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Dave Nadig
3:00
Good afternoon!
Welcome to ETF.com Live.  As always, you can enter your questions in the block below,
3:01
I'll try and cram as much as I can into about half an hour.  THere will be a transcript later today if you have to hop.
Also just a heads up - We'll be taking next week off, as I'll be at the Inside Smart Beta and Active conference in New York.
3:02
With that, let's get rolling.
LL&P
3:02
What impact do you think the rollback of the Volcker Rule might have on bond ETFs
Dave Nadig
3:02
So, a few thoughts.  First, nobody's really rolling back the whole thing.
3:03
The news today was pretty limited - that they're considering changing the time window for which banks get to justify their trading as legitimate market making (good) vs. prop trading (bad).
3:04
There's a lot we don't know about how this would impact ACTUAL trading, but theoretically, it could make it easier for banks bond-desks to hold inventory to enable trading for their customers (that's the stated reason to roll some of this back).
and a little more liquidity in the bond market isn't, in a vacuum, a bad thing.
I think there are some counterpoints though -- this pokes at one piece of the regulatory infrastructure, while not really addressing anything else.
3:05
Stephen Gandel had a great piece on this this morning over at Bloomberg (hold for link):
As for ETF impacts?  Really none.  This is about the underlying markets.
Bennie Jones
3:05
What is the best all around Multi-Factor ETF?
Dave Nadig
3:06
Well, you KNOW I'm going to half-answer/half-dodge that question, because it's just super broad.
there are dozens and dozens of multifactor ETFs that all have very different purposes, and will be different for different kinds of investors.
3:07
I do think its worth pointing out PRF though -- it's been around forever, and was in some ways "the first" smart beta ETF.
3:08
it's the Research Affiliates driven large cap U.S. ETF - so it's a bit like buying into Rob Arnott's brain.
but I do think you need to always ask "what am I replacing"
the answer with something like PRF is pretty clear - you're replacing large cap equity.
Liz Hankel
3:09
HI Dave, How arduous is it to launch your own ETF, and what's an "average" amount of time that would take?
Dave Nadig
3:09
Hi Liz!  So, I would say it's in general gotten easier.
3:10
if you truly wanted to start from scratch - let's say you're just an average RIA with an idea you think is the next great thing, and you wanted to do it ALL yourself, I'd say you're looking at a minimum of 6 months, and probably longer.
There's a big part of that that's just finding your partners -- lawyers, custodians, fund accountants, etc -- who will be part of all your legal filings and so on.
3:11
More often these days, however, smaller folks come to market using an umbrella firm like Exchange Traded Concepts, where you just sort of "rent" that existing infrastructure.  Or you could simply shop your subadvisory skills to someone like ADvisorShares.
3:12
It's a bit of a "what are you really after."  If you've got one core portfolio idea, it likely makes sense to partner up.  If you think you've got an angle on an ETF complex - a dozen funds, with your own distribution and marketing ideas -- then you might go it alone, and take the time (and money) that entails.
New To This
3:12
Can I buy shares of an ETF directly from the issuer rather than go through a brokerage?
Dave Nadig
3:13
I love simple questions - short answer, nope: you cannot buy ETF shares directly from the issuer.  With mutual funds, you can do this.
You can open up a Janus account, and just have a direct relationship with them.
now, it's SLIGHTLY complicated because a lot of the big issuers (Vanguard, Fidelity, Schwab) also run big brokerage platforms, so you can buy, for instance, Schwab ETFs in your Schwab accounts.
3:14
but in general, nope.  You buy ETFs like you buy AAPL stock.
Bill Donahue
3:14
Dave, how much impact do you expect that an ETF rule (e.g. codifying most of the current areas requiring exemptive relief) will have on the ETF industry?  Are there any particular areas (e.g. custom baskets) which could have more impact than others in an ETF rule?
Dave Nadig
3:15
So, for those less in the weeds:  ETFs exist through exceptions.  In order to do what they do, they need approval to bend or break a whole pile of securities rules around issuance, fund accounting, listings, and so on.  That's part of what makes the process a bit daunting.
the idea of an ETF Rule that cleans all that up and creates a simple, standard way of both launching and regulating ETFs has been kicking around for 15 years, and the idea is back on the SEC agenda.
3:16
I'm a BIG fan of cleaning it all up, and it would have some profound implications.
1: It would open the market even more to new entrants, lowering both cost and time to entry.  That could of course lead to a flood of products, which on the one hand is good for investors, but also makes ETF due diligence even more challenging.
3:17
2: It would remove the haves/have nots situation the industry currently has.  Issuers in the gate early (State Street, iShares, for example) often have much "fuzzier" and broad exemptive relief than what you could get today.
this means they can do things, like customize the creation/redemption process for big investors, that new shops can't do, which is plainly unfair.
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