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Dave Nadig
3:23
The vanguard thing is just an extension. Vanguard has a patent on the idea of using a share class of an existing mutual fund and "turning it into" an ETF.
So when you buy VOO, Vanguard's S&P 500 ETF, you're actually buying a share class of a GIANT mutual fund.  The other share classes are admiral shares, and a dozen other weird share classes that might even be used inside annuities and so on.
3:24
but overall, all those share classes have claims on one giant pool of stocks.
Only one of those share classes - the ETF - regularly does creation and redemptions,
3:25
And the benefit -- getting rid of your low basis stock -- accrues to the entire pool of assets.  There's not a separate segregated bucket from an accounting perspective that allocates certain stocks to certain share classes.
Thats really the nut of it.
3:26
THat the tax efficiency of ETFs bleeds over into fund shareholders at Vanguard.
Those patents expire in the next few years though.
OK last question.
Henry
3:26
Always wondered: why do traders wear "smocks" on the trading floor?
Dave Nadig
3:26
Quite simply for identification.  It's not a fashion statement.
3:27
If you go to the Cboe pits, for instance, you see everyone in their jackets, and they all have a nametag that's usually three letters on a big giant plastic badge.
In an open outcry system, you need to be able to quickly look and note who the counterparty to a trade you jsut made is.
the jacket says "this guy belongs here" and the badge says "It's janet from Schwab" or whatever.
3:28
OK, that's going to do it for this week.  Thanks for stopping by, and see you next time!
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