Q&A With Giang Bui: How Nasdaq is Making History With ETFs

Nasdaq recently celebrated a milestone in ETF innovation with the launch of the ALPS Active REIT ETF (REIT), the first semi-transparent ETF to launch on Nasdaq and the first Blue Tractor model ETF to launch anywhere in the world.

To discuss this innovation, we spoke with Giang Bui, Head of U.S. Exchange Traded Products at Nasdaq. While Giang is relatively new to Nasdaq, she is an experienced veteran of the ETF space, having served in both index development and listings roles over the past decade.

What is the ALPS Active REIT ETF (REIT)?

The ALPS Active REIT ETF (REIT) is an exchange-traded fund, or ETF, that lets investors access an active and flexible real estate investment trust (REIT) investment strategy. ETFs are very popular investment vehicles; they enable investors to gain exposure to a varied portfolio through the purchase of a single, publicly-traded security. ETFs are also essential in helping Main Street investors gain access to equity markets, with their low fees, liquidity, diversification, and affordability—the average price of an ETF remains below $100 per share.

What makes the ALPS Active REIT ETF (REIT) different from other ETFs?

The ALPS Active REIT ETF (REIT) is an active semi-transparent ETF. An active semi-transparent ETF either reveals its portfolio less frequently or relies on proxy portfolios to keep their true holdings confidential, whereas a traditional active ETF discloses all of its holdings and their weightings on a daily basis.

REIT is the first actively-managed, semi-transparent ETF to launch using the Blue Tractor Model, which is one of the six semi-transparent models approved by the SEC. Blue Tractor ETFs differ from other semi-transparent ETFs in that they disclose their holdings at the beginning of each day, but alter the weightings of those holdings from actual allocation. This protects the proprietary strategies that the investment advisors provide to investors.

Why is this important to the ETF industry?

Semi-transparent ETFs are an important innovation in the ETF industry. They allow ETF issuers and portfolio managers to keep the advantages of having a “secret sauce” of their strategy while also providing investors with the liquidity and cost and tax efficiency that comes with an ETF. More and more investors are recognizing this value. That’s a win-win for investors, ETF issuers and portfolio managers, and opens the ETF asset class to a new universe of participants.

What does this launch mean for Nasdaq?

REIT is the first semi-transparent ETF to launch on Nasdaq, and continues our strong tradition of market innovation and expanding market access to new classes of investors. We have an extremely strong ETF listings value proposition: we have the largest and most dynamic equity market the world, a cost-effective fee structure, and an amazing brand and support system. Nasdaq has more than 400 listed ETFs on our stock exchange with assets under management of more than $1 trillion.

The addition of semi-transparent ETFs means more opportunity for new and existing sponsors launching ETFs at Nasdaq. It means more investors will benefit from ETFs through our exchange. It opens the door to new developments in both the ETF and market structure space. There is no limit to possibilities here.

Will we see more of these semi-transparent ETFs come to Nasdaq?

This is the first of many more semi-transparent ETFs to launch on Nasdaq. Though there are less than 30 semi-transparent ETFs publicly trading today, we expect this to grow significantly throughout this year and beyond, and our market continues to be the largest and best in the world for trading U.S. equities, including ETFs.

We expect ETFs of all stripes to continue to grow in popularity. ETF inflows reached record levels in 2020 and we are on pace to surpass that this year. As institutional investors demand more cost-efficient securities, and as more Main Street investors continue to trade actively online, there will be increasing demand for ETFs. Nasdaq will be their home.

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