Weird? https://www.cnbc.com/2019/06/15/the...etf-gets-sec-approval-heres-how-it-works.html https://www.ft.com/content/8d880f4a-6031-11e9-a27a-fdd51850994c https://www.marketwatch.com/story/get-ready-for-a-new-flavor-of-etf-non-transparent-2019-11-15
Reads like a scam to fleece retail investors. No doubt fees will be high, and returns will not beat passive. Holdings are concealed from the public but ARE known to a group of insider "market makers" to arb the shares, giving the latter free money.
re; At the top of every bull market dark financial instruments are created and sold to a gullible public. It is not a perfect leading indicator but still a good one.
This is great. I’ve been following these developments for a year and waiting for nontransparent ETFs. 1. People continually complain that they cannot invest in hedge funds, while hedge funds and quants are looking for more ways to allow public to invest, also lobbying for this. These ETFs are just one of ways to make this happen to an extent. But retail investors may not even be the main target, at least initially. 2. Most ETFs already fail due to lack of interest and low trading volumes. No one needs more of that. They are meant for longer-term, larger investments, just like all ETFs strive for. 3. They’re not for regular day trading so no one needs to worry about losing a few cents, which happens on regular ETFs as well, including fees charged by brokers/advisors, ETF fees, etc. 4. Anyone who doesn’t want to trade or invest in them - doesn’t need to. So there is nothing to complain about. 5. Virtu openly stated that they have algos that can trade them/make markets even without knowing anything about them. I also have similar algos for occasional scalps and just need 6 months of historical data. So they can be great for people and firms that know what to do with them or how to trade them. There will always be someone who’ll figure out what to do with something that other people criticize and stay away from. That’s how everything in trading business starts, or any business.
actually at this point this reads more like empty handed sideliner looking for every sign of potential market top just to feel a little bit better
Seems to me this is a good thing. Is this not basically like a closed-end fund, but you have the ability of the participants to create new shares and what not to help keep price very close to NAVs, unlike closed end funds that often trade at huge discounts? Sure, one might not know the day-to-day holdings, so they will probably stray more from their NAV than totally transparent ETFs, but still has to be better than closed end funds. This just seems totally good to me, if you prefer totally transparent ETFs they are there for you.
Oh wow, I didn't consider this potential aspect - holdings are concealed to everyone but the insider "market makers" who can arb the shares - isn't that like insider trading, the kind of stuff they (sometimes) put people in jail for long period for? Is it confirmed this is how it would work? I thought maybe the idea would be that NO insiders have actual knowledge of current holdings - people would just have access to the latest reported holdings disclosed to the public, and so no one that could arb the shares other than with respect to the lasted data known to all.
No. The market makers would be given an exemption in this particular case from what would be considered insider trading by the public. Exemptions are an old wall street trick to gain advantage over the general public.
The Marketwatch article stated that a select group of MMs would be shown the otherwise "secret" holdings so as to price the shares properly and make a market. Certainly does have an echo of legalized insider trading - which is probably a big reason why it took 11 years for one of these things to get approved. Seems like these days, anything goes and nothing matters.