ETF Trends CEO Tom Lydon took part in a panel discussion on CNBC’s ETF Edge on Monday that dived into the hot topic of non-transparent ETFs.
Lydon joined ETF Edge host Bob Pisani along with Christian Magoon of Amplify ETFs and Stuart Thomas of Precidian Investments.
The segment explored the topic of actively-managed, non-transparent ETFs that are set to become an ETF industry game changer.
During the segment, Thomas elaborated on some of the benefits of the new ETF structure.
“Precidian ActiveShares is the first and only SEC approved ETF that seamlessly integrates the benefits of active management with all of the efficiencies of today’s ETFs,” Thomas said. “It works just like a traditional ETF.”
Thomas explained there are two major differences with the new ETF structure.
“Instead of putting out stale indicative values, we’re actually giving 1-second snapshots,” he said
Intraday values are typically updated every 15 seconds and should closely approximate the net asset value (NAV) of an ETF throughout the trading day.
As part of the new ETF structure, Thomas said a fund manager would engage a trusted agent or an authorized participant representative (APR).
“They are the only ones who are going to know what the constituents are on a daily basis,” he said. “APs will be required to set up accounts at the APR for purposes of creation and redemption activity only. And that APR will only be able to trade on an agency basis.”
The new type of ETF is receiving tremendous interest, according to Thomas, including custody banks, market makers, and people that want to do the AP representative role.
“I think we truly underestimated how big this was going to be,” he said. “Our phones are ringing off the hook.”
Lydon said the new type of fund structure would attract more companies into the ETF space.
“There are so many companies, big money managers who built their businesses on mutual funds, that are saying ‘Hey, I missed that passive train, but now I want to take my active strategies, put an ETF wrapper around it, not have to lift up the hood every day and show what’s underneath,’” Lydon said.
Watch the full segment discussing non-transparent ETFs here:
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