WEBVTT - Will 2024 Be the Year of the Bitcoin ETF? 0:00:05.559 --> 0:00:07.040 Booking Trains. I'm Joel Webber and. 0:00:07.040 --> 0:00:11.920 I'm Eric palchunas Eric. 0:00:12.000 --> 0:00:15.280 Last week we got to do a really great interview 0:00:15.560 --> 0:00:20.480 at the Bloomberg Intelligence ETF In Depth event where we 0:00:20.560 --> 0:00:23.680 brought back one of our pandemic interviews, like very early 0:00:23.760 --> 0:00:27.160 in the pandemic and talked to an SEC commissioner named 0:00:28.280 --> 0:00:29.640 Hester Purse. 0:00:29.760 --> 0:00:29.960 Yeah. 0:00:30.040 --> 0:00:33.600 No, she's been a guest on Trillions before a couple 0:00:33.600 --> 0:00:34.320 of years ago. 0:00:34.479 --> 0:00:36.519 During the pandemic. We were in our closets. 0:00:36.680 --> 0:00:40.040 Yes, and she's great. She's very open, you know, very 0:00:40.120 --> 0:00:42.720 open for a SC commissioner, and I thought it was 0:00:42.760 --> 0:00:44.599 a good way to end our event, which by the way, 0:00:44.640 --> 0:00:47.199 the Index team and the BSKT team also kind of 0:00:47.240 --> 0:00:49.760 sponsored the event. But it was a great event, full house. 0:00:50.000 --> 0:00:51.839 We had two hundred fifty people there. It's the eighth 0:00:51.920 --> 0:00:55.400 time we've done that event. And Trillions live recording closed 0:00:55.440 --> 0:00:57.880 the event. So when you when you hear what you're 0:00:57.880 --> 0:00:59.560 about to hear, just know this is in front of 0:00:59.600 --> 0:01:03.480 a live audience, which you can tell. I think you you. 0:01:03.840 --> 0:01:05.920 She kind of cracked people up a couple of times. 0:01:05.520 --> 0:01:08.360 She's funny, she's got a good funny h and she 0:01:08.480 --> 0:01:11.840 joined remote from Washington, d C. And we're also joined 0:01:11.840 --> 0:01:19.119 by Katie Gryfeld ETF reporter with Bloomberg News, this time 0:01:19.160 --> 0:01:23.039 on Trillions Live with Hester purs. 0:01:28.400 --> 0:01:34.000 All right, the grand Finale, hopefully we deliver. Uh So, 0:01:34.880 --> 0:01:37.240 this is a special situation here. We are going to 0:01:37.880 --> 0:01:40.839 record a live episode of Trillions. So let me bring 0:01:40.959 --> 0:01:45.480 up my co host, Joe Weber of Trillions and Katie Greyfeld, 0:01:45.480 --> 0:01:48.240 who I co host ETFIQ with, but she's on Trillions 0:01:48.240 --> 0:01:51.000 all the time. Anyway, let's bring them up and we 0:01:51.080 --> 0:01:54.240 have a great interview plan for you. And this is live, 0:01:54.360 --> 0:01:57.560 so let's keep the heckling limited, especially that guy over there. 0:01:57.640 --> 0:01:59.200 Why don't you go here? And then we'll put her 0:01:59.240 --> 0:02:05.360 over there. Well, we only do this on special occasions 0:02:05.560 --> 0:02:12.480 where we do a live episode of Trillions. Usually for 0:02:12.680 --> 0:02:14.760 the six years that Eric and I have been doing this, 0:02:14.800 --> 0:02:17.440 we've been in studios for a lot of the time. 0:02:17.520 --> 0:02:22.000 We've been in our closet or I guess my closet. 0:02:22.360 --> 0:02:23.160 I've been in my closet. 0:02:23.160 --> 0:02:25.240 You been in my closet. But he looks like the 0:02:25.320 --> 0:02:28.120 Blair Witch Project movie, where is like it just is 0:02:28.160 --> 0:02:29.559 really it's creepy. 0:02:29.280 --> 0:02:31.320 Because that was the pandemic obviously, and we were recording 0:02:31.320 --> 0:02:34.320 from home. That's not normal. We're back in the studio 0:02:34.400 --> 0:02:38.800 mostly Katie Greifeld's often with us. It's cool that Hester 0:02:38.919 --> 0:02:42.920 Purse is here today, though, because that was an episode 0:02:43.200 --> 0:02:45.840 very very early in the pandemic when we weren't quite 0:02:45.880 --> 0:02:47.840 sure what was going on in the world. And the 0:02:47.840 --> 0:02:50.560 world's changed and we're sort of back to normal now 0:02:50.560 --> 0:02:53.760 and we're going to talk to her about all things SEC. 0:02:53.840 --> 0:02:57.240 So let's let's bring her out SEC. Commissioner Hester Purse. 0:02:59.320 --> 0:03:01.120 There you go, Hi. 0:03:01.240 --> 0:03:02.880 I think she can see only us, but yeah, there's 0:03:02.880 --> 0:03:04.040 a big crowd here, so there you go. 0:03:04.120 --> 0:03:06.359 High Hester, I can see only you, but I'm sure 0:03:06.360 --> 0:03:07.320 I'll be able to hear. 0:03:07.160 --> 0:03:13.120 The Okay, So, Hester, The question that I asked you 0:03:13.639 --> 0:03:16.680 at the beginning of our interview with you last time 0:03:17.600 --> 0:03:21.440 was are you baking banana bread or sour dough? Because 0:03:21.480 --> 0:03:23.160 it was that point in the pandemic we were talking 0:03:23.240 --> 0:03:31.040 like late May one, and you replied that banana bread 0:03:31.080 --> 0:03:34.679 with chocolate chips is the only way to bake banana bread. 0:03:34.680 --> 0:03:36.720 So I'm curious, what are you baking now? 0:03:38.280 --> 0:03:39.880 This week? It was ginger snaps. 0:03:40.320 --> 0:03:43.480 Wow, there you go. What's next week going to be? 0:03:45.120 --> 0:03:45.720 Next week? 0:03:45.800 --> 0:03:48.320 Because I'm going to be trying to put off doing work. 0:03:48.920 --> 0:03:52.520 There will be bread, cookies, you name it. 0:03:52.920 --> 0:03:54.520 Okay, that's great, all right. 0:03:54.480 --> 0:03:56.080 It's my procrastinations. Cool. 0:03:56.280 --> 0:03:58.160 I thought you guys were staying late to approve all 0:03:58.160 --> 0:03:59.680 the spot bit hoityt filings. 0:04:00.240 --> 0:04:03.760 Yeah. Nice, nice try there. 0:04:04.560 --> 0:04:07.160 Okay, So let's just keep it going on bitcoin because 0:04:07.200 --> 0:04:09.040 we have to ask who's going to be the first 0:04:09.560 --> 0:04:10.680 ETF to get approved? 0:04:11.520 --> 0:04:12.160 All right, So. 0:04:12.200 --> 0:04:15.840 Before I get in to get tricked into answering any questions, 0:04:16.240 --> 0:04:18.000 I'm going to tell you that my views are my 0:04:18.080 --> 0:04:20.599 own views as a commissioner, not necessarily those of the 0:04:20.680 --> 0:04:22.200 SEC or my fellow commissioners. 0:04:22.800 --> 0:04:24.960 And as you might guess, I'm not going to answer 0:04:25.000 --> 0:04:25.480 that question. 0:04:25.680 --> 0:04:30.320 Okay, Okay, I'll try. We're all going to make make 0:04:30.360 --> 0:04:33.320 attempts here. I want to go over this. It's been 0:04:33.360 --> 0:04:36.560 ten years since the Winklevoss followed the ETF. You put 0:04:36.600 --> 0:04:39.679 out rebuttals over the years that you thought this should happen. 0:04:39.720 --> 0:04:42.839 I totally agreed with you. We're now at a point 0:04:42.839 --> 0:04:45.240 where it looks like, because of the Greyscale ruling, that 0:04:45.440 --> 0:04:49.000 something's happening. We've seen filings come back amended. We've seen 0:04:49.200 --> 0:04:52.599 meetings where they publicly show that, oh, black Rock and 0:04:52.960 --> 0:04:57.520 other issuers met with the Trading Commission's division. It just 0:04:57.520 --> 0:04:59.600 seems like all signs are kind of pointing that direction. 0:05:00.279 --> 0:05:02.599 Would you agree or is there something else we should 0:05:02.600 --> 0:05:05.400 look for? Do you think this kind of engagement is 0:05:05.440 --> 0:05:08.880 good for people who are looking to are hoping that 0:05:08.920 --> 0:05:10.680 these do hit the market at some point? 0:05:11.560 --> 0:05:14.120 I really am the wrong person to ask, because, as 0:05:14.160 --> 0:05:16.920 you noted, I thought that we should have approved one 0:05:16.920 --> 0:05:21.040 of these things over five years ago. So the fact 0:05:21.040 --> 0:05:22.960 that we haven't done it yet is a mystery to me. 0:05:23.120 --> 0:05:25.440 And trying to read the tea leaves is probably just 0:05:25.480 --> 0:05:27.960 as hard for me. We're almost as hard for me 0:05:28.000 --> 0:05:29.760 as it is for all of you. 0:05:30.640 --> 0:05:33.799 And I guess as we watch this evolve, and really 0:05:33.960 --> 0:05:37.200 we've really been on Bitcoin ETF watch, as Eric said, 0:05:37.200 --> 0:05:39.440 for the past decade, but especially for the past six 0:05:39.520 --> 0:05:44.280 months after that Blackrock refiling. Would you say at this 0:05:44.320 --> 0:05:47.960 point that the ETF ecosystem is ready, and more importantly, 0:05:48.080 --> 0:05:50.919 is the crypto ecosystem ready to handle this? 0:05:52.160 --> 0:05:53.920 I mean, I thought it was ready five years ago, 0:05:54.040 --> 0:05:57.080 so I don't think I think if anything that the 0:05:57.560 --> 0:06:03.400 system is more ready. We have experienced with foreign jurisdictions 0:06:03.440 --> 0:06:06.560 having tried similar things. We have experienced with products that 0:06:07.040 --> 0:06:11.880 are not spot products but futures products. So yes, I 0:06:11.920 --> 0:06:15.280 mean we're I think we have a lot of the 0:06:17.279 --> 0:06:19.840 things in place that need to be in place, even 0:06:19.880 --> 0:06:22.120 more than they were five years ago. 0:06:22.680 --> 0:06:25.440 And when we talk about this Bitcoin ETF, part of 0:06:25.480 --> 0:06:28.320 it is the ETF vehicle. And I guess is was 0:06:28.320 --> 0:06:31.320 your confidence back then partially rooted in the fact that 0:06:31.360 --> 0:06:35.520 the ETF vehicle is robust and had a track record 0:06:35.600 --> 0:06:37.680 of being able to put all kinds of stuff in 0:06:37.720 --> 0:06:41.040 it and simply, you know, use the power of arbitrage 0:06:41.080 --> 0:06:43.320 to keep the price close to the nave And did 0:06:43.320 --> 0:06:44.719 that track record factor into that? 0:06:45.400 --> 0:06:48.200 Yeah, I mean, I think that's absolutely right. ETFs have 0:06:48.279 --> 0:06:52.840 shown themselves to be a really helpful part of the 0:06:52.880 --> 0:06:56.919 market and a helpful way of bringing prices. You know, 0:06:56.960 --> 0:07:00.680 as you said, it's an arbitrage mechanism allows people a 0:07:00.720 --> 0:07:03.360 way to express their views about the value of things, 0:07:04.160 --> 0:07:06.560 and I think that could be very useful in this market. 0:07:06.760 --> 0:07:09.360 I should say that the facts and circumstances, of course, 0:07:09.360 --> 0:07:13.560 will matter any any application for anything. We're considering we're 0:07:13.600 --> 0:07:16.680 always going to be looking at the specific facts and circumstances, 0:07:17.080 --> 0:07:21.160 but you know, in general, this is we're very familiar 0:07:21.160 --> 0:07:26.200 with exchange traded products. We're now very familiar with the 0:07:26.360 --> 0:07:27.680 underlying bitcoin. 0:07:27.920 --> 0:07:30.480 So it seems to me that. 0:07:33.000 --> 0:07:36.520 The reasons that I thought five years ago are still 0:07:36.560 --> 0:07:41.640 there today. But again, talk to my colleagues, because I've 0:07:41.680 --> 0:07:42.520 been an outlier. 0:07:43.080 --> 0:07:46.040 Okay, so to get comfortable with that underlying bitcoin. How 0:07:46.120 --> 0:07:51.600 much bitcoin did the SEC have to acquire? 0:07:53.320 --> 0:07:56.000 Yeah, I think that you might want to talk to 0:07:56.080 --> 0:08:00.760 other parts of the government that have acquired bitcoin through 0:08:01.440 --> 0:08:03.720 through court actions. 0:08:03.800 --> 0:08:07.960 Through those It's true that I get the US government 0:08:07.960 --> 0:08:11.239 has acquired a bit of a bitcoin through some other means. 0:08:12.520 --> 0:08:15.080 I'm curious though about this Pandora's box effects that this 0:08:15.280 --> 0:08:18.960 opens up. Were you worried about that before five years ago? 0:08:19.000 --> 0:08:21.600 As you mentioned, Is that still a concern among your 0:08:21.640 --> 0:08:25.400 other commissioners? This what kind of response the fact that 0:08:25.480 --> 0:08:28.360 you know, you open something up, you authorize approval for it, 0:08:28.400 --> 0:08:30.360 but then we're going to have a whole other world 0:08:30.440 --> 0:08:32.240 of crypto knocking on your door. 0:08:34.080 --> 0:08:37.640 Look, you know, people can build products, Whether people will 0:08:37.640 --> 0:08:40.000 come and buy them is another question, And I trust 0:08:40.000 --> 0:08:42.120 that people who build products and spend a lot of 0:08:42.120 --> 0:08:44.640 money doing it are going to think about whether there's 0:08:44.679 --> 0:08:46.199 a market for what they're building. 0:08:47.120 --> 0:08:50.480 That's really not our it's not our job. Our job 0:08:50.559 --> 0:08:50.800 is to. 0:08:50.760 --> 0:08:53.720 Look at the rules and to look to see whether 0:08:53.760 --> 0:08:57.480 the products satisfy those rules. When I looked at at 0:08:58.080 --> 0:09:01.720 the prior exchange traded product that we consider bitcoin exchange 0:09:01.720 --> 0:09:04.320 traded products, I said, well, it looks to me very 0:09:04.320 --> 0:09:06.800 similar to some of these other products we've approved, so 0:09:07.200 --> 0:09:08.080 why not approve it. 0:09:08.400 --> 0:09:10.040 That doesn't mean that people. 0:09:09.760 --> 0:09:13.040 Will necessarily come and buy it, and so I think 0:09:13.559 --> 0:09:16.439 I don't really worry about that because I think people. 0:09:16.240 --> 0:09:20.880 Have market incentives to decide which products to bring. 0:09:20.720 --> 0:09:23.120 To market and hester in this process. 0:09:23.160 --> 0:09:26.800 It's been pretty amazing to just watch how much hype 0:09:26.800 --> 0:09:31.120 there has been over even routine paperwork refilings, et cetera. 0:09:31.280 --> 0:09:34.080 You will see the price of bitcoin pop occasionally when 0:09:34.120 --> 0:09:37.320 someone refiles something, and it seems like what's really in 0:09:37.360 --> 0:09:39.640 the zeitgeist right now is there's been a lot of 0:09:39.760 --> 0:09:42.839 chatter about whether the SEC is going to give its 0:09:42.880 --> 0:09:46.280 blessing to in kind redemptions or whether they're going to 0:09:46.320 --> 0:09:50.880 require cash redemptions for spot bitcoin ETFs, the sort of 0:09:50.880 --> 0:09:54.880 conversation there being that the SEC wouldn't want broker dealers 0:09:54.920 --> 0:09:58.680 to actually be handling bitcoin itself, and for that reason 0:09:59.080 --> 0:10:00.640 maybe that they would FA for cash. 0:10:00.640 --> 0:10:04.360 Can you bring us into any of that thinking, No. 0:10:04.280 --> 0:10:07.760 I mean again, I really can't say where the conversations are. 0:10:07.960 --> 0:10:14.079 I think people have been discussing memos that they've seen in. 0:10:14.040 --> 0:10:16.920 The file and what the filings look like. 0:10:17.000 --> 0:10:19.640 And that's normal as people are waiting to figure out 0:10:19.679 --> 0:10:24.600 whether or not the approvals will happen, but what they'll 0:10:24.679 --> 0:10:28.400 ultimately look like. I can't speculate on that. I can't 0:10:28.400 --> 0:10:32.280 speculate on whether it'll be cash or in time. 0:10:39.280 --> 0:10:42.520 And I was curious, as Katie mentioned, like someone updates 0:10:42.520 --> 0:10:46.280 in nineteen before these filings have very wonky names, and 0:10:46.320 --> 0:10:49.040 the thing blows up on Twitter, everybody is like getting excited, 0:10:49.040 --> 0:10:52.160 actually moves the price. Again, we're talking about these filings 0:10:52.200 --> 0:10:56.040 and the process. Do you guys see all this going 0:10:56.080 --> 0:10:58.800 on or you kind of shielded from it? And is 0:10:58.840 --> 0:11:01.719 it I mean, what is it unusual? I mean, I 0:11:01.720 --> 0:11:06.199 think it's unusual that just these really I gotta be honest, 0:11:06.240 --> 0:11:08.080 I really never cared that much about s ones I mean, 0:11:08.160 --> 0:11:10.000 until the ETF was sent to us and we added 0:11:10.000 --> 0:11:13.520 the DS page, I didn't really care. But over ten years, 0:11:13.559 --> 0:11:16.440 these little tiny changes in filings are being like comb 0:11:16.480 --> 0:11:20.800 through and it's become such an almost like pastime for 0:11:20.840 --> 0:11:23.440 the past year. Yeah, do you guys watch this? 0:11:23.559 --> 0:11:24.120 Do you see it? 0:11:24.160 --> 0:11:26.120 Are you like? What do you think of it? 0:11:26.720 --> 0:11:28.240 Well, I mean I've certainly seen that. 0:11:28.320 --> 0:11:32.640 I've listened to a lot of crypto podcasts, and I'm 0:11:32.720 --> 0:11:36.040 on Twitter, so I do, of course their X so 0:11:36.120 --> 0:11:37.160 I do, of course. 0:11:37.120 --> 0:11:39.160 See see that. 0:11:39.400 --> 0:11:43.160 I think, you know, it reminds me of how unfortunate 0:11:43.200 --> 0:11:46.800 it is that regulation ends up driving so much of 0:11:46.840 --> 0:11:49.800 what happens, and speculation about regulation ends up. 0:11:49.800 --> 0:11:51.240 Driving what happens. 0:11:51.280 --> 0:11:54.199 I really do long for the day when crypto podcasts 0:11:54.480 --> 0:11:57.880 don't spend forty percent of their time talking about regulations. 0:11:57.920 --> 0:11:59.199 Which podcasts. 0:12:03.800 --> 0:12:06.880 Katie asked a question about other than trillions, which other 0:12:07.000 --> 0:12:08.400 which podcasts. 0:12:07.880 --> 0:12:08.520 Do you listen to? 0:12:09.400 --> 0:12:10.760 The list is too long. 0:12:10.640 --> 0:12:18.800 To We're low on that list. So there's this tension 0:12:18.800 --> 0:12:22.800 that I since between you and some other commissioners about approval, 0:12:22.800 --> 0:12:27.040 and I'm just I'm curious what shortcomings has this process 0:12:27.040 --> 0:12:30.000 revealed to you? Like you mentioned you've been a fan 0:12:30.040 --> 0:12:33.040 of this idea for five years, So do you feel 0:12:33.040 --> 0:12:35.920 like there should be a change to how the SEC 0:12:36.000 --> 0:12:37.920 operates in this space. 0:12:38.400 --> 0:12:41.440 I mean, look, the commission structure is one that I 0:12:41.440 --> 0:12:43.560 really like, and I think it's good to have a 0:12:43.640 --> 0:12:46.200 variety of perspectives, So that's not something I'm. 0:12:46.040 --> 0:12:49.280 Trying to change. What I do think the SEC. 0:12:49.000 --> 0:12:52.320 Needs to change is its attitude towards all things crypto 0:12:52.400 --> 0:12:55.600 and blockchain. I mean, it really has gotten to be 0:12:56.800 --> 0:12:59.520 to me a little bit ridiculous that we take a 0:12:59.559 --> 0:13:03.640 position and that the moment something involves crypto or blockchain, 0:13:03.720 --> 0:13:07.240 we start applying standards that are different. Is it fair 0:13:07.320 --> 0:13:11.200 that we that we scrutinize things. Absolutely, I mean that's 0:13:11.240 --> 0:13:13.480 our job, and I think we all know that there's 0:13:13.520 --> 0:13:15.040 a lot of there are a lot of things that 0:13:15.080 --> 0:13:17.120 have happened in the name of crypto and blockchain that 0:13:17.160 --> 0:13:22.280 have been basically theft, and so there is certainly a 0:13:22.360 --> 0:13:26.040 role for the SEC and in watching out on these 0:13:26.040 --> 0:13:29.240 things and making sure that people are disclosing the risks 0:13:29.280 --> 0:13:32.280 properly and so forth. But we do owe it to 0:13:32.320 --> 0:13:36.280 people to apply the same standard to these products as 0:13:36.280 --> 0:13:37.160 we do to others. 0:13:37.960 --> 0:13:41.840 How persuasive are your ginger snap cookies and getting people 0:13:41.960 --> 0:13:43.360 on the commission to change in their minds. 0:13:43.880 --> 0:13:45.840 Well, I guess we'll see. I mean, I just made 0:13:45.840 --> 0:13:47.120 them this week. 0:13:46.480 --> 0:13:50.079 So wait, if we see approval, we can link that 0:13:50.200 --> 0:13:54.000 cause and effect. Okay, you guys have any more Bitcoin questions? 0:13:54.840 --> 0:13:57.200 Well, there's one more I did just want to ask, 0:13:57.240 --> 0:14:00.320 which came from from you, which is it seems like 0:14:00.880 --> 0:14:04.240 there's a lot of mystique within the SEC about how 0:14:04.280 --> 0:14:07.480 these conversations go down and physically there's actually like. 0:14:07.520 --> 0:14:08.920 Different floor tenth floor. 0:14:09.160 --> 0:14:12.240 Yeah, yeah, you've heard this thing about I don't know, 0:14:12.360 --> 0:14:15.360 is this something you guys say, like someone told me, Oh, 0:14:15.520 --> 0:14:18.640 it's a tenth floor issue now, and what goes on 0:14:18.640 --> 0:14:19.320 on the tenth floor. 0:14:20.360 --> 0:14:24.200 Well, I'm on the tenth floor right now, I recording 0:14:24.240 --> 0:14:25.240 trillions podcast. 0:14:25.960 --> 0:14:29.160 But yeah, I mean the building is set up so 0:14:29.200 --> 0:14:31.280 that the commissioners are on the tenth floor, and so 0:14:31.360 --> 0:14:36.480 you do hear that tenth floor decisions. And you know, 0:14:36.520 --> 0:14:40.080 I think the staff is always providing advice to us 0:14:40.080 --> 0:14:42.560 and recommendations, but I do like to highlight that to 0:14:42.640 --> 0:14:44.680 people that ultimately, at the end of the day, it's 0:14:44.720 --> 0:14:46.760 the five of us that make the decisions, and so 0:14:47.960 --> 0:14:49.680 you know you can do the math. You need to 0:14:49.720 --> 0:14:53.160 get three of the five in order to get decisions made. 0:14:53.400 --> 0:14:57.080 So I do have to be a better baker and 0:14:57.120 --> 0:15:00.600 figure out what a few of my fellow commissioners what 0:15:00.720 --> 0:15:01.720 kind of cookies they like. 0:15:02.880 --> 0:15:05.400 All right, before we move on from the crypto conversation, 0:15:05.440 --> 0:15:06.920 I do have one more question, and it kind of 0:15:06.920 --> 0:15:08.880 goes back to what Joel was asking about when it 0:15:08.920 --> 0:15:12.960 comes to the Pandora's box, and if we do get 0:15:12.960 --> 0:15:16.760 spot bitcoin ETF approval, is it too simplistic to think 0:15:16.800 --> 0:15:20.720 that spot ether will follow after that whatever other coin 0:15:20.840 --> 0:15:22.040 is in vogue right now? 0:15:23.240 --> 0:15:24.640 Or what are you thinking about that? 0:15:25.600 --> 0:15:28.040 Again, if you're trying to read tea leaves, you should 0:15:28.080 --> 0:15:31.320 talk to my colleagues because I have been an outlier 0:15:31.400 --> 0:15:34.960 on many crypto related issues for a long time, and 0:15:35.000 --> 0:15:36.840 so I don't think I'm the best one for you 0:15:36.960 --> 0:15:39.000 to talk to you about those kinds of things. 0:15:39.200 --> 0:15:42.720 Okay, we're done the bitcoin, so let's all take a 0:15:42.960 --> 0:15:43.640 exhale now. 0:15:43.520 --> 0:15:45.800 All right, let's move on. We have other good topics. 0:15:45.800 --> 0:15:46.240 Don't worry. 0:15:47.360 --> 0:15:49.760 I was lucky enough to speak at the Division of 0:15:49.800 --> 0:15:53.360 Investment Management earlier this year, you had your first ever 0:15:53.440 --> 0:15:56.200 investment conference, and one of the topics I went the 0:15:56.240 --> 0:15:58.920 whole day and listened to other people's and this idea 0:15:58.960 --> 0:16:00.800 of like black Rock and Van Guard and how they 0:16:00.880 --> 0:16:04.000 vote and whether they're voting to ESG or not ESG. 0:16:04.160 --> 0:16:04.440 Enough. 0:16:04.480 --> 0:16:08.440 It came up a lot in this event, and I 0:16:08.440 --> 0:16:10.640 think it was Dalia Blasts, who used to be the commissioner, 0:16:11.120 --> 0:16:14.440 had said at one point, well, if they would just 0:16:14.560 --> 0:16:17.160 let people vote their shares, this would sort of maybe 0:16:17.200 --> 0:16:20.520 the marketplace would decide this because you know the size 0:16:20.520 --> 0:16:22.360 of black Rock and Vanguard. If you look at any stock, 0:16:22.360 --> 0:16:24.440 they're number one or number two. They own fifteen percent 0:16:24.480 --> 0:16:27.040 of every company in America, and this is something most 0:16:27.040 --> 0:16:29.360 people can like understand. Wait, we don't want them having 0:16:29.360 --> 0:16:33.000 that much power. They now have proxy programs to allow 0:16:33.040 --> 0:16:35.600 their investors to have some choice in the voting. Is 0:16:35.640 --> 0:16:37.840 this an issue that the SEC is looking at. Does 0:16:37.880 --> 0:16:42.840 the proxy voting programs kind of easier concerns or is 0:16:42.880 --> 0:16:45.120 it just the nothing burger that is really more of 0:16:45.160 --> 0:16:46.080 just the media. 0:16:45.800 --> 0:16:50.080 Issue without talking about any particular asset manager. I think 0:16:50.080 --> 0:16:53.160 it really is important to be pretty precise about how 0:16:53.200 --> 0:16:57.880 we think about funds and asset managers. So the asset managers, 0:16:58.200 --> 0:17:02.760 although they do many of the large asset managers have 0:17:02.800 --> 0:17:05.959 a lot of money under management, they don't actually own anything. 0:17:06.800 --> 0:17:09.760 The ownership is at the fund level, right. 0:17:09.800 --> 0:17:14.440 The funds own the assets and then people own the funds. 0:17:14.720 --> 0:17:17.720 So you have shareholders who own the funds. But the 0:17:17.800 --> 0:17:23.000 fund is itself a separate entity with its own objectives, 0:17:23.040 --> 0:17:27.280 and its shares ought to be voted or not voted 0:17:27.320 --> 0:17:31.399 in accordance with those objectives. So if you're buying a 0:17:31.440 --> 0:17:34.600 passive index fund, I would argue that you're not expecting 0:17:34.640 --> 0:17:39.600 an activist voting and engagement strategy unless you're being told 0:17:39.680 --> 0:17:43.000 specifically that that's what you're getting. So if an asset 0:17:43.040 --> 0:17:45.360 manager wants to sell a fund that's a passive fund, 0:17:45.440 --> 0:17:50.960 passive index fund, but involves an act development in engaging 0:17:51.000 --> 0:17:54.560 with companies and voting and otherwise, then that's something that 0:17:54.560 --> 0:17:58.560 should be very clear. So when we talk about passing 0:17:58.680 --> 0:18:03.280 down a vote through to the shareholders of a fund, 0:18:04.720 --> 0:18:07.440 the vote actually belongs to the fund, not to the shareholders, 0:18:07.480 --> 0:18:10.880 and so I think that we have to be careful 0:18:10.880 --> 0:18:13.000 about what those mechanisms look like too. 0:18:13.160 --> 0:18:15.760 Again, an asset manager can do what it. 0:18:15.680 --> 0:18:19.240 Wants as long as it tells that the people who 0:18:19.240 --> 0:18:20.920 are buying the fund. If it says we're going to 0:18:21.000 --> 0:18:25.199 vote the shares in proportion to how shareholders of the 0:18:25.200 --> 0:18:29.639 fund say they want them voted, you know, as long 0:18:29.680 --> 0:18:31.679 as people know ahead of time. But I think it 0:18:31.720 --> 0:18:35.080 really is important to remember that the fund is its 0:18:35.119 --> 0:18:38.520 own entity, with its own objectives, which might clash with 0:18:38.560 --> 0:18:41.960 the objectives of the asset manager and with the objectives 0:18:42.000 --> 0:18:43.600 of shareholders. 0:18:42.960 --> 0:18:43.720 In that fund. 0:18:46.040 --> 0:18:48.399 I'm curious as we approach sort of the end of 0:18:48.440 --> 0:18:51.680 the year here has to we at Bloomberg News tend 0:18:51.680 --> 0:18:53.760 to do a lot of stories that are pitched toward 0:18:53.800 --> 0:18:57.439 the year ahead, and I'm just curious, like, what is 0:18:57.480 --> 0:19:00.840 your sleeper priority as you look in to next year. 0:19:02.640 --> 0:19:07.040 Well, the SEC has a very busy agenda, and the 0:19:07.160 --> 0:19:11.760 chair sets the agenda. As chair, he gets that prerogative. 0:19:12.880 --> 0:19:16.080 I personally would if I were setting the agenda, would 0:19:16.119 --> 0:19:19.440 be working on some different things. I think Capital Formation 0:19:19.560 --> 0:19:22.639 has not gotten enough attention. I think there's some bread 0:19:22.640 --> 0:19:25.240 and butter, sort of boring kind of rules that need 0:19:25.320 --> 0:19:27.960 some attention to. I'd love us to take on transfer 0:19:28.000 --> 0:19:32.080 agent rulemaking as an example of that, so I think 0:19:32.119 --> 0:19:34.280 there are areas we could be spending our time. I 0:19:34.280 --> 0:19:36.679 think it's likely that we'll be spending our time on 0:19:36.720 --> 0:19:39.560 the regulatory agenda that the Chair has set out. 0:19:40.240 --> 0:19:43.080 Well, speaking of boring things that maybe very exciting to 0:19:43.119 --> 0:19:45.080 the people in this room, I want to talk about 0:19:45.520 --> 0:19:49.520 share classes specifically. Vanguard had that patent where it could 0:19:49.880 --> 0:19:53.240 issue its ETFs as a share class of its mutual funds. 0:19:53.240 --> 0:19:56.680 That patent has since expired, and you've seen the likes 0:19:56.720 --> 0:19:59.879 of Dimensional. I think Fidelity as well has applied for 0:20:00.160 --> 0:20:04.440 exemptive relief to also do that with its mutual funds. 0:20:05.200 --> 0:20:07.920 Where does that fall on the priority list if at all? 0:20:09.160 --> 0:20:12.080 Yeah, I mean I certainly wasn't surprised to see those 0:20:12.480 --> 0:20:13.879 exemptive applications come in. 0:20:13.920 --> 0:20:16.000 I think it is important to remember that there's a. 0:20:15.960 --> 0:20:19.080 Process that they have to go through, and so that 0:20:19.160 --> 0:20:23.240 process is actually run at the staff level. A lot 0:20:23.280 --> 0:20:25.040 of the work is done at the staff level, and 0:20:25.080 --> 0:20:28.399 so it's kind of running in parallel to our rulemaking. 0:20:29.320 --> 0:20:32.159 But again, no sense of timing. I can't give you 0:20:32.200 --> 0:20:33.720 a sense of timing on that. 0:20:34.200 --> 0:20:36.919 Well, beyond timing, can you talk a little bit about 0:20:37.000 --> 0:20:40.919 some of the potential issues here? The potential discussion points 0:20:40.960 --> 0:20:44.320 because speaking it over with some of the issuers involved 0:20:44.359 --> 0:20:48.359 and also people within the industry, it's been said that 0:20:48.400 --> 0:20:51.600 one of the hang ups is it's unclear what benefits 0:20:51.640 --> 0:20:55.359 this would actually mean for the ETF holders. Hoping you 0:20:55.400 --> 0:20:56.840 can share some thinking around that. 0:20:57.880 --> 0:20:59.760 Yeah, I mean, I think it's too early for me 0:20:59.800 --> 0:21:02.880 to say what those discussions are ongoing now, So it's 0:21:02.920 --> 0:21:05.200 too early for me to say sort of where the 0:21:05.880 --> 0:21:09.240 issues will be. The staff is engaging with each of 0:21:09.280 --> 0:21:12.520 the applicants on those kinds of issues. I mean, it's 0:21:12.560 --> 0:21:15.040 a little you know this is it can be a 0:21:15.040 --> 0:21:20.560