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Hector
3:26
Hi Dave! Do you think the new SEC rule change we saw recently will encourage many more ETFs to be launched in the near to medium future? Will it be easier to target niche portfolios at low cost for ETF founders?
Dave Nadig
3:26
So, if I was being super cynical, I'd say this is coming SO late in the ETF market development cycle that it's a bit like they looked around and said "everyone already got their exemptive relief? Great!  Now we'll make it easier."
3:27
In other words - a LOT of the players who you'd expect to get into ETFs already have gone through the pain, even if they havent launched a single product yet.
This is particularly true of old guard mutual fund companies.
3:28
SO, it makes it a LITTLE easier for, say, some upstart crew with a good idea and a little venture capital, but it's a bit marginal.  It maybe saves them a few months, maybe (at the outside) $100k in fees ...
so its real, but it's not like, market altering.
So I dont think its a flood ... it's a opening the tap just a bit wider.
The other stuff in the SEC rule - like custom baskets -- is much more meaningful to the ETF ecosystem as a whole.
3:29
OK, my hands are failing me here, so I'll take one last one:
Why?
3:29
The Journal had a piece today talking about how iShares is competing with themselves of fees? Why would they do that?
Dave Nadig
3:29
So, the article today talked about the ETF fee war, and pointed out that some of the iShares core products - IEMG and IEFA in particular - were launched directly to compete against EEM and EFA
3:30
those are two GIANT funds, with pretty fat expense ratios.
EEM is at 69 basis points
In todays market, thats way out on the edge of expensive
3:31
IEMG, which is arguably a BETTER fund (it goes deeper down the cap spectrum) charges 14 basis points.
on the surface, that's nonsensical, and investors have realised that
so money has POURED out of the expensive funds into the cheap ones, and by  my calc, its around $130m in fees that Blackrock is just not collecting, just from money flows this year.
so why?
3:32
Because the alternative is Vanguard and Schwab take all that money.
its really that simple.
Facing this inexorable fee war, they can do two things.
they can cut the fee on EEM to 14bps
or they can launch a new product and hope SOME of the EEM money sticks at the old price.
And for sure -- plenty has.
3:33
EEM still has 30  billion in assets.
So the second question is - why would anyone stay in EEM when its charging so much more.
really the answer there is liquidity.
3:34
EEM still trades like water, and it has very active derivatives you can trade against it as well.
Over time, I just expect the situation will eventually reverse.
IEMG will become the bigger, more liquid fund.
(I think it's already bigger).
3:35
and I wouldn't be surprised for the options to "move over" as well.
But in the end - we all win.
I'm going to wrap it up there folks.  Thanks for the really great questions this week.  We'll have a transcript up shortly.
Here's a link to the tool we talked about at the top, as well:
3:36
or rather, to my explanation of it.
you can reach any stock at etf.com/stock/ticker (so http://www.etf.com/stock/AAPL, for instance)
have a great rest of the week!
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