Advertisement

NYSE: 'ETFs have segmented up the market'

NYSE Head of Exchange Traded Products Douglas Yones joined YF to discuss the NYSE's increase in ETF activity.

Video transcript

SEANA SMITH: Let's talk about how this volatility is affecting some investment decisions, specifically the ETF market. And for that, we want to bring in our guests. We have Doug Yones. He is New York Stock Exchange Head of Exchange Traded Products. And Doug, we've seen a strong start to the year for ETFs. You noted in a recent report, 90 new-- more than 90 new ETF launches, $256 billion in total cash flow. But when you look at the market volatility recently, how do you see this affecting specifically the ETF landscape?

DOUGLAS YONES: Yeah, the ETF growth rate has been absolutely incredible this year. Those numbers are actually now $331 billion has entered the ETF space. Most of that money is going into equity ETFs, ETFs that cover, really, anything from the stock market. One of the ways we've seen a lot of the volatility play out with exchange traded funds has really been investors playing into different parts of the industry.

So thematic ETFs have seen big growth, people really tackling every part of the industry. And there's been some movement on out of tech, more into some of the biotech and some of the other places that new ETFs continue to broach. What's really interesting, though, is that ETFs have segmented up the market, everything from the cannabis space, all the way down into value stocks. There's almost an ETF for it.

ADAM SHAPIRO: Doug, for those of us who are just passive average investors who've been raised on a diet of index funds through, like, a Fidelity or a Vanguard, S&P 500, would it be better for us to be looking at an Index 500 ETF? Is it more efficient? I read sometimes that the tax consequences might be better. Which is it?

DOUGLAS YONES: Your diet is a good one, exactly what you mentioned. Most of the time, advisors are going to really go down a really great road for investors, which is, think about your portfolio as a core and then satellite. And within that core, you mentioned the idea of, like, a low cost index fund, something that'll give you great exposure to the equity markets. That's a perfect ETF for the core.

But look, all of us love to follow the markets. We love to invest in places we are excited about, whether it's a space ETF or it's healthcare or something else going on with gaming, right? These are all things that get people excited. And there's nothing wrong with that as an investor. And so use that as your satellite. Put the pieces here and there.

But use ETFs. They're going to be broad. They're going to have a lot of diversification in them. They tend to be lower cost, a lot more tax efficient. But I love the core satellite approach. We can stick to the core with sort of those broad based, you know, whether it's equities, fixed income. And then if you want to play around a bit and have some fun, that tends to be where your satellite positions are.

SEANA SMITH: Hey Doug, when you take a look at ETFs and Bitcoin, we have the SEC delaying that decision on the Bitcoin ETF until June. I guess, how do you see that affecting the ETF market? And how big of a potential investment opportunity is this?

DOUGLAS YONES: Yeah, the crypto space, digital currency space, I mean, as we know, that's a really volatile area, not just in price, but in news, right? Every day, it seems like something new is happening. At the New York Stock Exchange, I mean, we have a long history of innovation. We are very involved in that space. We're excited. We're working with a lot of ETF issuers. We're hoping that we can eventually get an ETF out the door.

And in the meantime, we're working on all the regulatory pieces that are required in order to get the SEC comfortable with the idea of a Bitcoin or Ether or any other type of ETF. But not to worry. The ETF industry, we love innovation. We love being at the leading edge. And I can promise you a lot more news coming from the New York Stock Exchange when it comes to digital currencies.

ADAM SHAPIRO: Doug, I used to love the days I got assigned to cover from the floor of NYSE. I just have to ask you, as we've gotten through this pandemic and we've seen that a digital world works just fine, is there really a need to have people on the floor at NYSE. And if so, why?

DOUGLAS YONES: Yeah, there really is. One of the neat experiments, if you will, was that the floor itself had to close last year. It was actually closed for roughly two months. And that was the first time in history we could actually measure, using data, to actually show the value of those humans on the floor. And it's literally millions upon millions of dollars saved every single day for you and me as investors by having humans behind me on the floor. So it really gave us an opportunity to show in numbers the value of the floor presence.

As you've heard, today is one of the kind of reopening days. More and more of us, me included, coming back to the floor. We're going to bring a lot more humans back. It reduces volatility. It reduces the amount in which stocks will move by computers talking to computers. It saves you and me money. It also saves companies money when they're going and doing follow-on shares.

If you're using an index fund-- you brought up index funds-- they're using that closing market, that auction every single day to trade the companies that list here at the New York Stock Exchange. The lower we can-- they can reduce that volatility, the more savings that-- the more money that goes in your and my pocket, which is a good thing. So, yes, the floor remains open, will remain open. And it's a great thing for investors worldwide that we have the floor of the New York Stock Exchange.

SEANA SMITH: Doug Yones, great to have you, New York Stock Exchange's Head of Exchange Traded Products.