WEBVTT - Talking ETFs With the SEC's Hester Peirce 0:00:06.440 --> 0:00:12.400 Welcome to trillions. I'm Joel Webber and I'm Eric bell Tunis. Eric, 0:00:12.440 --> 0:00:15.360 you're back from the beach. I survived. I can see 0:00:15.360 --> 0:00:18.239 you via our zoom and you look like you've got 0:00:18.280 --> 0:00:21.080 some sun on your face. Congratulations. I'm still white and pasty. 0:00:22.079 --> 0:00:24.720 I needed that. Um, but the planes were half empty. 0:00:24.760 --> 0:00:28.560 Everybody was wearing masks. They apparently scrub them down. And uh, 0:00:28.640 --> 0:00:30.280 it was great. We had a good time. I feel 0:00:30.280 --> 0:00:33.839 great and my dad was happy to see us. So Eric, 0:00:33.880 --> 0:00:35.720 we've been doing this podcast for two and a half 0:00:35.800 --> 0:00:38.920 years together. I think we've had a lot of great guests, 0:00:39.159 --> 0:00:42.600 but I think today's guests might be the best guests 0:00:42.600 --> 0:00:46.960 we've had. Yeah, definitely up there. This is really exciting 0:00:47.040 --> 0:00:49.640 for me because a lot of the issues we talked 0:00:49.680 --> 0:00:52.519 about over the past two and a half years are 0:00:52.560 --> 0:00:55.800 typically stuff that become media stories. You know, are et 0:00:55.960 --> 0:00:58.680 f s trading at discounts? Um, what about the x 0:00:58.760 --> 0:01:01.840 I V story? You know who owned that. All of 0:01:01.880 --> 0:01:04.920 these issues are issues that make it to the forefront, 0:01:04.920 --> 0:01:07.759 tend to be issues that the SEC has to look at, 0:01:07.840 --> 0:01:11.240 which is me foreshadowing who the guest is. But there's 0:01:11.280 --> 0:01:13.040 a lot of times we'll say we wonder what the 0:01:13.120 --> 0:01:15.240 SEC thinks about this, and so now we have an 0:01:15.240 --> 0:01:19.440 opportunity to get that perspective. Well, I miss spoke slightly 0:01:19.480 --> 0:01:22.679 because we actually have two guests. In addition to someone 0:01:22.720 --> 0:01:25.679 from the SEC who will introduce him just a second, 0:01:25.840 --> 0:01:29.679 we also have a Bloomberg Intelligence analyst who covers regulation 0:01:29.760 --> 0:01:32.759 joining us. Nathan Dean. Hi, Nathan, how you doing? Thanks 0:01:32.800 --> 0:01:34.399 for having me. I'm gonna give you that. I'm gonna 0:01:34.440 --> 0:01:36.440 give you the drum roll because you are actually the 0:01:36.480 --> 0:01:39.840 person who helped make this happen. So, Nathan, who's our 0:01:39.840 --> 0:01:44.000 guest today? Our guest today is uh SEC Commissioner Hester Purse, 0:01:44.440 --> 0:01:47.360 also known as crypto Mom to many people in the 0:01:47.360 --> 0:01:51.560 bitcoin community. And it's just an absolute honor to have her. 0:01:51.600 --> 0:01:53.400 And thank you for allowing me to come on and 0:01:53.440 --> 0:01:56.160 ask a few questions myself. Uh, this is going to 0:01:56.240 --> 0:01:59.520 be a wonderful discussion. Nate and I work in Bloomberg 0:01:59.560 --> 0:02:02.080 Intelligence and we cross paths. I don't know once every 0:02:02.120 --> 0:02:04.920 two months he'll write about something with the SEC that 0:02:04.960 --> 0:02:07.440 deals with the t f S and UM. So we've 0:02:07.440 --> 0:02:09.400 gotten to know each other pretty well. And I think 0:02:09.440 --> 0:02:11.680 also when you said crypto Mom, that's how I got 0:02:12.520 --> 0:02:16.679 introduced to Commissioner because when the Bitcoin ETF wasn't approved, 0:02:17.240 --> 0:02:21.240 she was on the side of dissenting from that, and 0:02:21.240 --> 0:02:22.440 that's how I got to know it. But then I've 0:02:22.480 --> 0:02:26.160 read a lot of her speeches and I find myself 0:02:26.280 --> 0:02:29.400 very in tune with her takes. So I'm really excited 0:02:29.400 --> 0:02:40.519 about this best time on trillions. SEC Commissioner, hester person, Commissioner, 0:02:40.840 --> 0:02:44.040 Welcome to Trillions. I'm delighted to be here. I do 0:02:44.160 --> 0:02:46.440 have to start with two disclaimers. One, I'm sure I 0:02:46.440 --> 0:02:48.639 will not be the best guest you've ever had. And 0:02:48.800 --> 0:02:51.919 to um, the views that I represent are my own 0:02:52.000 --> 0:02:54.960 views and not necessarily those of the SEC or my 0:02:55.000 --> 0:02:59.800 fellow commissioners. Okay, what are your views on banana bread 0:03:00.120 --> 0:03:03.640 versus sour dough during the pandemic. Banana bread is good, 0:03:03.639 --> 0:03:05.480 but it has to have chocolate chips in it, and 0:03:05.480 --> 0:03:08.920 then it's better than sour dough. That's a pro tip 0:03:09.040 --> 0:03:12.640 right there. Um. Okay, So down to business. You noted 0:03:12.680 --> 0:03:15.400 in a recent speech that e t f s were 0:03:15.400 --> 0:03:18.200 in the portfolio of seven point eight million Americans, and 0:03:18.200 --> 0:03:20.799 that number even comes from a couple of years ago. Um, 0:03:20.800 --> 0:03:23.120 And that they're gaining even more share. How big do 0:03:23.160 --> 0:03:25.360 you see them getting and what do you guys at 0:03:25.360 --> 0:03:28.680 the SEC watch out for. Well, it's hard for me 0:03:28.800 --> 0:03:32.959 to anticipate how big they'll get. I think they'll be 0:03:33.600 --> 0:03:37.280 more and more a fixture of more and more Americans portfolios, 0:03:37.400 --> 0:03:42.320 and I can't see them declining in in in importance. 0:03:42.360 --> 0:03:45.880 I think they'll grow an importance UM in terms of 0:03:45.920 --> 0:03:48.760 what we watch for. You know, I think now that 0:03:48.800 --> 0:03:53.080 there's such an important fixture, that also means that there 0:03:53.120 --> 0:03:55.360 there's something that we have to pay attention to. From 0:03:55.400 --> 0:04:00.840 an investor protection um and in market stability perspective, I 0:04:00.840 --> 0:04:02.800 think we look we look at them from both of 0:04:02.840 --> 0:04:05.760 those perspectives. One of the things before we get into 0:04:05.760 --> 0:04:08.560 market stability and some of the exotic products UM when 0:04:08.560 --> 0:04:10.560 we talk about the rise of e t f s 0:04:10.680 --> 0:04:15.320 and Passive. I tracked Vanguard and black Rock a lot, 0:04:15.400 --> 0:04:17.840 and I'm just amazed that how much they take in. 0:04:17.880 --> 0:04:20.560 They almost taken like all the money and almost all 0:04:20.600 --> 0:04:23.680 the money is going to Passive. And so there's some 0:04:23.720 --> 0:04:26.880 people who get concerned that, you know, black Rock and Vanguard, 0:04:26.920 --> 0:04:30.840 as Passive gets bigger and that money is concentrated, are 0:04:30.839 --> 0:04:32.800 going to own too much of America's companies. I mean, 0:04:32.839 --> 0:04:34.480 I think right now the rule is a fund can't 0:04:34.480 --> 0:04:37.960 own more than ten and I think Vanguard's biggest fund 0:04:37.960 --> 0:04:39.600 has maybe two and a half percent of Apple, so 0:04:39.640 --> 0:04:41.280 they have a lot of room to grow. But that 0:04:41.279 --> 0:04:45.520 would mean Vanguard could of a stock. Do you guys 0:04:45.560 --> 0:04:48.120 look at that? Is it possible that there might be 0:04:48.160 --> 0:04:52.080 a regulation to sort of limit how much a company 0:04:52.160 --> 0:04:53.960 can own of a stock because right now I think 0:04:54.000 --> 0:04:57.520 between black Rock and Vanguard they own about of most companies. Well, 0:04:57.560 --> 0:05:02.240 I think it is important to distinguish each queen Vanguard 0:05:02.480 --> 0:05:07.159 for black Rock asset managers and the particular funds that 0:05:07.279 --> 0:05:10.880 they advise, because it's actually the fund that's the owner, 0:05:11.720 --> 0:05:16.440 and the funds are managed separately, so they're not Each 0:05:16.480 --> 0:05:20.039 fund has its own objective, so it's they're not all 0:05:20.120 --> 0:05:23.800 managed um in lock steps. And and that means that 0:05:24.200 --> 0:05:27.400 you can't really say, okay, let's just look at everything 0:05:27.440 --> 0:05:31.440 that one large asset manager has and just attribute that 0:05:31.480 --> 0:05:35.240 to the large asset manager itself. Um, you have to 0:05:35.360 --> 0:05:40.240 look more at a at a more granular level to 0:05:40.400 --> 0:05:44.039 see which fund owns what. Now that said, as you 0:05:44.120 --> 0:05:47.080 pointed out, some funds do have quite a big percentage, 0:05:47.560 --> 0:05:53.080 and that is something that's that's a new phenomenon. I'm 0:05:53.120 --> 0:05:56.839 not entirely new, but it's a it's a growing phenomenon, 0:05:56.920 --> 0:05:59.960 and so I think it's something that that everyone watched. 0:06:00.120 --> 0:06:04.720 Is that said, there's a lot of concern about passive investing, 0:06:04.800 --> 0:06:10.599 and my theory is that if passive investing it grows, 0:06:10.800 --> 0:06:13.200 then there is definitely going to be room for active 0:06:13.240 --> 0:06:15.800 investors to make a lot of money. If everyone is passive, 0:06:16.360 --> 0:06:19.640 the few people who aren't will be able to to 0:06:20.320 --> 0:06:23.599 do quite well. So I don't think that this means 0:06:23.640 --> 0:06:25.799 the end of active and I don't think it means 0:06:25.839 --> 0:06:30.920 that UM markets can't function. So, Commissioner, I'd like to 0:06:30.960 --> 0:06:33.719 ask a question from the regulatory point of view. You know, 0:06:33.800 --> 0:06:37.960 last September, the SEC finalized it's et F Modernization Framework 0:06:38.440 --> 0:06:42.680 Rule UM, you know, which in part aims to facilitate 0:06:42.680 --> 0:06:46.760 greater competition and innovation. You know to our audience and 0:06:46.800 --> 0:06:49.800 our audience are generalists. What are the main takeaways for 0:06:49.880 --> 0:06:52.880 investors to know? And do you think more work needs 0:06:52.920 --> 0:06:55.640 to be done in terms of this just the overall 0:06:55.640 --> 0:07:00.080 et F framework. I think the main takeaway from that 0:07:00.480 --> 0:07:05.000 rule is that we finally sat down, put pen to 0:07:05.040 --> 0:07:09.000 paper and said, all right, let's take the collective experience 0:07:09.040 --> 0:07:13.720 that we've had over the past nearly three decades UM, 0:07:13.800 --> 0:07:16.960 and let's let's put that into a formal rule. Up 0:07:17.040 --> 0:07:20.920 until that point, the way e T F got approved 0:07:21.080 --> 0:07:25.440 was through an exemptive application process, which is a lengthy 0:07:25.960 --> 0:07:30.200 UM process and an expensive process and means that UM, 0:07:30.280 --> 0:07:33.920 we were basically doing one off approval and that just 0:07:34.000 --> 0:07:38.160 doesn't make sense for something as established as ETS. So 0:07:39.160 --> 0:07:42.640 there had been attempts before UM. In in I think 0:07:42.640 --> 0:07:44.680 two thousand and eight, there was an attempt to do 0:07:44.800 --> 0:07:48.920 a rule in this space, but obviously got overtaken by events. 0:07:49.160 --> 0:07:50.640 So the fact that we were able to get a 0:07:50.720 --> 0:07:53.640 rule out I think is is just good for predictability 0:07:54.000 --> 0:07:57.000 rule of law reasons. You want to have a general 0:07:57.040 --> 0:08:00.480 framework that everyone relies on. You want everyone's can additions 0:08:00.520 --> 0:08:04.200 to be the same UM, and so so it provided 0:08:04.240 --> 0:08:08.520 some regularity, and I think that's a great start. What 0:08:08.560 --> 0:08:11.440 it means is that it frees up our staff resources 0:08:12.560 --> 0:08:16.760 to spend time on more UM unusual e T s, 0:08:16.880 --> 0:08:18.960 the ones that you would want us to spend a 0:08:19.000 --> 0:08:22.280 little bit more time thinking about UH. And so that 0:08:22.440 --> 0:08:24.920 was That was a side benefit of the rule, just 0:08:25.000 --> 0:08:28.360 having having more staff time to think about some of 0:08:28.400 --> 0:08:31.920 these unusual products that are more unusual products that people 0:08:31.960 --> 0:08:34.439 have come to us UM and asked if they could 0:08:34.679 --> 0:08:38.120 bring to market. Do I think that we could do 0:08:38.280 --> 0:08:42.880 more on the on the rule? Could we extend it? Yes, 0:08:43.040 --> 0:08:46.000 I think we could have included leveraged and inverse ets 0:08:46.080 --> 0:08:49.160 and the rule we we chose not to, So I 0:08:49.200 --> 0:08:52.240 think there will be room for us to to add 0:08:52.520 --> 0:08:55.720 some more regularity to the E T F market in 0:08:55.760 --> 0:08:59.199 the future, once we've had more experience with different kinds 0:08:59.240 --> 0:09:02.320 of E T F UM. That's a great segue the 0:09:02.400 --> 0:09:04.720 unusual part, because I wanted to get into some of 0:09:04.760 --> 0:09:07.839 the some of the more juicy topics here, namely, uh 0:09:08.280 --> 0:09:12.160 the exotic products like you mentioned, we just saw USO 0:09:12.400 --> 0:09:16.040 was the latest, you know, teachable moment I called them 0:09:16.080 --> 0:09:18.560 where people might not have understood what was happening or 0:09:18.559 --> 0:09:21.640 how futures get rolled before that. It was x I 0:09:21.720 --> 0:09:25.000 V leverage GTF was like five years ago. These kind 0:09:25.000 --> 0:09:27.400 of exotic products crop up now and then, and then 0:09:27.440 --> 0:09:30.640 black Rock will propose these acronyms that they'll be able 0:09:30.679 --> 0:09:32.319 to make like E T I or e t P 0:09:32.480 --> 0:09:35.839 like a labeling system to keep playing vanilla away from 0:09:35.840 --> 0:09:39.160 the exotic stuff. We've proposed that what we call traffic light, 0:09:39.200 --> 0:09:41.920 which is like movie ratings, and you know, if it 0:09:41.960 --> 0:09:45.160 has leverage or rolls futures, it would get a red 0:09:45.240 --> 0:09:47.199 light and we would just show you quickly why it 0:09:47.280 --> 0:09:50.120 got the red light. But this is a real tough 0:09:50.280 --> 0:09:53.400 nut to crack because not all E t F s 0:09:53.440 --> 0:09:56.079 are boy scouts and not all E t N s 0:09:56.160 --> 0:09:58.200 or e t P s are that bad. And I 0:09:58.240 --> 0:10:01.120 think there's a lot of moving part it's here. What's 0:10:01.120 --> 0:10:03.640 your take on how to allow for innovation in the 0:10:03.679 --> 0:10:08.840 exotic areas while protecting the innocent. Well, I think it's 0:10:08.880 --> 0:10:11.559 a good question and something that we think about all 0:10:11.559 --> 0:10:14.320 the time. But we do think about it from the 0:10:14.360 --> 0:10:17.880 perspective of not being a merit regulator. We're not, so 0:10:18.000 --> 0:10:21.560 we're not looking at products as they come through and saying, yeah, 0:10:21.559 --> 0:10:25.480 this one will be good for investors, this one not good. Um, 0:10:25.760 --> 0:10:27.760 So we allow the one that that we think will 0:10:27.800 --> 0:10:30.400 be good, and we disallow the one that that we 0:10:30.520 --> 0:10:34.560 just just disapprove the one that will not be good. Instead, 0:10:34.640 --> 0:10:37.880 what we do, as we say, is the disclosure that 0:10:38.040 --> 0:10:41.839 the fund is going to use going to tell investors 0:10:41.880 --> 0:10:45.040 what they need to know in order to understand whether 0:10:45.080 --> 0:10:48.080 this product will work in their portfolios or will work 0:10:48.160 --> 0:10:52.439 as a tool in their investment strategy. And so that 0:10:52.679 --> 0:10:55.360 is really where our focus needs to be, and from 0:10:55.400 --> 0:10:59.640 my perspective, UM we have had some success in this 0:10:59.720 --> 0:11:04.400 area in making sure that the disclosure is quite clear. Uh, 0:11:04.440 --> 0:11:08.439 And I think sometimes people do have the teachable moments, 0:11:08.440 --> 0:11:11.959 as he said, and you know, they can be really 0:11:12.360 --> 0:11:14.360 bad events, and so I'm not trying to I'm not 0:11:14.400 --> 0:11:19.160 trying to downplay them, but I do think it's it's 0:11:19.200 --> 0:11:22.520 good for people to read the disclosure and then think 0:11:22.520 --> 0:11:26.600 about how how they'll things will play out and not 0:11:26.720 --> 0:11:30.080 assume just because things have been going one way for 0:11:30.120 --> 0:11:32.360 a very long time that they're going to keep going 0:11:32.440 --> 0:11:35.600 that way. We've seen in recent months some really some 0:11:35.679 --> 0:11:40.440 really big changes in our markets, obviously, and that means 0:11:40.480 --> 0:11:42.880 that products that worked one way for a long time 0:11:42.920 --> 0:11:46.040 may work in a very different way during that change time. 0:11:46.120 --> 0:11:51.839 And so UM even very sophisticated investors who were using 0:11:51.920 --> 0:11:56.679 strategies UM that they thought worked really well found themselves 0:11:56.720 --> 0:12:00.360 in a bit of a difficult situation in recent months 0:12:00.360 --> 0:12:04.400 when things changed dramatically, and so it's a good lesson 0:12:04.440 --> 0:12:06.600 for all of us. You have to think not only 0:12:06.640 --> 0:12:09.520 of what the markets look like today, but of how 0:12:09.559 --> 0:12:12.439 things might change in the future. And you have to 0:12:12.480 --> 0:12:17.120 protect yourself, um and and and think think ahead and 0:12:17.120 --> 0:12:21.000 protect yourself for circumstances that might look very different than 0:12:21.160 --> 0:12:24.480 what you're experiencing now. Um So we all learn in 0:12:24.920 --> 0:12:28.280 market events like like the ones that we've had in 0:12:28.320 --> 0:12:31.520 recent months. That makes total sense. I guess the only 0:12:31.559 --> 0:12:33.880 thing that I've found in there that I would feel 0:12:33.960 --> 0:12:37.439 would might get a little pushback is reading the disclosures. 0:12:37.480 --> 0:12:41.080 I think there's just an unfortunate reality that people just 0:12:41.120 --> 0:12:45.800 don't read the documents that much. Um So, the hence, 0:12:46.200 --> 0:12:48.640 you know, my take is a need for maybe some 0:12:48.720 --> 0:12:54.120 kind of outside third party objective rating system like movies 0:12:54.240 --> 0:12:58.240 or something that gives you the information quickly so that 0:12:58.320 --> 0:13:01.120 you don't have to go and through the prospectives or 0:13:02.000 --> 0:13:04.080 or do you think just maybe trying to just urge 0:13:04.080 --> 0:13:06.440 people to read the prospectives or put the information higher 0:13:06.520 --> 0:13:08.960 up in the documents. Um what's your take on that, 0:13:09.080 --> 0:13:13.120 like apathy of reading the documents, Well, that's certainly is 0:13:13.559 --> 0:13:17.360 a phenomenon that we see, and and it's an understandable one. 0:13:17.400 --> 0:13:21.640 I mean, the disclosures that we have, frankly for for 0:13:21.679 --> 0:13:26.720 all investment products are ones that are really difficult to read. UM. 0:13:26.760 --> 0:13:31.680 We are working on that in in various ways. We've recently, 0:13:31.720 --> 0:13:35.400 in connection with with a new regulation for broker dealers 0:13:35.440 --> 0:13:39.280 and investment advisors, we put out a requirement that there 0:13:39.360 --> 0:13:43.040 be a short form disclosure, which we hope will be effective. 0:13:43.559 --> 0:13:48.920 I've been pushing specifically for for allowing firms to use 0:13:49.000 --> 0:13:52.840 technology to better communicate with investors, because I think lots 0:13:52.840 --> 0:13:55.520 of investors who might not be inclined to read a 0:13:55.559 --> 0:13:59.800 disclosure statement might well listen to it on a podcast, 0:14:00.040 --> 0:14:03.160 watch it on a video, work with it through an 0:14:03.160 --> 0:14:07.480 interactive app on their phone. And so a lot of 0:14:07.760 --> 0:14:11.560 firms really are interested in offering these kinds of things 0:14:11.559 --> 0:14:14.720 to to investors, but the rules, the way they're written 0:14:14.720 --> 0:14:17.880 now make that really hard to do. UM. What can 0:14:17.920 --> 0:14:22.480 we do to allow um populations that speak different languages 0:14:22.520 --> 0:14:25.360 than English to get disclosures in a language that works 0:14:25.400 --> 0:14:28.600 for them, So we can be more creative on that front. 0:14:29.520 --> 0:14:32.640 But even if we we do a better job in 0:14:32.680 --> 0:14:35.360 that area. I think you're right that they're going to 0:14:35.400 --> 0:14:38.000 be a lot of people who still are looking to 0:14:38.280 --> 0:14:42.040 third parties for guidance about what they should what they 0:14:42.040 --> 0:14:44.600 should buy, and what they should avoid. And I don't 0:14:44.600 --> 0:14:48.320 think a rating system is a bad idea, especially if 0:14:48.320 --> 0:14:52.040 it's something that's done designed by the private sector. I mean, 0:14:52.040 --> 0:14:56.600 if I'm going to buy a refrigerator, I don't know 0:14:56.760 --> 0:14:59.760 a lot about refrigerators. I don't purchase them very often, 0:15:00.320 --> 0:15:03.000 and so I'm going to look up some sort of 0:15:03.160 --> 0:15:06.680 third party advice on which ones are good and which 0:15:06.680 --> 0:15:09.960 ones aren't, and I'm going to run that search based 0:15:09.960 --> 0:15:14.040 on what my particular needs are. And so I think 0:15:14.080 --> 0:15:19.600 those kinds of third party rating systems can be very valuable. Commissioner, 0:15:19.640 --> 0:15:21.880 I have to ask if you've ever heard of Eric's 0:15:21.880 --> 0:15:24.680 traffic light system prior to him pitching it to you 0:15:24.880 --> 0:15:27.960 during this podcast. Well, I'm sorry that I haven't, but 0:15:28.160 --> 0:15:30.960 I think it's an interesting idea, UM. Commission I want 0:15:30.960 --> 0:15:33.280 to ask you about another area of interest right now, 0:15:33.320 --> 0:15:36.320 which is E, S, G, E T F S UM. 0:15:36.480 --> 0:15:38.480 Eric is sort of a hater in that world, UM, 0:15:38.520 --> 0:15:41.280 and you know he thinks thinks that, Well, we've we've 0:15:41.280 --> 0:15:44.080 covered that before, but you've spoken out UM I believe, 0:15:44.080 --> 0:15:46.560 on on how the labels of E s G, E 0:15:46.640 --> 0:15:49.120 T F S can also be misleading. What are your 0:15:49.160 --> 0:15:52.120 specific concerns there, Well, I think I'm not the only 0:15:52.160 --> 0:15:56.960 one to raise concerns about greenwashing UM, which essentially means 0:15:57.000 --> 0:16:00.360 that you say, oh, well, everyone wants to wants E 0:16:00.560 --> 0:16:03.680 s G now in their in their portfolio, so we'll 0:16:03.680 --> 0:16:06.360 just flap the E s G label on and we'll 0:16:06.400 --> 0:16:08.760 just keep doing whatever it is we were doing before. 0:16:09.360 --> 0:16:11.800 And that may be fine. I mean, maybe what you 0:16:11.840 --> 0:16:14.720 were doing before was E s G. E s G 0:16:14.960 --> 0:16:20.800 is such a broad set of UM characteristics. So again 0:16:21.000 --> 0:16:24.280 going back to what I said before, what people need 0:16:24.320 --> 0:16:26.840 to do, what what companies need to do when they 0:16:26.840 --> 0:16:30.280 offer these products is they need to explain what they 0:16:30.360 --> 0:16:35.080 mean by E s G for that particular product and 0:16:35.080 --> 0:16:38.800 and be very clear about that and then allow investors 0:16:38.800 --> 0:16:41.880 who care about those things to to pick the E 0:16:42.120 --> 0:16:45.400 s G products that works for them for whatever purpose 0:16:45.400 --> 0:16:49.520 they're trying to achieve. I mean, I think they're There 0:16:49.600 --> 0:16:53.000 is a lot of attention on whether or not E 0:16:53.240 --> 0:16:55.680 s G is good for returns or not. And and 0:16:55.720 --> 0:16:58.960 again because we don't really have a consistent view of 0:16:59.280 --> 0:17:02.600 what E s G means. You can't really say across 0:17:02.640 --> 0:17:04.520 the board, yes, it's good to have an E s 0:17:04.560 --> 0:17:08.760 G portfolio. It's going to increase your return UM, and 0:17:08.760 --> 0:17:12.080 and some people are willing to sacrifice returns in order 0:17:12.359 --> 0:17:15.400 to achieve some other objectives. So again, I think it's 0:17:15.480 --> 0:17:20.679 really important that UM that the company's offering these products 0:17:20.720 --> 0:17:23.760 are very clear on whether you will be sacrificed in 0:17:23.800 --> 0:17:29.119 return or whether they believe that that the E s 0:17:29.160 --> 0:17:34.960 G characteristics are consistent with with achieving the highest return 0:17:35.040 --> 0:17:44.480 consistent with that strategy. Let's shift because I don't want 0:17:44.480 --> 0:17:47.680 to lose some of these other topics here. Um. Obviously Bitcoin, 0:17:47.880 --> 0:17:50.560 this is uh how I got to hear of you 0:17:50.640 --> 0:17:53.600 when you wrote that descent. Um, I was just sort 0:17:53.640 --> 0:17:56.359 of note about bitcoin. E t f s in the 0:17:56.440 --> 0:17:58.359 world or the e t P s in the world. 0:17:58.640 --> 0:18:02.000 There's now different funds across the world. The one in 0:18:02.040 --> 0:18:04.159 Sweden that's an e t N has been around for 0:18:04.240 --> 0:18:07.560 five years now, and the premiums on the ones that 0:18:07.600 --> 0:18:09.960 are e t p s are very small. You can 0:18:09.960 --> 0:18:13.000 tell the creation redemption process is working fine. Then you 0:18:13.040 --> 0:18:15.560 go to the US and you have g BTC, which 0:18:15.600 --> 0:18:18.080 is a private trust that trades over the counter, so 0:18:18.880 --> 0:18:22.359 that can trade up to at premiums up to and 0:18:22.400 --> 0:18:24.959 that's got a couple of billion at this point. So 0:18:25.320 --> 0:18:27.320 I made the case that they should approve it a 0:18:27.480 --> 0:18:31.560 to give GBTC people a better shot at a fair price, 0:18:32.040 --> 0:18:35.200 and be because Europe has shown that the creation redemption 0:18:35.200 --> 0:18:38.600 process works. Great. What's your latest on where we are 0:18:38.680 --> 0:18:44.879 with this? Well, recently I issued a second descent, saying 0:18:45.840 --> 0:18:49.679 to me, it appears that the current commission is not 0:18:49.960 --> 0:18:55.360 interested in approving any exchange traded product that's available to 0:18:55.359 --> 0:19:00.800 to a retail audience that has crypto underlying um, so 0:19:01.280 --> 0:19:04.800 I'm not I tend to be fairly optimistic about lots 0:19:04.800 --> 0:19:06.879 of things, so I hope that that this point of 0:19:06.960 --> 0:19:10.960 view will change. But the analysis that we've applied in 0:19:10.960 --> 0:19:14.399 in preventing these products from trading in the United States 0:19:15.440 --> 0:19:20.080 is a uniquely tailored analysis that we only seem to 0:19:20.240 --> 0:19:23.320 use for these kinds of products, which suggests to me 0:19:23.400 --> 0:19:26.159 that we have one standard for crypto products and another 0:19:26.200 --> 0:19:29.400 standard for other types of products. And I don't think 0:19:29.400 --> 0:19:32.040 that's right. And when you talk about this and they 0:19:32.040 --> 0:19:34.639 say they don't want to have an exchange listed product, 0:19:35.359 --> 0:19:39.119 Do they consider the GBTC situation, Because it's it's big. 0:19:39.160 --> 0:19:41.760 I mean, and let's say you bought it at a 0:19:42.920 --> 0:19:47.320 premium and the premium just happens to drop, but bitcoin 0:19:47.359 --> 0:19:49.480 went up. You actually lost money even though the underlying 0:19:49.520 --> 0:19:51.840 went up. No, I think that's a great point, and 0:19:51.880 --> 0:19:53.560 I think it's it's I mean, I don't want to 0:19:53.560 --> 0:19:56.439 speak about any product and I haven't tracked that product 0:19:56.480 --> 0:20:00.520 the way that you have. But I think that in general, 0:20:00.960 --> 0:20:05.159 the reason that products that trade on exchanges are attractive 0:20:05.400 --> 0:20:10.440 is because they do offer this this really good price 0:20:10.520 --> 0:20:14.480 discovery process and they work really really well, and so 0:20:14.560 --> 0:20:19.000 that's why people um like to trade products on exchanges, 0:20:19.040 --> 0:20:23.000 and there's value there. So so I think it's it's 0:20:23.040 --> 0:20:27.200 something that, um that we should consider. But what what 0:20:27.320 --> 0:20:33.960 I've seen among folks at the SEC is that there's 0:20:34.000 --> 0:20:37.959 a real concern to allow any kind of products that 0:20:38.000 --> 0:20:42.919 will be easily accessible to retail investors. And I do 0:20:43.040 --> 0:20:47.920 think it's a bit of a of a merit regulation perspective. UM. 0:20:48.280 --> 0:20:52.400 I think it's it's the conclusion that they don't think 0:20:52.440 --> 0:20:57.800 it's it's something that that retail folks should be should 0:20:57.840 --> 0:21:00.600 be engaged with. And my response to that as well, 0:21:01.200 --> 0:21:05.680 there's retail and institutional interest in crypto. Whether that's good 0:21:05.760 --> 0:21:08.960 or bad, that's not really our place to decide. But 0:21:09.040 --> 0:21:12.760 if we don't allow people to get access through our 0:21:12.920 --> 0:21:16.679 regulated securities, markets still get access in other ways. And 0:21:16.760 --> 0:21:21.360 that's that's fine, um, of course. But but I think 0:21:21.400 --> 0:21:23.600 what my colleagues would say as well, all right, then 0:21:23.640 --> 0:21:26.280 if they're problem and again I shouldn't as I started 0:21:26.280 --> 0:21:30.119 out the podcast, I'm not speaking for my colleagues, but 0:21:30.280 --> 0:21:34.800 to me that that suggests that if their problems, then 0:21:35.000 --> 0:21:37.760 we don't have to take responsibility for them. And that 0:21:38.960 --> 0:21:43.399 isn't a really good rationale for a regulator to deny 0:21:43.480 --> 0:21:49.440 a product um to trade in our market. Yeah, just 0:21:49.440 --> 0:21:52.560 just among those lines. Commissioner, you know crypto dad. Former 0:21:52.800 --> 0:21:56.560 CFTC chairman Christopher John Carlo has left. Your term is 0:21:56.680 --> 0:21:59.760 up in June, and you know, obviously I think everybody's 0:21:59.800 --> 0:22:03.320 where commissioners can serve beyond their term dates. But when 0:22:03.400 --> 0:22:07.920 you eventually leave the commission, should the bitcoin bitcoin community 0:22:07.960 --> 0:22:11.560 be concerned that there's not somebody on the regulatory side 0:22:11.600 --> 0:22:16.119 that would be pushing or a champion for cryptocurrency, you know, 0:22:16.240 --> 0:22:19.239 is there is there going to be avoid there. So 0:22:19.280 --> 0:22:22.240 I don't view myself as a champion for cryptocurrency. What 0:22:22.359 --> 0:22:27.160 I do view my role as saying, look, innovation brings 0:22:27.359 --> 0:22:30.320 good things to society. It doesn't mean that every innovation 0:22:30.480 --> 0:22:33.160 is a good thing. It just means that the job 0:22:33.200 --> 0:22:35.320 of a regulator is not to stand in the way 0:22:35.320 --> 0:22:38.520 of innovation. It's to set up a regulatory framework that 0:22:38.640 --> 0:22:42.560 is flexible enough to accommodate innovation. And I think there 0:22:42.560 --> 0:22:45.600 there are many people both at the SEC and at 0:22:45.640 --> 0:22:49.680 the cfcc UM, which is which is our fellow capital 0:22:49.680 --> 0:22:55.000 markets regulator, who are very interested in seeing innovation move 0:22:55.080 --> 0:22:58.320 forward and figuring out framework that will work well for innovation. 0:22:58.880 --> 0:23:01.280 And I've always said it, you know, whether or not 0:23:01.720 --> 0:23:06.800 any particular commissioner is at the Commission is sort of irrelevant. 0:23:06.840 --> 0:23:09.159 What you're trying to do is you're trying to build 0:23:09.600 --> 0:23:15.359 institutions that that succeed Apart from whether any particular person 0:23:15.440 --> 0:23:19.359 is there or not. I think that that it is 0:23:19.400 --> 0:23:24.720 good to push the SEC to rethink its approach to innovation, 0:23:24.840 --> 0:23:27.080 and I will continue to do that as long as 0:23:27.080 --> 0:23:30.760 I'm there. But there are others at the SEC who 0:23:30.800 --> 0:23:33.560 feel the same way as I do, both on the 0:23:33.600 --> 0:23:38.360 Commission and on the staff Commissioner. I'd like to ask 0:23:38.400 --> 0:23:41.760 you about bond ETFs, which have been a concern of 0:23:41.880 --> 0:23:45.159 late because some have traded a discounts to their navs 0:23:45.200 --> 0:23:49.120