Speaker 1:
Welcome to ETF Central, recorded here at the New York Stock Exchange, the home of ETFs. We're diving deep with the people shaping the space, the technologies driving innovation, and the stories behind the tickers. Whether you're an investor, issuer, or industry insider, welcome home.
Bilal Little:
Welcome to today's episode of ETF Central. My name is Bilal Little, I'm your host. Really excited about my next guest. This is my business partner, her name is Maital Legum. She's head of operations for all ETFs here at the New York Stock Exchange. She's listed more ETFs than anybody in the industry. What's most important about this particular guest is we get to unpack a really unique conversation to give you a glimpse and insight into all things that operationally go into listing and launching an ETF. So really excited about this.
Maital, welcome to the show.
Maital Legum:
Good to be back with you. First time hosting a podcast where I'm the guest with you. We've been working together for a year, so I think it's about time.
Bilal Little:
Yeah. Yeah, this is a good time. I'm excited to have you. This is going to be a good conversation. Maital, for the guests who don't know you, or for the listeners who don't know you, tell us a little bit about your background and how long you've been here.
Maital Legum:
All right. So I know it's going to come as a shock for those who are seeing this and can't believe it, but I've been here for just the short 14 years. Hard to believe. It's felt like a lifetime, the industry, we'll talk about this. But the industry, the process change and continues to change. So it's been a really dynamic place to be for the last 14 years. Just from an NYSE and an ICE perspective quite frankly, but also just from an ETF industry product development, adoption. Just every way you could look at it, it's just been extremely transformative and it's kept it really interesting. So here I am, 14 years later, and it's hard to believe because you can't believe I'm that old that I've been here for 14 years, but here I am.
Bilal Little:
No, it's like the industry's all converging, so it's amazing opportunity across the ETF spectrum, which is nice. So for people who don't know, tell the viewers a little bit about your background specifically on listing and launching ETFs?
Maital Legum:
Sure. As I said, I've been here for quite some time and I started in the ETF team 14 years ago. Which I came on board, and my whole job was just helping issuers list products. Which is still what I do today in a very different capacity obviously. But worked with one of our colleagues, Tom Champion, who is still here. I think I gave him a shout-out on another podcast that I did because whether he liked it or not, he hired me and here I am still working with him. So we would focus on half the issuers and we would go through the whole process. And back then, you could imagine that we were probably listing a quarter of what we list today, but every listing was actually more challenging than it is today from an exchange perspective. And we'll talk a little bit about that, why that is.
And then today, I really manage the whole process. So when an issuer decides, "Hey, I want to list on the New York Stock Exchange," then they come to myself and my team and we talk about, okay, well, what does that actually mean and what does that entail? And once you're listed, what are the things that you need to think about now that you're an NYSE listed fund? Versus before, where you weren't listed.
Bilal Little:
Yeah. No, it's funny because when I transitioned to join the team, I come from the side of the business where we call everyone asset managers. When I got here, you guys call everyone issuers. So obviously, the terms are synonymous, they effectively mean the same thing. So let's just talk about for an issuer listing for the first time, what's that process, and how do they engage with you and your team?
Maital Legum:
So the Exchange is something that they think about in so many different parts of the listing process, so I think it really depends on the type of issuer that it is. So what we're seeing a lot of today is the traditional asset managers who are like, "Finally, okay, it's time to list ETFs." They have no choice. It kind of is they don't really have a choice anymore. So they know how to run money.
Bilal Little:
Yeah.
Maital Legum:
They know how to run portfolios. A lot of them know how to sell. A lot of them know how to talk to clients. But what they don't know is what it actually means to be in an ETF wrapper.
Bilal Little:
Yeah.
Maital Legum:
It sounds great because that's the buzzword around town. ETFs are tax-efficient, they're lower cost, it's easy to buy and sell, it's easy for retail to access. But they don't actually know what it means to be a listed fund. So now what happens is that they take everything that they've known, they know how to manage portfolios, they know where it fits in a client allocation, but they don't know what it means that now it's going to be accessible all day long.
Bilal Little:
Yeah, yeah, yeah.
Maital Legum:
Now, they have another partner that's a self-regulatory organization. What can and can we not do? And that we work with the folks upstairs to manage that process. But you can't just do anything you want because now you're listed. So if you want to make changes to the funds.
Bilal Little:
Yeah.
Maital Legum:
Instead of just notifying, filing like you would or in a press release, now the Exchange is a part of that conversation because this is pricing and trading all day long. So are there things that you want to do today or make changes to the fund that might impact investors? And what does that actually mean that now they can buy and sell it all day long? You know what I'm saying? That's something that's unknown to them.
And now, they're also working with the Exchange, they're working with market makers, or working with APs. They're always working with the custodian banks, but it's a lot faster-paced. You got to think about so many more things than just managing their portfolio.
Bilal Little:
Yeah.
Maital Legum:
I know you gave me a list of questions-
Bilal Little:
Yeah, that's fine.
Maital Legum:
... but I'm jumping the gun.
Bilal Little:
That's fine.
Maital Legum:
That's some of the challenges that come with becoming an ETF issuer, especially for the traditional asset manager. And you come to the Exchange, and some of them who have done a lot of due diligence, who have done their homework, this industry is very friendly so everyone talks to each other and tells you, "This is what you need."
Bilal Little:
Yeah.
Maital Legum:
Or a lot of the custodians know a lot of this and a lot of the attorneys know a lot of this. But it's putting all the pieces together.
Bilal Little:
Yeah.
Maital Legum:
What does this secondary market piece actually mean?
Bilal Little:
Yeah.
Maital Legum:
So when they come to us, some of them know nothing.
Bilal Little:
What they need to do?
Maital Legum:
And some of them are like, "Okay, what does that mean?"
Bilal Little:
Yeah.
Maital Legum:
"It's going to trade all day? How is it going to price?" Or, "Hey, what do I have to think about when I want to make a change to my fund?" Oh, well, you should probably let us know and let's talk about it because you don't want to do something midday, or what is material and what is not material. These are things that a traditional asset manager never has to think about.
Bilal Little:
Yeah, for sure.
Maital Legum:
Then all of a sudden, this ETF wrapper makes you, A, talk to five other partners that you've never interacted with.
Bilal Little:
Yeah.
Maital Legum:
As well as the whole compliance and regulatory element that people, it's really important, but it's something that you have to build into your process.
Bilal Little:
Yeah.
Maital Legum:
So we help issuers through that build out and their rule books and their processes so they understand where we fit in to their ecosystem because I think ETF, asset managers who go into ETFs' world all of a sudden are like, "Why are there so many parties involved?"
Bilal Little:
Yeah, yeah.
Maital Legum:
"Why do I need to talk to 10 more people every single day?" It's both good and bad, but obviously it creates a lot of complexity that they are not used to.
Bilal Little:
Yeah. So I'm glad you bring that up because I think it's a great opportunity for you to actually share what role specifically does the New York Stock Exchange play and your role to help manage that relationship. Because there's so many different pieces of the puzzle, but it seems as though the core partner will be the exchange, and in this case the New York Stock Exchange.
Maital Legum:
Right. So one of the great benefits of working here and having this seat is that we see so much.
Bilal Little:
Yeah, yeah.
Maital Legum:
So we list hundreds of ETFs a year, so in my career here that's thousands.
Bilal Little:
Yeah.
Maital Legum:
We really interacted with every piece of the puzzle. We have this view that's super unique. So as a listing exchange, yes, we run great secondary markets, that's not what we're going to talk about in terms of market quality. Yes, we have a great internal support system. But one of the greatest assets for the New York Stock Exchange ETF team is the knowledge and the expertise.
Bilal Little:
Yeah.
Maital Legum:
What does that mean? It's that we're a little bit like in-house consultants. So you can come with any question and just ask us literally.
Bilal Little:
Yeah.
Maital Legum:
You're part of this conversation too ...
Bilal Little:
Yeah.
Maital Legum:
... from a sales and distribution perspective. People are like, "I'm getting five different vendors telling me all these things. What do I need to know? What do I need to focus on?" And we're a little bit of a sounding board on that. That could come into a lot of different flavors, so it could be from a sales perspective. It could be from a legal perspective, or it could be from a custodial. Again, there's so many partners. So we've really become this mini free of charge, or free of charge at your listing fee-
Bilal Little:
Yeah.
Maital Legum:
... we're really partners. And so, we spend a lot of our time just talking to issuers to help them grow their business, or even just get to the starting point of listing an ETF.
Bilal Little:
Yeah.
Maital Legum:
And we talk about this all the time. Well, why would you do that? How do you make money?
Bilal Little:
Yeah.
Maital Legum:
So at the end of the day-
Bilal Little:
It's still a business.
Maital Legum:
It's still a business, you're right. So people are like, "How do you spend all your time just giving people free advice?" Well, we're only successful to the extent that our clients are successful.
Bilal Little:
Yeah.
Maital Legum:
I always like to tell prospects or issuers if your fund doesn't grow, doesn't trade, we're not successful.
Bilal Little:
Yeah.
Maital Legum:
We want to grow together. So a lot of what we do, we lay the seeds, and that maybe in two, three, four, five, 10 years from now, your fund is going to be large and it's going to be trading and it's going to have auction volume and that's really when everything kicks in. But it could take a couple years and we spend a lot of that time helping you in that process and in that journey because it is so different and unique from anything that you might have come from, most likely as a traditional asset manager of course.
So we work ... I can't even tell, I'm trying to think of the strangest questions I've ever gotten. That would have been a good prep.
Bilal Little:
Look, this is a great point. So what are the misconceptions issuers actually have at the time of listing or launching?
Maital Legum:
Yeah. I think people get so hung up on getting everything exactly perfect. But the beauty of ETFs is that you can grow your assets at all times.
Bilal Little:
Yeah.
Maital Legum:
It's like get this thing done, get it out the door, work out the kinks, and then go sell it. So I think what happens because most of us are always focused on, "Okay, this is the goal, we want to finish this project," but you're really starting your project when you list. So I think people get so fixated on all the tiny, little details, even from a PR, and marketing, and sales perspective. They make these plans. I'm like, "You're a small team, maybe you should focus on talking to market makers and getting everything set for launch and making sure that you're going to be managing this fund from the day-to-day correctly." Versus 20 steps ahead, "Well, what's our marketing?"
Bilal Little:
Yeah.
Maital Legum:
Well, sales should always be thought of before you even launch, but we'll get into that, too. But the point is that it's like, hey, this is open-ended funds.
Bilal Little:
Yeah.
Maital Legum:
So you can sell this at any time.
Bilal Little:
Yeah.
Maital Legum:
So you know what, list five, see what's topical at that time.
Bilal Little:
Yeah.
Maital Legum:
See what solutions people are looking for and go with that. But create that menu of options for yourself. And we're all excited, we all want to talk about bell ringings. Let's not talk about that. But we all want to talk about ... Or podcasts, or whatever you want to do to talk about your product and to get the name out and that's all very important. But when you focus on that-
Bilal Little:
Yeah.
Maital Legum:
... without over any of the details.
Bilal Little:
Yeah.
Maital Legum:
To me, and you shouldn't list funds that aren't going to sell, I get that. But the order of operations of don't get fixed on that to delay your launch-
Bilal Little:
Yeah.
Maital Legum:
... is where I'm like, "This is where you should focus," and then move on. It's all a big picture. You're not going to launch ETFs that you don't think you're going to be able to sell. Well, we hope. We hope. Sometimes you don't know.
Bilal Little:
Yeah, yeah.
Maital Legum:
There is one in a thousand that that happens.
Bilal Little:
Yeah.
Maital Legum:
But it's focus in due time. That's why I love ETFs.
Bilal Little:
Yeah.
Maital Legum:
The beauty is that it's open-ended so you can always grow.
Bilal Little:
Yeah.
Maital Legum:
You can always pivot. Let's say this strategy doesn't work, you want to adjust it a little bit. That's okay.
Bilal Little:
Yeah.
Maital Legum:
It's very fluid.
Bilal Little:
No. Before we transition into the post-launch part of the conversation, let's just simplify the entire step-by-step process. Maybe not do every single step, but if you were to build a checklist of the five items that people should do at the very beginning of their launch, would it be, hey, let me make sure I got my lawyer correct, let me make sure I have a good partner from a custodian perspective, let me make sure I have good relationships with market makers? What would be that five-step process, just off the top of your head, that you would check?
Maital Legum:
So first and foremost, it's choosing the right partners.
Bilal Little:
Okay.
Maital Legum:
Okay. One of them being the New York Stock Exchange obviously. But you have a lot of choice in ETFs, which I think is why when you're like, "I want to launch an ETF," I could be very confusing.
Bilal Little:
Yeah.
Maital Legum:
Because there's so many different vendors, there's so many different partners that you're going to have to work with. Some of them will be your vendors, some of them you'll sign a contract and you'll be paying them, and some of them are going to be partnerships with market makers and authorized participants and people that are new to you as an issuer, but very well known in our ecosystem. So it's creating great relationships with your partners because at the end of the day, they're going to be so important to your success because they're going to help you through that process. This industry is very friendly.
Bilal Little:
Yeah.
Maital Legum:
So people are always trying to help each other. And then, we all want you to grow because, just like I said, we only do well if you do well. Same with many of your other partners. Except your lawyers, they're always going to charge you no matter what. But just having somebody you're really comfortable working with and someone who you can trust is really important.
Bilal Little:
Okay.
Maital Legum:
That's like, "I want to list an ETF." That's great. Now, "I got to get legal counsel. I got to talk to market makers. I got to talk to an exchange. I got to talk to a custodian. I got to have a distributor." All these parties have to come together and work together for that common goal. So if you have to spend a lot of time in talking to, who are you comfortable working with? Who do you think is going to help you grow? And you have to ask yourself those questions as you're going through that journey because there's a lot of people who are going to be wanting your business.
Bilal Little:
Of course.
Maital Legum:
This is a growing industry. It's a hot industry. So I think that's probably what takes issuers the longest.
Bilal Little:
Okay.
Maital Legum:
But it's probably the most important.
Bilal Little:
Important? Yeah.
Maital Legum:
Because once you have all of those things set-
Bilal Little:
It's foundational.
Maital Legum:
Exactly, it's your foundation. It's not so easy to change these. It's not easy to change a custodian. It's not easy to change an exchange. You can, of course. Nobody is going to get you locked in. But how much easier is it if you're comfortable already, everything is going well, and that doesn't become a hurdle to your business?
Bilal Little:
Yeah.
Maital Legum:
I joke that people shouldn't be fixated on sales, but at the end of the day, you shouldn't be listing an ETF unless you know that there's a market for it and that you can distribute it and sell it.
Bilal Little:
Absolutely.
Maital Legum:
That is an element of one of the five things is, Okay, how am I going to distribute it?
Bilal Little:
Yeah.
Maital Legum:
Is there a market for this? Is this something somebody out there needs in their portfolio?
Bilal Little:
Yeah.
Maital Legum:
Is it something that a retail investor wants? That's a question you should be asking yourself before you list it just because there's so many good ideas out there.
Bilal Little:
Right.
Maital Legum:
There are.
Bilal Little:
We don't have a shortage of good ideas right now.
Maital Legum:
But if they don't fit into a framework, they're not going to do anything.
Bilal Little:
Yeah.
Maital Legum:
And then at the end of the day, and I always tell people, your market makers are really important. They're going to give you the support that you need, you're going to quote onscreen. But, and this is a very unpopular opinion, if nobody knows about your ETF, nobody cares about your market quality.
Bilal Little:
Exactly.
Maital Legum:
So I hate to say it.
Bilal Little:
Yeah.
Maital Legum:
But at the end of the day, trust me, if people know about your ETF and they're interested, market makers are also going to be interested.
Bilal Little:
Yeah.
Maital Legum:
You have to also develop a plan to show market participants that people are going to care about your ETF.
Bilal Little:
Yeah.
Maital Legum:
That there's a reason that you're bringing this out. So it all fits together, if you know what I'm saying?
Bilal Little:
No, absolutely.
Maital Legum:
So good partnership. Make sure that your case of why you're listing this is really solid.
Bilal Little:
Yeah.
Maital Legum:
Because your partners don't want to work with you if you're just list ... They're not going to want to work with you if you're just coming up with something that nobody wants except you because you think it's good. I don't know.
Bilal Little:
Absolutely.
Maital Legum:
You have to be able to scale this and it's really important that you know your story-
Bilal Little:
Yeah.
Maital Legum:
... why you're doing something before you have any of these. Honestly, before you have any conversations in my opinion, as an asset manager.
Bilal Little:
Yeah.
Maital Legum:
Obviously, if you have a distribution network and you just want to have more in your toolkit as a large asset manager, we have many of those.
Bilal Little:
Yeah, yeah, yeah.
Maital Legum:
I won't name any favorites. Then of course, that makes sense. But especially the smaller niche issuers who are using white label platforms, a lot of these turnkey solutions because you have a great idea. You have the work really hard to say, "This is why I'm doing it," and you have to focus on that or you're not going to garner the support from the ecosystem.
Bilal Little:
Yeah. No, look, I agree with you. I got to tell you, when I first came over, everything that you're saying makes so much sense. Because look, operationally to get things set up, you quickly realize whose either going to have success or who will not have success because they're going to be bogged down with questions that might not be applicable for the longevity and success of their business. But if they would have addressed these things up front, chances are they might not have had the issue.
Now, let's transition the conversation because you brought this up to, okay, you list, and now let's talk about success in market. I just want to share this because I think this is so important. When I came over, you and the rest of the team would spend a lot of time saying, "Their sales and distribution strategies need to be ironed out at the time of ideation," to your point. Yes, you want to make sure the foundation is good, but now that you're in market, you said this just a minute ago, if no one knows you exist, how are you telling your story and how do we build visibility?
What success measures have you seen people take and/or have after they've listed and launched in the market? What do you think there?
Maital Legum:
I've not seen many issuers succeed by coming up with how they're going to market and distribute after they list, I'll say that. That's one in a thousand.
Bilal Little:
Yeah.
Maital Legum:
Listen, there's going to be that crazy idea that hit right in terms of market timing, news cycle, and it works.
Bilal Little:
Yeah.
Maital Legum:
But it's not like you build it, it will come. That's not how it works. We are not in the year 2000, or whatever some off the original ETFs, the first hundred ETFs listed. So the measure of success is really I think slow and steady wins the race.
Bilal Little:
Yeah.
Maital Legum:
With a caveat. There are other opportunities, don't get me wrong at all. But this industry has so much noise.
Bilal Little:
Yeah.
Maital Legum:
We are going to list 1000 ETFs this year. 1000. I used to know every single symbol and every launch, and now I can't.
Bilal Little:
Let's just put that in perspective. We're going to launch 1000 this year. What did we do last year?
Maital Legum:
Half of that.
Bilal Little:
Wow.
Maital Legum:
And then the year before, if I look at the last 14 years, I thought we had years of 230 and I'm like, "Oh, my God, that was a record-breaking year."
Bilal Little:
Right.
Maital Legum:
All of a sudden, we're four-times that.
Bilal Little:
Yeah.
Maital Legum:
As I said, there's a lot of noise. There really is. But a lot of these traditional asset managers are coming into play and they already have reputation, they have a client base, they have a salesforce. So that's great, but to think that you're just going to list an ETF and then you're going to come up with how you're going to sell it later on, I wouldn't advise it. How about that? I wouldn't be advising that.
So at the end of the day, the most successful firms are the ones that, A, are very realistic in terms of their expectations. And to understand that this is something that's going to take a while. Again, you have gatekeepers, you have platforms, you have track record challenges and that's 99% of the products that are coming out. So don't count on being the one in a million that's going to hit it because somebody leaked the story that was exactly what your ETF was about.
Bilal Little:
Yeah.
Maital Legum:
You can't count on that.
Bilal Little:
Yeah, yeah, yeah.
Maital Legum:
So don't just list without reason because there might be something that somebody wants. So success is really understanding what's your five-year plan. And yeah, five years-
Bilal Little:
Yeah.
Maital Legum:
... is probably realistic. You need to be able to sit on this stuff for five years. Otherwise, we see a lot of this. We see a lot of closures. People don't raise enough capital to put these ETFs up for long enough and it's kind of a shame, but I guess that it's not surprising.
Bilal Little:
Yeah.
Maital Legum:
But I do think you need three to five years to even scratch the surface on some of this stuff. And you've seen, and again I don't want to name specifics, but you've seen this in play. We were just together in T. Rowe Price. And I was there two years ago and they were like, "We're at a billion." We're like, "Oh, T. Rowe, you're massive." Then all of a sudden, now it took two years and it's just skyrocketed again.
Bilal Little:
18 billion, yeah.
Maital Legum:
And if you talk to them, they were like, "We managed expectations on this."
Bilal Little:
When you say that, you mean internally to their senior-
Maital Legum:
Internally, as well as to then to say.
Bilal Little:
To themselves, yeah.
Maital Legum:
Learn what it means to be an ETF issuer.
Bilal Little:
Yeah.
Maital Legum:
It takes time, plus time in market, plus people being comfortable with your product, and go from there.
Bilal Little:
Yeah.
Maital Legum:
Success is really patience, which is really hard for people.
Bilal Little:
Yeah.
Maital Legum:
I'm not an entrepreneur. Entrepreneurs, I get it. You're always trying to figure out how you're going to grow as fast as possible, but this industry, it's hard to do that in this world.
Bilal Little:
Yeah.
Maital Legum:
And in this competitive market where assets are sticky. We can get into this, but that's why we've also seen people ... Nobody's launching another S&P 500 ETF.
Bilal Little:
Yeah.
Maital Legum:
Because that's not what the opportunity is. The opportunity is in the active space. That's where product development is. That is where people have some allocations that they could play around with. No one is selling their super cheap plain vanilla index for your no-name ETF.
Bilal Little:
Yeah.
Maital Legum:
And I think people have gotten that.
Bilal Little:
Yeah.
Maital Legum:
So we've seen that, but that sliver of active opportunity is small, but massive.
Bilal Little:
Yeah.
Maital Legum:
So we're hardly seeing passive funds launched today.
Bilal Little:
Yeah.
Maital Legum:
But if you look at the assets, more assets are still flowing into passive ETFs. We talk about active is growing tremendously, however there's still more assets going into passive. That's just how it is.
Bilal Little:
Yeah.
Maital Legum:
But that piece of the pie is getting larger and is where a lot of people can make big moves.
Bilal Little:
It's so funny because you touched on a lot. So there's two things that I want to hit on really quickly because we joke about this as a team. When ETF issuers list, I have to say this directly to the camera, this is so true, they think they're listing an IPO. You talk about success and longevity, meaning planning to tell your story multiple times, over and over, over the news cycle to grow your asset steadily. However, they think it's this IPO launch and list, and bang, all the assets are going to come in, "I'm in market." No one knows you exist to the point that you set.
So now, we transition into this conversation because I think this is important. You're talking about longevity and you're talking about where the assets are going now. Speak a little bit about the innovation that you're seeing with the active space and why you think that is still the area for growth for the ETF wrapper.
Maital Legum:
Of course. I'll separate it into two buckets. Really, it's three buckets in the ETF space. I love how people talk about active has overcome, in terms of the number of funds that are out there are active more than passive. We have about half the funds in the US are technically active.
Bilal Little:
Yeah.
Maital Legum:
But we separate that into several categories. So one opportunity, and I keep talking about it because I think it's actually ... I'm a very conservative type of person, so I like this slow and steady, you have a distribution. So what we're seeing is these traditional asset managers now just offering their solutions and their well established PMs-
Bilal Little:
[inaudible 00:26:58], yeah.
Maital Legum:
... just put their fund in an ETF wrapper. Multi-share class obviously is coming and that makes it easier, but let's just pretend that's not there yet.
Bilal Little:
Yeah.
Maital Legum:
That's an opportunity to take your current client base, you can expand it even more, but to take your current PMs and that team that has done so well over the last 10, 15, 20 years, and now you're going to offer something in an ETF wrapper. Now, not only do your current clients want an ETF because of tax-efficiencies, and lower costs, and ease of coming in and out, you now can expand that even more, you do have some opportunities there. But I do think that there's still the majority of their sales probably come, I don't know,-
Bilal Little:
Yeah, for sure.
Maital Legum:
... come from your traditional clients. So it's just being able to take something that's worked just from a portfolio management perspective and putting it in an ETF. That's one of the, I don't want to say easiest, but that's what we've seen a lot. I call it the last slew of traditional asset managers are coming into ETFs right now. There's still some that are not there yet. It took a while.
Bilal Little:
Yeah, yeah.
Maital Legum:
So we're seeing a lot of that and they're seeing a lot of success because they know what they're doing, they have their research, they have their PMs, they have their track record.
But one of the most exciting area of development that we are seeing in the ETF space is this income producing structured product, like products that are not becoming available to the mass market. So the end of 2019, we had this ETF Rule come to be. As I was saying, it used to be much harder to list ETFs from our perspective.
Bilal Little:
Yeah.
Maital Legum:
So it was an opportunity for the SEC to create what we call the ETF Rule. And what it did is it basically opened the doors to anything you could do in a mutual fund wrapper you could pretty much do in an ETF today. If you look at from 2019 until today, that really opened the floodgates.
Bilal Little:
Yeah.
Maital Legum:
And that opened the floodgates to being able to do strategies that are very similar to structured products, things that you and I never had access to as individual investors, as retail investors. You had to have access to a certain amount of funds to be able to be with this hedge fund, or buy structured notes. So what is happening is that that is now being wrapped in an ETF for anybody to be able to just buy.
Now, is that safe? It complicates things.
Bilal Little:
Yeah.
Maital Legum:
Because these products are not always super easy to understand.
Bilal Little:
Yeah, yeah, yeah.
Maital Legum:
So from that perspective, I think there are challenges to these. They're great tools.
Bilal Little:
You mean to educate?
Maital Legum:
To educate, yeah.
Bilal Little:
Yeah.
Maital Legum:
So they're great tools for us to be able to utilize in our portfolios.
Bilal Little:
Yeah.
Maital Legum:
But they're also much harder and there's a reason that they weren't just available to any retail investor until now. But you know what, I think the world has come to, "Hey, these are your options, you decide whether you should buy it or not."
Bilal Little:
Yeah.
Maital Legum:
The same goes with the crypto stuff.
Bilal Little:
Yeah.
Maital Legum:
There's a lot of hesitation to allow these, my grandmother to go into her account and buy this ETF that she does not understand.
Bilal Little:
Yeah.
Maital Legum:
And there's still a lot of that, but I think we've come to a point where maybe we're okay with that.
Bilal Little:
Yeah.
Maital Legum:
The disclosures are there and it's up to you as an individual investor to go and read that and figure out if this is a good fit for you. And can you take on the risks, yes or no?
Bilal Little:
Yeah. You touched on this. Well, I got to bring it up, you brought this up, I didn't bring this up. You brought this up, just so we agree. Do you agree?
Maital Legum:
All right.
Bilal Little:
All right. Crypto. So generic listing standards-
Maital Legum:
Oh. This is all part of the-
Bilal Little:
Yeah, it's part of it.
Maital Legum:
It's part of the development, yeah.
Bilal Little:
But because, look, you head up operations here. Honestly, this is kind of coming down your alley. What's going on? What are your thoughts and what do you see?
Maital Legum:
All right. So for those who haven't been keeping up, and I'm sure most people listening probably do realize this, but the end of September. Can I say the date that we're filming this? There was what we call a Generic Listing Standard. So previously, any time we had to list a crypto ETF, it was a pretty long regulatory process that you had to ask the Commission to review your specific ETF, go through this whole process up to 240 days, and then they approved or disapproved. And it's boring stuff, but I live and breathe this, so if you have any questions, you let me know. People listening, email me, I'll explain. But they gave us a rule set where we actually don't have to go through that process, so it's what we call a Generic Listing Standard.
Bilal Little:
Okay.
Maital Legum:
What that means is that anybody that wants to list an ETF that meets these generic listing standards are going to be able to do so from an exchange perspective, because there's other regulatory bodies down in DC that also have to review your application, so it's not just us. But the path to listing is now much shorter-
Bilal Little:
Okay.
Maital Legum:
... than it was before. So before, I said up to 240 day and maybe approval or disapproval. But they gave us measures of ... This is what the SEC does in general and we've done this through the entire 30-plus years of ETFs. You asked for product relief one, by one, by one, by one. Once you do enough of them, there's a path to approval.
Bilal Little:
Yeah.
Maital Legum:
And they're like, "Here's what you have to meet in order to list."
Bilal Little:
Okay.
Maital Legum:
So I think we got there. We got Bitcoin, we got Ethereum. There's no shortage of those type of products in application, so they've seen enough to feel comfortable to say if you meet all these measures-
Bilal Little:
Certain standards, yeah.
Maital Legum:
... futures, a certain amount of time, then you can list because we feel comfortable. Because why do we need to do one, by one, by one?
Bilal Little:
Yeah.
Maital Legum:
It's not really the best use of their time-
Bilal Little:
Yeah.
Maital Legum:
... and there's a lot of things on their docket. That is going to open up the floodgates even more, in case there weren't enough. There's a lot of coins out there.
Bilal Little:
Yeah. There's a lot. There's a lot going on.
Maital Legum:
There's a lot going on there. It's also that's a whole other ballgame because it's not even just ... You're not talking about your traditional asset managers, which is what I keep talking about.
Bilal Little:
Yeah.
Maital Legum:
But now you're talking about this whole other type of issuers.
Bilal Little:
Yeah.
Maital Legum:
Who can now issue products because they don't have to be a traditional asset manager to run a crypto ETF.
Bilal Little:
Yeah.
Maital Legum:
They have to set up the framework and of course they have to do that.
Bilal Little:
Yeah. Now, historically, they might have never run capital before.
Maital Legum:
A lot of them probably yes.
Bilal Little:
No established track record. Yeah. So yeah, you're right.
Maital Legum:
This is what people want.
Bilal Little:
Yeah.
Maital Legum:
So there's a lot of opportunity.
Bilal Little:
Yeah.
Maital Legum:
And when there's a lot of opportunity, then people are going to fight. It's going to be who's going to be first to market?
Bilal Little:
Yeah.
Maital Legum:
There's a lot of retelling. I think eventually it will probably just become part of our ecosystem and we won't even remember that crypto was brand new.
Bilal Little:
A thing, yeah.
Maital Legum:
But right now, that's the shiny object that everybody's chasing so you can only imagine that we're having a lot of those conversations.
Bilal Little:
Yeah.
Maital Legum:
And how to list, and there's new listing standard. So my team, you talked about it, that's now what we're responsible for. Now we have these rules, now we have to work with all the issuers to tell them how they list under these rules.
Bilal Little:
Yeah.
Maital Legum:
And under the hood, how it's going to work, and what you must have set up, and what you must represent in order to comply, in order to list under our expectations, which the SEC gave us our rule set.
Bilal Little:
Our marching orders.
Maital Legum:
Exactly, they gave us our marching orders. So now, it's our job, my job with a lot of people in this building, not just me.
Bilal Little:
Yeah, yeah, yeah.
Maital Legum:
To work with these issuers and to guide them through that. As you said, a lot of these issuers know even less because they're not even asset managers.
Bilal Little:
Exactly, exactly.
Maital Legum:
I think there's a lot of competition.
Bilal Little:
Okay.
Maital Legum:
There's a lot of noise, but there's also a lot of opportunity.
Bilal Little:
Yeah.
Maital Legum:
That's great for us.
Bilal Little:
For sure.
Maital Legum:
We can't breathe, we're super busy. I think we listed 30 funds last week and 30 this week and it's nonstop, but the industry has a maturing to do. I think we'll get to a point where maybe it will slow down in a couple years. Years, years. There's a lot of spaces, there's still a lot of space to go up.
Bilal Little:
So I'm glad you brought this up because this is the perfect transition. We launched 4600 products, over $20 billion in revenue, $12.7 trillion in total assets. The industry seems to be very healthy and vibrant. Over the next 12 to 24 months, give me one or two big predictions.
Maital Legum:
Oh, gosh.
Bilal Little:
I'm not going to hold you to it, but we're going to just throw you in the hot seat.
Maital Legum:
See, I'm going to push it out even more.
Bilal Little:
Okay.
Maital Legum:
This is where I'm at.
Bilal Little:
Okay.
Maital Legum:
I think 12-24 months, we're still going to be on this basically nonstop upward, in terms of number of listings-
Bilal Little:
Yeah.
Maital Legum:
... and in terms of assets.
Bilal Little:
Okay.
Maital Legum:
I think that there's still a lot of new opportunities and people are still chasing that. Then now with multi-share class. So I think we're going to see still a velocity like we're seeing today in terms of new product listings.
Bilal Little:
Yeah.
Maital Legum:
And with that, also assets.
Bilal Little:
Okay.
Maital Legum:
Now, I take that out, that's 12, 24 months, maybe 36 months, I think we come to a point where it's how many ETFs can there be out there and how many people are going to know about them and buy them? So there might be an opportunity for some consolidation. As the industry will mature, I think that number will become a little more stable.
Bilal Little:
Yeah.
Maital Legum:
How many ETFs can this market handle? More than we have today because we've seen it with the mutual funds.
Bilal Little:
For sure.
Maital Legum:
But I don't know what that number is.
Bilal Little:
Okay.
Maital Legum:
So don't hold me to it, but I do think that we see a place five, 10 years from now when the number of listings do slow down.
Bilal Little:
Okay.
Maital Legum:
But the assets will continue to grow. That's healthy. And then you're going to see delistings and liquidations of things that didn't work.
Bilal Little:
Yeah.
Maital Legum:
Okay, you don't want to leave duds out there.
Bilal Little:
Yeah.
Maital Legum:
It's not good for you or for the ecosystem, quite frankly.
Bilal Little:
For sure.
Maital Legum:
And then also, some consolidations. How many Bitcoin ETFs do we need? 20?
Bilal Little:
Yeah.
Maital Legum:
Maybe. I don't know, I could be wrong. There could be enough. But I do think that we're going to see some consolidation, a slowdown in listings, but we're probably five years out from that.
Bilal Little:
Okay.
Maital Legum:
So just brace yourself for the next couple years that it's not going to slow down, because it's not. I don't know if you agree. We're talking to people every day.
Bilal Little:
Every day.
Maital Legum:
So we know that nobody's slowing down.
Bilal Little:
Yeah.
Maital Legum:
They're not thinking ... That depends on the market, too. Now everyone's happy. We'll see what happens.
Bilal Little:
Yeah, some more volatility. But to your point, there's a lot of different optionality there.
Maital Legum:
Yeah. Even with volatility, if markets are down, there's an ETF for everything.
Bilal Little:
There's an ETF for that.
Maital Legum:
There's literally an ETF for that. Somebody used to want to do some show called There's an ETF For That, I don't know who it was.
Bilal Little:
Maital, I want to say thank you so much for joining ETF Central. It's been great.
Maital Legum:
It's always good to be here and being on the pod with you.
Speaker 1:
That's a wrap for today's conversation, but the ETF discussion doesn't stop here. For more insights, deep dives, and voices shaping the market, stay connected on etfcentral.com. From the New York Stock Exchange, we'll see you next time.
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation or any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.
