In “The ETF Files: How the US Government Inadvertently Launched a $3 Trillion Industry,” Bloomberg News explores how the ETF industry came into existence, highlighting both AMEX's and the SEC’s major role in its development.
Corporate partner Kathleen Moriarty, who was actively involved in creating Standard & Poor’s Depositary Receipts (SPDRs), the first US exchange-traded fund (ETF), spoke to Bloomberg about her time providing legal assistance to AMEX, its creator.
In the article, Moriarty sheds some light on the unique structure of the ETF, explaining how, “The ‘in-kind’ creation/redemption process was to deal with Bogle’s concerns and with the transactional drag. It also reduced costs by as much as 50 basis points.”
Additionally, the structure enabled significant tax benefits, and because no money exchanges hands when shares are created and redeemed, the product would not emit capital gains distributions the way mutual funds do—which Moriarty called “a wonderful side effect.”
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