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ETF.com Live!
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Dave Nadig
3:00
Hey folks!  Welcome to another session of ETF.com Live! Feel free to keep asking me questions, and I'll get to as many as I can before my tennis elbow makes me quit.
As a special note:  Next thursday, our EIC, Drew Voros and I are doing a webinar that's just straight up ETF 101, with a live Q&A on video.
3:01
You can register for that here:
And as usual, don't worry if you miss something, we'll post a transcript of this session shortly after we wrap up.
With that, let's get started.
Bill Donahue
3:02
Dave, thanks for continuing to do these ETF Live sessions. The SEC released a series of proposals (1,000 pages) yesterday that I will collectively refer to as SEC Fiduciary Rule, which includes more disclosures around broker dealer conflicts of interest, disclosures about services provided by investment advisors and broker dealers, as well as a proposed fiduciary standard for advisors. One main criticism of these proposals is that they do not define "best interest." What is your preliminary viewpoint of these proposals and how they might impact ETFs should they be adopted? Thanks.
Dave Nadig
3:02
Hi Bill!  Big meaty question to kick off with.
I feel pretty strongly in universal standards and level playing fields, so I applaud the SEC for wading into what can be a real briarpatch.
3:03
As much as I have a reputation for being a regulation wonk, I have not read every one of the 1,000 pages:
3:04
But I've skimmed it and read the summaries from the poor reporters who stayed up all night. Importantly, the actual RULE is only 2 pages:
(Yes, I had those in my browser history.  I'm a big hit at parties.)
3:05
The criticism that the rule itself is very very vague I think is sound criticism.
I suspect that the comments received from the industry will all talk about what the heck "best interest" really means.
But here's my bottom line: I'm not sure the proposed rule change makes a huge difference as it's sitting now.
3:06
The FIdicuary Rule, as written, I think would have and actually did drive some incremental assets
But I don't think this one would have the same effect.
Worth nothing though: the SEC also suggested that they are going to only allow the term "advisor/er" to be used by people who are operating as fiduciaries.  That's a nice clarification.
But end of the day: this is just watered down.
Todd Rosenbluth - CFRA research
3:07
On etf.com there’s tools to understand how well an ETF historically tracks its benchmark. What happens when the index changes like with MJ and Xtrackers single country ETF. First trust plans to convert an etf to an India ETF I saw on etf.com.
Dave Nadig
3:07
Hi todd, welcome back!
Man, what a nightmare right?  The "reuse" of ETFs is a major pain, and not just for data providers.
3:08
The data on ETF.com is primarily sourced from FactSet and Elisabeth Kashner's team there (FactSet bought it from ETF.com years ago, so obviously we like it!)
The rule then, as I'm sure it is now, is that if the index change is "substantial" then the statistics around things like tracking re-set.
3:09
So for example - Vanguard has done a bunch of changes over the years, say from S&P indexes to CRSP indexes.  They did those over a long period with transition indexes, and ultimately, large cap US equity was still large cap US equity.
In those cases, the indexes were mapped along with how NAVs changed, and the stats remained.
But something like MJ?  FOrget it.  The history gets tossed out.
There's a judgement call from the FactSet team on what "substantial" means, but really it's usually pretty obvious.
3:10
THere are some edge cases probably -- DJX (wisdomtree Japan) made some pretty significant changes but I BELIEVE keeps a long term, sitched together history.
The joys of being a data monkey.
Anonymous
3:10
Why does VWO fair value its NAV but EEM does not? Is there a rule?
Dave Nadig
3:10
THis is such an awesome question.
3:11
Simple answer: because VWO is a shareclass of the Vanguard EM mutual fund, and that's "just how those funds do it."
The complex answer is super interesting:
(grab a coffee!)
it's on the board of the fund to decide what the valuation processes are.
If you run a Japan fund in the U.S., well, the market in Japan is literally never open during U.S. hours.
3:12
So from 930 in the morning to 4PM, when you strike NAV, the "closing" price of the mutual fund or ETF will only move if the Yen moves.  The security values are just the close from last night.
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