WEBVTT - Words of Wisdom From Mr. ETF 0:00:05.960 --> 0:00:08.639 Welcome to Trillions. I'm Joel Webber and I'm Eric Bell 0:00:08.680 --> 0:00:15.960 Tunis Eric. This is a special episode of Trillions that 0:00:16.120 --> 0:00:20.480 coincided with a live event where you were on stage. 0:00:20.520 --> 0:00:23.000 I was in the audience actually, but it was like 0:00:23.120 --> 0:00:25.840 the old times, the before times, um, and it was 0:00:25.880 --> 0:00:29.600 part of this new Voices initiative at Bloomberg. Who is 0:00:29.640 --> 0:00:33.120 our guest? Yeah, it was the one or only Reggie Brown, 0:00:33.159 --> 0:00:35.360 who a lot of people in the industry. No, I 0:00:35.360 --> 0:00:38.040 mean he's very popular inside the industry and out to 0:00:38.080 --> 0:00:41.559 a degree, and he was, um a perfect guest for 0:00:41.640 --> 0:00:44.960 a session like this in person, Um, somebody who can 0:00:44.960 --> 0:00:47.600 go anywhere in the conversation. Reggie is a market maker, 0:00:48.120 --> 0:00:50.199 so he's making markets in all different types of E 0:00:50.240 --> 0:00:52.319 t F s. And the reason he sometimes is called 0:00:52.400 --> 0:00:55.160 E t F Godfather is because a lot of times 0:00:55.200 --> 0:00:56.760 if you're a small issue or you go to him 0:00:56.960 --> 0:00:59.120 to see if he'll give you c capital, just a 0:00:59.160 --> 0:01:02.080 little bit of assets to start your life. And so 0:01:02.840 --> 0:01:05.199 you know, people come to him. Um. And so that's sorry, 0:01:05.200 --> 0:01:07.920 you got how we got the nickname. And he's really good. 0:01:07.920 --> 0:01:10.000 He's well versed in all topics and so we thought 0:01:10.000 --> 0:01:13.240 it'd be good to interview him on stage live and 0:01:13.280 --> 0:01:15.399 it was really it was fun. And the part of 0:01:15.480 --> 0:01:19.040 Joel Weber on this episode will be played by Scarlet Foo, 0:01:19.160 --> 0:01:22.759 our colleague who's now at Bloomberg Quicktick and knows a 0:01:22.800 --> 0:01:25.480 ton about et F s as well. Like I mentioned earlier, 0:01:25.480 --> 0:01:28.880 this is part of a the Bloomberg New Voices initiative 0:01:28.920 --> 0:01:34.120 that started in to increase the representation of women both 0:01:34.240 --> 0:01:39.320 online and on air on Bloomberg TV. It's since expanded 0:01:39.360 --> 0:01:42.120 to include a cohort of black executives as well as 0:01:42.200 --> 0:01:48.080 Latin X executives. If you're interested in learning more about 0:01:48.120 --> 0:01:51.640 Bloomberg New Voices, or if your company would like to 0:01:51.680 --> 0:01:55.120 participate in the media training program, please go to Bloomberg 0:01:55.200 --> 0:02:00.440 dot com back Slash New Voices this time on Brilliance, 0:02:01.240 --> 0:02:06.080 Mr E T F. Reggie Brown, and we're now going 0:02:06.160 --> 0:02:11.280 to turn it over to the Trillions Podcast with Reggie Brown, 0:02:12.080 --> 0:02:22.119 principal at GTS and Bloomberg's Scarlet Food and Eric. Thank 0:02:22.160 --> 0:02:29.040 you attended, Thank you, hi everyone, Thank you so much 0:02:29.080 --> 0:02:31.880 for joining us. Reggie Brown great to have you, of course, 0:02:32.080 --> 0:02:35.760 um principle at GTS, but also shares the et F 0:02:35.760 --> 0:02:38.280 Fund Board at America and Century Investments and Eric bau 0:02:38.360 --> 0:02:41.919 tunas co host of Trillions podcast. Also, he has a 0:02:41.960 --> 0:02:44.880 new book coming out in April called The Bogle Effect. 0:02:44.880 --> 0:02:48.400 It's on the massive impact that Vanguard's mutual ownership structure 0:02:48.440 --> 0:02:52.359 has and will have on the financial industry, investors and portfolios. 0:02:52.360 --> 0:02:54.320 He is my go to guy on all things et 0:02:54.520 --> 0:02:57.840 F at Bloomberg. So let's get started here. Um, I 0:02:57.880 --> 0:02:59.480 just kind of want to set the scene Eric, with 0:02:59.520 --> 0:03:01.640 you kind of telling us what's going on in the 0:03:01.639 --> 0:03:05.040 markets right now, because commodities are on fire, stocks and 0:03:05.080 --> 0:03:07.960 bonds are stumbling because of rising inflation. We know the 0:03:07.960 --> 0:03:10.720 Federal Reserve has raised interest rates and will continue to 0:03:10.760 --> 0:03:13.480 do so give us a quick glimpse of what all 0:03:13.600 --> 0:03:17.480 this looks like through the length of exchange traded funds. Sure, So, 0:03:17.520 --> 0:03:19.840 I mean every year e t F has taken about 0:03:19.880 --> 0:03:23.040 two billion a day. Really, It's it's almost like the 0:03:23.040 --> 0:03:24.919 way people move from CD s to the MP three 0:03:25.040 --> 0:03:27.880 or digital. There's just this baseline of flows. So even 0:03:27.880 --> 0:03:29.720 equity e t s are taking your money, even fixed 0:03:29.720 --> 0:03:33.320 in coming ts are taking money. But then there's this layer, 0:03:33.880 --> 0:03:36.160 which is where the flows are basically moving to where 0:03:36.160 --> 0:03:39.840 the performances and this year, we're seeing flows into things 0:03:39.840 --> 0:03:42.400 that have lagged in the past, like commodities. They've been 0:03:42.440 --> 0:03:45.560 basically beat up for a decade. They're finally having their 0:03:45.640 --> 0:03:49.480 day goals, actually having a little revenge on bitcoin because 0:03:49.480 --> 0:03:52.520 bitcoin's down, gold is up, so that gold's catching a bid. 0:03:53.080 --> 0:03:56.800 Even broad based commodities, oil, natural gas, a lot of 0:03:56.800 --> 0:03:58.960 the stuff that people wrote off. To be honest, this 0:03:59.240 --> 0:04:02.000 is having a comeback this year. But that's I think 0:04:02.040 --> 0:04:04.560 the main theme. But I think still you have the 0:04:04.640 --> 0:04:07.440 blob of money is still buying into sort of cheap beta. 0:04:08.240 --> 0:04:10.920 In the core, that sort of massive retail money seems 0:04:10.920 --> 0:04:15.040 to be pretty unshaken. But on the outer edges, people 0:04:15.080 --> 0:04:18.000 are rotating between sectors and asset classes and that's sort 0:04:18.000 --> 0:04:19.799 of what we see. And when you say cheap beta, 0:04:19.839 --> 0:04:23.800 you're referring to passive index funds. Yeah, like a total 0:04:23.880 --> 0:04:26.839 market fund that holds, you know, four thousand stocks and 0:04:26.920 --> 0:04:29.440 charges five basis points. It looks an awful lot, like 0:04:29.440 --> 0:04:31.640 the SMP five hundred or the Russell to it could 0:04:31.640 --> 0:04:33.680 be large cap or the whole market. Yeah, that's that's 0:04:33.720 --> 0:04:36.520 what cheap data means. Okay, So Reggie, from where you sit, 0:04:37.120 --> 0:04:41.080 have e t s complicated the current market dynamics complicated 0:04:41.160 --> 0:04:43.720 or solved the problem? Well, which one? I think it's 0:04:43.720 --> 0:04:47.039 solved the problem so well. Look, I think as the 0:04:47.040 --> 0:04:52.040 marketplace reset around secumentation, ETS has offered liquidity, particularly this 0:04:52.120 --> 0:04:57.560 year where the marketplace reset based on rising rates, higher inflation, 0:04:58.120 --> 0:05:01.920 judicial problems in Europe. Et s provided at the exhaust 0:05:02.000 --> 0:05:05.799 vow that the regulars look for and largely has solved 0:05:05.800 --> 0:05:08.120 a problem, allowing retail investors to come in to the 0:05:08.160 --> 0:05:11.920 marketplace that incredibly cheap prices is Eric reference and also 0:05:11.960 --> 0:05:14.880 allows for price discovery because Russia stock market is closed, 0:05:14.920 --> 0:05:18.440 but people are able to trade Russia through r s 0:05:18.600 --> 0:05:19.960 X and E t F or at least they were 0:05:20.000 --> 0:05:23.839 for a while. Yeah, I could see Eric signaling time out, 0:05:23.839 --> 0:05:27.040 time out, the second time out. Yeah, no, they were. 0:05:27.160 --> 0:05:28.960 This is the I'd love to hear your take on this. 0:05:29.600 --> 0:05:32.440 Are normally E T F or like cockroaches. They trade 0:05:32.440 --> 0:05:37.479 through anything, um, ten years ago the stock market. Yeah. Well, 0:05:37.520 --> 0:05:39.279 if you come up with a better metaphor, let me know. 0:05:39.360 --> 0:05:42.920 But they're definitely survivors. And ironically people are like, oh, 0:05:42.960 --> 0:05:45.280 if the underlying is a liquid ETFs are going to 0:05:45.360 --> 0:05:48.640 have problems. Actually, ETS tend to be the one thing 0:05:48.720 --> 0:05:51.280 liquid when the underlying isn't. And we've seen this over 0:05:51.360 --> 0:05:54.280 and over in different markets. But for the first time 0:05:55.200 --> 0:05:58.960 rs X was halted and it's still traded. But then 0:05:59.000 --> 0:06:02.000 the exchange that you and even trade the e t F. Obviously, 0:06:02.120 --> 0:06:05.280 this is a unique geopolitical situation involving our own government, 0:06:05.640 --> 0:06:07.400 but I've never seen that. In fact, we have Dave 0:06:07.480 --> 0:06:09.599 Dave needed gone last week talking about this and he said, 0:06:09.600 --> 0:06:11.760 you had to go back to Cuba or Iran, which 0:06:11.800 --> 0:06:14.080 predates the e t F to find anything like this. 0:06:15.040 --> 0:06:18.000 It is unique. Um, But if you look at market 0:06:18.080 --> 0:06:21.960 closing for international investors, India had that problem once the 0:06:22.000 --> 0:06:27.040 way they close off inflows from foreign investors, but exchanges 0:06:27.080 --> 0:06:29.120 closed all the time. You hadn't in Greece, you had 0:06:29.160 --> 0:06:31.760 in Egypt, So it's not really unique. But this is 0:06:31.880 --> 0:06:35.960 unique where the exchange and the market value of that 0:06:36.279 --> 0:06:39.720 country with the zero from a U S perspective. Now, 0:06:39.800 --> 0:06:41.920 one thing that we should mention is Reggie Brown. You 0:06:42.040 --> 0:06:44.520 are known within the e t F world. Forbes famously 0:06:44.560 --> 0:06:47.120 called you the godfather of e t S because you 0:06:47.240 --> 0:06:50.640 make markets in these products and you seed new funds 0:06:50.680 --> 0:06:52.679 as well, which means you have a front row seat 0:06:52.720 --> 0:06:57.280 to both innovation, new ideas and copycat efforts as well. 0:06:57.839 --> 0:06:59.720 Can you guess an idea of how you spend your day. 0:06:59.760 --> 0:07:02.960 What's the split between new ideas and recycled ideas? Is 0:07:03.000 --> 0:07:09.080 it fifty? Is it no? I think largely it's new ideas. 0:07:09.360 --> 0:07:13.640 Uh lately it is Asset managers recognize the need to 0:07:13.640 --> 0:07:16.440 come into the et F space and talk to them 0:07:16.520 --> 0:07:20.240 largely about how to do that, and then around thematics. 0:07:20.320 --> 0:07:23.880 So right now that themes are rising rates inflation, their 0:07:23.920 --> 0:07:26.600 e t fdeas coming into the marketplace to solve those 0:07:26.640 --> 0:07:30.679 problems for investors. And then before then, you know, looking 0:07:30.720 --> 0:07:33.920 at ets to have options inside of it to buffer 0:07:34.640 --> 0:07:38.880 um certain market movements. So the the week to week 0:07:39.000 --> 0:07:42.600 overall is pretty interesting. From a new idea situation, there 0:07:42.680 --> 0:07:45.800 are always um et sponsor wanted to leverage someone else's 0:07:45.920 --> 0:07:48.840 ideas because they have better distribution or they have better 0:07:48.920 --> 0:07:53.160 pricing power. But that's a spitter competition. Yeah, a lot 0:07:53.200 --> 0:07:55.960 of people would accuse the vanguards and the black rocks 0:07:56.000 --> 0:07:59.320 out there of doing just that, copycatting other people's ideas, 0:07:59.440 --> 0:08:01.680 but on a big their scale as opposed to coming 0:08:01.760 --> 0:08:05.840 up with their new interesting innovative e t S. Well, 0:08:05.920 --> 0:08:07.880 I'll take you to task. I would think that I 0:08:08.040 --> 0:08:10.680 Shares have done a terrific job of opening new markets 0:08:10.760 --> 0:08:13.600 to two sectors. There first to launch a bond ETF, 0:08:14.200 --> 0:08:18.120 they were somewhat first looking at the style box UM 0:08:18.720 --> 0:08:22.720 for multi factor situation, so they have their role. Van 0:08:22.800 --> 0:08:24.960 Guard looks at it from I'm coming to marketplace and 0:08:25.120 --> 0:08:27.240 be the cheapest in the marketplace. And that's going to 0:08:27.320 --> 0:08:32.120 be uh competition between Schwab and Vanguard around the zero fee. 0:08:32.600 --> 0:08:35.680 But look at it. Look in the United States, retail 0:08:35.720 --> 0:08:39.600 investors have the opportunity coming into into the marketplace selecting 0:08:39.679 --> 0:08:44.000 ETF and get exposure through some complex vehicles. It's important 0:08:44.320 --> 0:08:47.800 that we as industry provide the education for them, make 0:08:47.800 --> 0:08:50.560 sure understand what they're buying. E t F are complex, 0:08:57.200 --> 0:08:59.680 So walk us through how the sausage is made, how 0:09:00.320 --> 0:09:02.400 what happens when someone comes up with a new idea 0:09:02.520 --> 0:09:04.640 for an e T F. Who do they go to 0:09:04.840 --> 0:09:08.120 how do they get that done? Well, largely um for 0:09:08.200 --> 0:09:11.679 a market maker like GTS, we're typically in the last 0:09:11.800 --> 0:09:15.000 phase of the cycle. But we'll hear about it. But 0:09:15.320 --> 0:09:17.280 you have to go through writing a perspectives got to 0:09:17.320 --> 0:09:20.280 go through hiring a lawyer and going through that phase. 0:09:20.840 --> 0:09:22.960 As a market maker, they're looking for us like would 0:09:22.960 --> 0:09:25.880 you make a market in this classification? Some of the 0:09:25.960 --> 0:09:28.400 stuff where it's like no way, stay away just because 0:09:28.480 --> 0:09:32.679 it has a lot of hair. For example, UH commodity 0:09:32.920 --> 0:09:35.520 e t s to have futures inside of it. The 0:09:35.600 --> 0:09:38.160 futures are can be really thin, really difficult to trade. 0:09:38.679 --> 0:09:40.560 Is something that we're not gonna want to touch. Because 0:09:41.000 --> 0:09:43.800 a market maker such as GTS, we look at the 0:09:44.040 --> 0:09:46.480 trade ability of the asset class, the ability to get 0:09:46.520 --> 0:09:49.240 in and get out efficiently. For e t s to 0:09:49.320 --> 0:09:51.760 have futures in it, there's a role cost that gets 0:09:51.800 --> 0:09:55.040 pretty expensive, and that is a lot of complexity where 0:09:55.200 --> 0:09:59.120 that cost is embedded into the spread. Most ets sponsors 0:09:59.200 --> 0:10:02.120 they want their ets looked like sp y whereas a 0:10:02.160 --> 0:10:05.160 penny what And a lot of times that's not practical 0:10:05.400 --> 0:10:08.520 because one you don't have secondary trading um where a 0:10:09.080 --> 0:10:12.760 retailer inside the trading spread. But then again, the onnerlying 0:10:12.760 --> 0:10:16.239 asset class is a little bit wide expensive like international securities, 0:10:16.600 --> 0:10:20.079 stamp taxes are embedded their access to the market real 0:10:20.160 --> 0:10:23.160 time United States, So if you're you an US investor, 0:10:23.280 --> 0:10:27.000 you want to invest in Japanese equities to two pm 0:10:27.160 --> 0:10:30.040 in New York time, you need a market americrant to 0:10:30.080 --> 0:10:32.120 give you a synthetic price. I have to go up 0:10:32.120 --> 0:10:35.319 by futures, and then I'm taking you on risk and 0:10:35.440 --> 0:10:38.120 that risk is transferred into a spread that with delivered 0:10:38.160 --> 0:10:40.720 to you. So I think it's really important to understand 0:10:41.280 --> 0:10:43.520 um the ask flass you're trading in and how best 0:10:43.559 --> 0:10:45.520 to access it. So if you were to look at 0:10:45.520 --> 0:10:48.600 a chart of state oil prices oil futures and then 0:10:48.640 --> 0:10:51.160 looking at et F that trades oil, they don't line 0:10:51.240 --> 0:10:53.559 up exactly because of the role, costs and all the 0:10:53.600 --> 0:10:56.360 other complexities that you're just referring to. So there is 0:10:56.800 --> 0:11:00.520 a whole cohort of commodity ETFs that are to relate 0:11:00.600 --> 0:11:03.760 it that the role is either a contango of backckwardation 0:11:04.160 --> 0:11:06.679 and that's reflecting in e t F. So again I 0:11:06.800 --> 0:11:10.000 go through the complexity of the online asset class. It's 0:11:10.040 --> 0:11:12.840 important to note that an e t F or mutual 0:11:12.880 --> 0:11:15.800 fund has the same risk characteristics. A separate e t 0:11:15.960 --> 0:11:20.800 F is traded on exchange open to global amount of investors, 0:11:21.160 --> 0:11:25.400 where you don't have the filter provided by an advisor, 0:11:25.480 --> 0:11:29.560 for example. So it's important that the individual investor understands 0:11:29.640 --> 0:11:33.440 what they're investing in. Yeah, your music to my ears, 0:11:33.480 --> 0:11:36.520 I will say those complex commodity type there three or 0:11:36.520 --> 0:11:39.360 four percent of the assets I called the exotics, where 0:11:39.360 --> 0:11:42.600 the rated R section of the industry. We actually created 0:11:42.640 --> 0:11:45.280 a system to give green, yellow, and red. I think 0:11:45.320 --> 0:11:47.719 this should be widely adopted. So if you can help 0:11:47.760 --> 0:11:49.880 me out, I think you should. If you pull up 0:11:49.880 --> 0:11:51.800 a robin Hood account and you want to buy like 0:11:52.200 --> 0:11:56.560 I don't know VXX or USO, it should say bluebrig 0:11:56.600 --> 0:11:59.319 Intelligence red light, and then you have to go and 0:11:59.520 --> 0:12:01.559 we'll tell you why and then hey, if you're still 0:12:01.600 --> 0:12:03.600 find buying it, fine, Um. But I think this would 0:12:03.600 --> 0:12:06.080 be a way to protect the innocent while allowing innovation 0:12:06.200 --> 0:12:11.719 in the exotic areas. Thoughts well, Eric, I'll take it 0:12:11.800 --> 0:12:16.720 a task here. I think that there's levels of understanding. 0:12:17.040 --> 0:12:21.480 I think that unlike the United States, Singapore had creative 0:12:21.480 --> 0:12:24.800 a classification that if it was a complex CTF had 0:12:24.840 --> 0:12:26.640 an X in front of a ticker, he had to 0:12:26.679 --> 0:12:29.880 take a test. You know, the United States is free 0:12:29.920 --> 0:12:32.480 and fair, and I think that we want to promote 0:12:32.520 --> 0:12:35.760 competition to marketplace and allowed investor to make your own choice. 0:12:36.400 --> 0:12:39.240 So you're talking about red lights. I think he's bringing 0:12:39.280 --> 0:12:42.000 complexity because no one don't understand that understand the red 0:12:42.080 --> 0:12:45.599 light to want to stand, but they copyrighted it. I 0:12:45.640 --> 0:12:48.439 wanted to I actually literally wanted to use gpg p 0:12:49.480 --> 0:12:52.880 R but NC seventeen maybe t vix so there was 0:12:52.920 --> 0:12:55.959 only like four four products in the n C seventeen category. 0:12:56.080 --> 0:12:59.079 So Eric, about leveraging here right, your your leveraging ideas 0:12:59.120 --> 0:13:04.439 here right, it's some journalists here, Eric. So given all that, Eric, 0:13:04.520 --> 0:13:06.040 just for a moment moment here, I feel like we 0:13:06.120 --> 0:13:07.920 need to bring in bitcoin. What would be I T 0:13:08.080 --> 0:13:10.079 O B. Would that be a red light? Would that 0:13:10.120 --> 0:13:12.199 be a yellow light? Anything that rolls futures is a 0:13:12.240 --> 0:13:15.040 red light because most people just don't, you know, normal 0:13:15.080 --> 0:13:17.760 people don't even like you said cantango, most people think 0:13:17.800 --> 0:13:21.319 that sounds like a dance, and really it's a punishing term. 0:13:21.800 --> 0:13:27.160 Bid is contango is okay? When you when you buy 0:13:27.200 --> 0:13:30.600 oil futures and they're going to expire soon, most people 0:13:30.679 --> 0:13:33.440 know you don't want to take delivery, so you are 0:13:33.480 --> 0:13:35.439 going to have to roll to the next one, and 0:13:35.480 --> 0:13:36.959 the next one is going to be a little higher 0:13:37.200 --> 0:13:40.520 to maintain that exposure. Do that twelve times and that 0:13:40.559 --> 0:13:43.800 could be a year. And so if you hold a 0:13:43.880 --> 0:13:46.200 long term that's mentioning e t F with with an 0:13:46.280 --> 0:13:48.319 expense or issue of thirty, no one would buy it. 0:13:48.880 --> 0:13:50.959 But most people don't understand that. And every now and 0:13:51.000 --> 0:13:52.840 then when oil gets hot, people pile in the USO 0:13:53.679 --> 0:13:55.719 or they pile into one of these ETFs. But I 0:13:55.760 --> 0:13:58.360 would say it's it's usually at the fringes. Most of 0:13:58.440 --> 0:14:01.480 the big, gigantic blob of money is into the rated 0:14:01.559 --> 0:14:04.959 G stuff, the vanilla stuff. But I like that it's 0:14:05.000 --> 0:14:07.439 a big tent makes my job interesting. I have a 0:14:07.679 --> 0:14:10.680 short attention span and a love of novelty, and there's 0:14:10.720 --> 0:14:13.319 always something new to try to figure out. So I 0:14:13.440 --> 0:14:15.160 like the big tent aspect of it. But there are 0:14:15.160 --> 0:14:17.720 definitely some products you can get hurt on. So we're 0:14:17.760 --> 0:14:20.800 talking about new issues and how you spent a lot 0:14:20.840 --> 0:14:22.800 of time focusing on that. There have been a lot 0:14:22.840 --> 0:14:25.640 of attempts to have new biitcoin ETF spot bitcoin e 0:14:25.720 --> 0:14:28.120 t s, but they've all been rebuffed by the SEC. 0:14:28.560 --> 0:14:30.760 They're they're not moving forward with that. What's going on 0:14:31.240 --> 0:14:33.160 when what is it going to take for the SEC 0:14:33.320 --> 0:14:36.280 to approve spot bitcoin e t s, which clearly are 0:14:36.320 --> 0:14:39.320 in demand by people. What do you think, Eric, Well, 0:14:39.760 --> 0:14:47.720 you your opinion is worth more than mine because he well, well, 0:14:47.720 --> 0:14:50.840 I have an opinion here. Yeah, people call him for advice. 0:14:50.880 --> 0:14:53.080 I'll just put it down. I have an opinion. If 0:14:53.120 --> 0:14:55.800 you look at UM, the e t F industries, first 0:14:55.840 --> 0:14:59.280 of all ec F industry, UM came in existance in 0:14:59.400 --> 0:15:02.520 ninety nine. They started in Philippi stock Change. I'm from Philadelphia. 0:15:03.920 --> 0:15:07.360 Seven UM lawsuits went to Canada, came the United States. 0:15:08.320 --> 0:15:10.840 So you know, we have thirty two years of empirical 0:15:11.240 --> 0:15:16.240 data around around how ets behave in various markets. So 0:15:16.360 --> 0:15:20.560 you look at bitcoin, there's a lot of investor interests 0:15:21.120 --> 0:15:24.560 and Eric and I are talking earlier. To trade the 0:15:24.640 --> 0:15:28.080 actual bitcoin, it's pretty expensive and no one understands the 0:15:28.240 --> 0:15:33.000 implicit costs that you're paying. If you're buying a bitcoin, 0:15:33.080 --> 0:15:37.680 you're gonna probably pay one and spread or commissioned to 0:15:37.800 --> 0:15:40.800 buy that. Think about that. That's a hundred and fifty 0:15:40.840 --> 0:15:45.120 basis points of your money going to someone's pocket. And 0:15:45.200 --> 0:15:48.000 if you look at the exchanges, there's four and fifty 0:15:48.560 --> 0:15:52.479 bitcoin exchanges around the world, and none of them are connected. 0:15:52.880 --> 0:15:55.200 So like if you want to buy ge for example, right, 0:15:55.560 --> 0:15:58.720 you pull up your retail trading app, I won't you 0:15:58.840 --> 0:16:01.160 say a name? Then you get a price and you 0:16:01.280 --> 0:16:03.760 hit a button and Edward comes to gts. Oh, by 0:16:03.800 --> 0:16:07.720 the way, we are retail market maker. Um, when you're 0:16:07.760 --> 0:16:11.560 buying a bitcoin, you're trading on that specific exchange associate 0:16:11.680 --> 0:16:15.040 with their fee structure. So the e t F community 0:16:15.640 --> 0:16:19.760 does a really good job of democratizing those costs pretty quickly. 0:16:20.200 --> 0:16:24.400 And so we're looking forward to trading a spot bitcoin 0:16:24.600 --> 0:16:27.200 e t F because we're going to flatten the costs, 0:16:27.720 --> 0:16:31.560 open it to a wide range of investors, and then 0:16:31.680 --> 0:16:34.680 bring liquidity. So for me to make a market and 0:16:35.320 --> 0:16:39.120 a Bitcoin spot e t F, I need to essentially 0:16:39.240 --> 0:16:42.680 have market connections to every four and fifty of those 0:16:42.720 --> 0:16:48.040 exchanges in order to arbitrage the various prices, to close 0:16:48.120 --> 0:16:52.280 down those prices and lower costs. So I'm advocating for 0:16:52.600 --> 0:16:55.160 a bitcoin e t F. My friends a bit wise 0:16:55.720 --> 0:16:58.520 are looking for an e t F. My friends at 0:16:58.600 --> 0:17:02.160 great scale are eying to close up that discount in 0:17:02.280 --> 0:17:05.679 their vehicle. Look, there is nine billion dollars of investor 0:17:05.760 --> 0:17:08.520 money locked up in that product at a discount that 0:17:08.720 --> 0:17:12.120 is not fair, and the government is holding that back 0:17:12.280 --> 0:17:14.959 from being arbitraged. So I look at it as an 0:17:14.960 --> 0:17:18.680 opportunity set um in my business. I've traveled the world 0:17:18.760 --> 0:17:21.920 talking about e t F and liquidity and household inclusion. 0:17:22.800 --> 0:17:26.080 In the higher feed countries. Japan, for example, the the 0:17:26.240 --> 0:17:29.720 unitary fee is three. That means that the average fee 0:17:29.760 --> 0:17:34.480 is three to invest in vehicles on that exchange in 0:17:34.600 --> 0:17:37.280 that country. If you look at the United States, the 0:17:37.320 --> 0:17:42.040 average fees hovering around fifty semi five basis points. Lower 0:17:42.119 --> 0:17:45.520 prices bring more people into the marketplace to participate, So 0:17:45.760 --> 0:17:49.119 I advocate for household inclusion through lower prices and competition. 0:17:50.280 --> 0:17:52.240 What you're saying is sort of one of our theories, 0:17:52.280 --> 0:17:56.520 which is the crypto really captivated the E t F world. 0:17:56.600 --> 0:17:58.200 When's it going to launch? What's it going to be like? 0:17:58.640 --> 0:18:00.879 And you know, James and Tom are back there. We 0:18:00.960 --> 0:18:04.080 covered this like crazy for a year, but then we 0:18:04.080 --> 0:18:06.720 started to realize, wait a second, be careful what you 0:18:06.760 --> 0:18:08.359 wish were E t F s are going to rock 0:18:08.440 --> 0:18:11.240 the bitcoin world. In the crypto world, especially the exchanges, 0:18:11.760 --> 0:18:13.960 because some of these exchanges are used to getting like 0:18:14.040 --> 0:18:17.119 a lot of money for trading, and we did the 0:18:17.200 --> 0:18:20.359 numbers of crypto exchanges make about thirty to forty billion 0:18:20.400 --> 0:18:22.760 dollars a year at least in the last twelve months, 0:18:23.359 --> 0:18:26.560 and they do one trillion dollars worth of trading. E 0:18:26.680 --> 0:18:29.879 t F market makers like Reggie do thirty six trillion 0:18:29.920 --> 0:18:32.440 dollars of trading and make one fourth of that money. 0:18:33.200 --> 0:18:35.320 So e t F s I think are going to 0:18:35.480 --> 0:18:38.200 disrupt some of these changes and flatten those costs because 0:18:38.520 --> 0:18:40.320 you'll be able to go and buy a bitcoin et 0:18:40.440 --> 0:18:42.560 F for a spread of one basis point, not one fifty. 0:18:43.359 --> 0:18:45.280 And I think the expense ratios will probably get down 0:18:45.320 --> 0:18:48.679 to the forty basis point level and it'll be liquid, 0:18:48.760 --> 0:18:51.119 and I think that's going to be a good competition. 0:18:51.160 --> 0:18:53.520 I think the exchanges are probably due for a little disruption. 0:18:54.040 --> 0:18:56.000 I mean that hiring Matt Damon left and right and 0:18:56.119 --> 0:18:58.720 Larry David and they've got so much money there, you know, 0:18:58.880 --> 0:19:01.760 they own the super Bowl. This your uh so if 0:19:01.800 --> 0:19:05.640 they approved the spot bitcoin ETF crypto exchange, stupable commercials 0:19:05.680 --> 0:19:07.600 will go down. So this sounds like it's a good 0:19:07.680 --> 0:19:10.960 thing for retail investors. Then why is the government so cautious. 0:19:11.080 --> 0:19:13.679 What is it waiting for in particular before it does 0:19:13.800 --> 0:19:16.679 give the green light. There's a lot of fraud out there, unfortunately. 0:19:16.800 --> 0:19:20.720 If you look at them the I c O market 0:19:20.760 --> 0:19:26.880 where you're raising capital through internet offerings of securities, those 0:19:26.880 --> 0:19:30.760 offerings are fraud. If you look at sanctions UM that 0:19:31.040 --> 0:19:33.920 President Biden has placed on a country of Russia, the 0:19:34.000 --> 0:19:38.720 Augo guards can transfer their wealth using bitcoins, so it's unregulated, 0:19:38.920 --> 0:19:42.600 and I think that's fearful for the regulators, and that 0:19:42.880 --> 0:19:47.760 where there is unregulation and gray areas, invariably mom pop 0:19:47.800 --> 0:19:50.879 retailers are being run over. So I think there's a 0:19:50.960 --> 0:19:52.680 lot of things that has to happen. I think we 0:19:52.760 --> 0:19:56.800 made a lot of strides to entering recordtory concerns UM, 0:19:57.200 --> 0:19:59.159 but there's still a lot of analysis that needs to 0:19:59.200 --> 0:20:03.879 occur to bring comfort to folks in Washington and Brussels, 0:20:04.200 --> 0:20:07.520 to globalize the regulation. I will say, though, you know, 0:20:07.600 --> 0:20:10.440 there's probably what nine or ten countries who have approved 0:20:10.960 --> 0:20:13.320 spot bitcoin ets and they seem okay with all that. 0:20:13.440 --> 0:20:19.680 Why is the US in a different mindset empirical empirical 0:20:19.720 --> 0:20:23.040 evidence where it's just you know, if you can't tax it, 0:20:24.359 --> 0:20:26.359 you can't oversee it. They're not going to approve it. 0:20:26.480 --> 0:20:28.840 It's just the way our government works. You know, I 0:20:29.520 --> 0:20:34.520 can't necessarily argue that that's not incorrect. But again, what 0:20:34.680 --> 0:20:37.800 I don't want is verbial. My grandmother trading and something 0:20:37.920 --> 0:20:40.520 she heard on to on TV and then she looks 0:20:40.600 --> 0:20:42.640 up and she paid two percent over what she uh 0:20:42.960 --> 0:20:45.359 what was supposed to be paid for. So you know, 0:20:45.600 --> 0:20:48.720 these are all just good examples of the need for 0:20:48.960 --> 0:20:54.119 investor protections, transparency, and oversight for the best parts of 0:20:54.160 --> 0:20:56.280 the market. I hear you that there's a lot of 0:20:56.320 --> 0:21:00.200 market chasing. You know, if you approve if e t 0:21:00.359 --> 0:21:04.399 f A spot e t f UM is approved, exchanges 0:21:04.600 --> 0:21:08.840 will be flattened out through competition in the real estate market, 0:21:09.119 --> 0:21:12.920 and UH in Puerto Rico will actually collapse because because 0:21:13.040 --> 0:21:15.120 all those big boys guys will come out of Puerto 0:21:15.200 --> 0:21:18.400 Rico and then come back to New York because accentsion 0:21:18.440 --> 0:21:21.920 has gone away. So obviously there's a lot of clamoring 0:21:21.960 --> 0:21:23.760 for bigcoin e t s, But you also hear a 0:21:23.800 --> 0:21:27.159 lot of pitches um for everyone's ideas. People come to 0:21:27.200 --> 0:21:29.399 you to get funding. You hear the good pitches, the 0:21:29.480 --> 0:21:32.480 bad pitches, the ugly pitches. Can you give us a 0:21:32.560 --> 0:21:34.360 sense of some of the ideas that you've turned down 0:21:34.400 --> 0:21:35.760 that you said, you know what, I don't think this 0:21:35.880 --> 0:21:41.080 is gonna work well. Famously I told the big was twins, no, no, no, 0:21:41.480 --> 0:21:44.400 in two thousand and twelve. I've been right so far. Um. 0:21:45.640 --> 0:21:49.120 But there are a lot of wacky ideas where folks 0:21:49.160 --> 0:21:51.639 want to use the e t F rule to bypass 0:21:52.280 --> 0:21:56.240 capital games and bring um, you know, non traded assets 0:21:56.280 --> 0:21:58.920 and e t F format. I stopped those at the door, 0:21:59.119 --> 0:22:02.040 Like what was the most wild one? Kind of put 0:22:02.080 --> 0:22:04.440 my hedge fund inside of an ETF structure and launch 0:22:04.480 --> 0:22:07.040 it as a structure we don't have marked the market. 0:22:07.080 --> 0:22:10.160 You can't do that, you know. I think that, Um, 0:22:10.600 --> 0:22:12.960