are way too cheap to kick in 25-35 basis points for recordkeeping anyway.
(Oddly, the sector SPDRs do, but they are small).
Todd Rosenbluth - CFRA research
3:09
Increasingly ETF firms are going the self indexing route. How can an investor know if this happening with their fund? What if anything differently  should investors understand about these strategies than an MSCI or S&P based fund?
Dave Nadig
3:09
Hi Todd!  Thanks for joining.  Great question.
The biggest self indexer is probably WisdomTree – the majority I believe are self indexed.
The “how you find out” is pretty easy – they disclose it all over the place: in the prospectus, on the website pages, and so on.
3:10
(In general, I actually find most self-indexers are better at getting good documentation on things like index methodology in front of investors than the big, name brand indexers. - ive wasted so many hours chasing down index docs)
I guess the big question is should investors care?
3:11
With a shop like wisdomtree, you’ve got some of the smartest investment minds in the business on staff: Luc Siracusano, Jeremy Schwarz, Jeremy Siegel (apologies for spelling?) from Wharton, and so on.  They do real, hard core, nerdy research, which they then bake into their products through custom indexes.
The COULD certainly just outsource the actual work to MSCI or Solactive, but to some extent, why?
3:12
You can rent calculation services from those types of folks, so it’s not as if Wisdomtree needs to all of the sudden staff a giant corporate actions or data team to do the job.
And since they control all the IP, they can effectively do the index part “for free” which lets them keep their costs down, which theoretically means they can keep their fees lower than they would otherwise.
In short, I think it’s not a bad thing – you just need to do the work to decide if you like the self-index!
Chooch
3:13
Will I see approval of a non-transparent ETF in 2018 (or in my lifetime)?
Dave Nadig
3:13
Heh -- i wonder the same thing myself sometimes.  I have another question here about who might get the approval first.
3:14
There are several folks with their hat in the ring here, I wont go through all of them.  I think what's actually happening is that the SEC is slowly driving all of the different applications towards a similar model
which means that the differences between approaches will get narrower and narrower until, effectively, they all end up approved.
3:15
I have heard rumblings that with someone who really understands ETFs on the top of the food chain (Dhalia Blass, again, sorry on spelling) that the process should speed up.
But I think I'm giving up on trying to pick the timing window
I've been wrong for 2-3 years already!!!!
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