ETF Edge - Innovation versus regulation

Episode Date: July 6, 2026

The first half of the year has witnessed an explosion of ETF innovation built on the back of a market frenzy. Relaxed regulation has been part of that equation. But there’s a time-tested saying about “too much of a good thing…” Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

The ETF Edge podcast is sponsored by InvescoQQQ. Let's rethink possibility. Investco Distributors, Inc. Welcome to ETF Edge, the podcast. If you're looking to learn the latest insights on all things, exchange, traded funds, you're in the right place. Every week, we're bringing you compelling interviews, thoughtful market analysis, and breaking down what it all means for investors. I'm your host, Dominic Chu. It's been a record first half of the year, not just for the markets overall, but for innovation as well.

Will the second half be the same? Here's my conversation with Alex Morris, the president, CEO, and CIO at FM Investments, along with Mike Aiken's, the founding partner of ETF Action. Gentlemen, thank you both for being with us right now. I'd like to, Alex, start off with you as the head of one of the big issuers of mutual funds and ETFs out there. I wonder if you could give us your take on what you saw in the first half of this year

with regard to the business of ETFs and mutual funds, and just what it showed you about the current, not just investing environment, but even maybe the political, regulatory environment as we're seeing it unfold. Well, Dominic, it's been a lot happening, and that's the exciting part about the ETF industry. You get to see it happen in real time.

Any way you measure it was big. We had a big inflow year last year, biggest on record. We had a big inflow year this year. If it keeps at this pace, we'll very easily beat what happened last year. And I think it shows invest, really want this content. On a good day,

ETFs make up about 20% of the printed tape. On a really volatile day, they get close to half, which really shows you that ETFs are not just the bolt-on part of your portfolio. They used to be 15 years ago. They are the bulk of the portfolio. We've seen a lot of interesting things happen, right? As investments played out, technology was big.

No surprising ETFs that specialize in technology were also big. Cryptocurrency was hit. Many of those funds that folks were in, by the way, in crypto were levered, generally to be. the upside. So when crypto declines, those two X levered upsize funds take twice as much of a hit. But what we've really seen, you know, really starting a few years ago when the government created 6-11, this sort of very technical thing that for ETF issuers and buyers meant that now issuers could create funds more rapidly, bring them to market with a more standard set of rules,

and generally within about 75 days as opposed to months or years, we saw lots of innovating things happen. The issuers have followed suit. They followed them. money, what investment themes people wanted they went to, but they've also allowed innovators to build things like what we've done in single treasury ETFs to be on the yield curve exactly you want to be. Interesting ideas in total return investing. But now we're starting to wonder, when does it go too far? When is it we can't have nice things? And the SEC is the chief regulator for ETFs, ask that question openly, how far should we go? You know, and remind folks that they're regulators for a reason. They're not just an enabling organization. They do have a duty to investors.

And there needs to be a good give and take. Otherwise, what's been the most powerful force from everyone from Main Street to Wall Street and everywhere in between is going to be broken. And we don't want to see that happen because ETFs have done so much good and have so much more good to do. I mean, it's absolutely true, Alex. I mean, the business, the industry has exploded. We've talked multiple times on this show about the idea that there are more tickers for ETFs than there are for actual single stocks in the marketplace right now because that innovation has really taken hold. in earnest, especially over the last three to five years. Mike, I want to bring up something interesting to Alex's point.

We actually had a chance to speak with Brian Daly, who's the director of the division of investment management over at the SEC. Somebody I know you guys are all very familiar with because he's the primary regulator for so-called 40-act companies, mutual fund, and ETF providers and issuers. And one of the things he brought up was just how much on the leading edge this SEC is and how business friendly it is. Take a listen to what he had to say. We are the most pro-innovation SEC ever.

So we love innovation. We want to foster innovation. All right. So what he was basically talking a little bit more about was this is the most business-friendly SEC that's ever been in existence. To Alex's point, that has a good side of things and also a bad side of things potentially as well.

I wonder, Mike, from your standpoint, has the ETF business, from what you've seen in the first half of the year, really been able to kind of foster that innovation, and at what point in your mind, do these new products coming to market really kind of skirt that line between investing and what some folks call casino-like behavior?

So I think the line's already been crossed when it comes to the casino type behavior, but I don't think that's the SEC's fault or the ETS fault. I think we're in a very large bull market, and people are excited about it to be invested in the market, and you have a little bit of a gamification,

going on. But if we take a step back, the ETF is just a wrapper, right? It's a wrapper designed to make it more efficient to invest in different areas of the market. Those areas of the market has expanded. As Alex mentioned, 6C11 really changed the game in terms of what investors, how they could build the ETF product and how they could manage it to it. But if you think about the vast majority of ETFs and the vast majority of flows that are going into ETFs, they serve very good purposes, whether it be broad-based beta index, a very niche strategy that focuses on a small subset of stocks that capture a certain theme, very precise fixed-income instrument. It's the wrapper that is attractive to investors, and the issuers are doing a very good job, taking advantage of that wrapper to make, to empower the investor to build better portfolios. That being said, there are certain things that were not meant to be inside.

of a regulated product, if you will. I do think that leverage is getting a little carried away within the ETF marketplace. I also think derivatives in general are becoming too much of a go-to use case inside of the ETF space. It's not that the products are bad. I think you have to realize that, you know, I've always said the overwhelming number of ETFs that come to market, do what they say they're going to do. If it's 2x, you know, some memory stock or if it's, you know, inverse or whatever it may be that does what it says. However, sometimes what it says it is going to do is not great for the overall kind of ecosystem of the market.

Now, Alex, that's an interesting point here as well because for right now we've kind of cap things at triple levered, right, for index-based ETFs. Those attract things like the underlying NASDAQ index and others. And we haven't seen anything above a 2x leverage factor, you know, with regard to single stock transactions. So you can't get like a SpaceX or an Nvidia for like 3 to 5x. We've actually seen the regulators put some throttles and tap the brakes around some of the issue request to develop some of those types of products. I wonder from your standpoint, because you are the CIO and CEO of an issuer, somebody who puts out

ETFs. You mentioned this idea of being able to have a regulator and not just an allower. What exactly does that mean to somebody who wants to bring more ETFs to market and wants to garner more assets under management? At what point do you, as the CEO of an ETF issuer, say that maybe things have gotten a little bit too out of whack? You know, it's always a delicate balance, right? Issuers like us are chasing every investor dollar we can have, and we're big believers in the markets. And we want the market. markets decide what works and what doesn't. But we also know we have a duty to deliver, as Mike said, what it says on the tin for investors. And sometimes what investors want should be had in a different

format, right? There's a lot of heavy lifting those three letters, ETFs do. If what you really want is lots of leverage, the futures market is probably the place for you to be, the options market, where you can get not two or three, but 10 or 100x sort of exposures, for which you have to sign lots of different paperwork and disclosures and other formats that lets you know the risks that you you're taking in that inherent underlying leverage. I do think there's a balance we have to delete, we have to create as an issuer of what could we do? There's a lot of interesting ideas that we and our team have had that we've opted not to bring to market, not necessarily because a regulator would stop us, but we just felt maybe they weren't necessary or there was a

better way to do it, whether that's limited liquidity types of funds where being priced a few times a second wouldn't actually help. It might hurt, whether that's lots of leverage or options or really complicated strategies where they're only off by a single letter from a very popular ticker where someone could make a small keyboard error be off by half an inch, and all of a sudden they've got two or three X, you know, what the sort of exposure they expected, or something completely different. And we never lose sight that as an issuer, we work for the investors. We want this to be transparent. We want this to be highly liquid. We want it to trade well. We also want them to know what they're getting and appreciate it. And they're parts of the market who do

want and do know how to handle some of the leverage items that are out there, some of the defined outcome ETFs. But there's also large chunks that may think they understand and then find there's a completely different outcome than what they signed up for. And that's when we usually see the other side of regulation, not the proactive side that's business friendly and trying to create a safe environment, but the one that has to penalize the outliers who might have stepped outside the bounds. You know, Mike, this is an interesting point and one obviously that we're having a conversation with right now because it is turning into a hotter and hotter topic on Wall Street. The ETF wrapper, to your point, is one of the most stunning bits of product innovation that the

financial markets have seen over the course of the last 30, 40 years. And it's been adopted in wholesale by many people, investment advisors, retail investors, and everybody else in between. I guess if this is the case, the accessibility is one of the things that makes ETFs so attractive, not just the wrapper and because there are certain tax benefits, but because it's almost more accessible to people to get some of these more complicated strategies, as Alex points out, put in something that you can trade through your kind of traditional online broker the way that you would any other kind of funder transaction. To that degree, it is actually a good thing to democratize the market.

is it not? Or is that accessibility factor, Mike, something that you have to now regulate as well because there are so many more imaginative products coming to market? Yeah, that's a good question, Dom. It's a difficult one. I do believe, you know, for an everyday investor, if I want some stocks getting ready to release earnings, I believe that stock is, you know, have going to beat estimates and I want to get 2x leverage. The ETF wrapper for a lot of investors is an easier way to do it. It's probably a safer way to do it because it is a long only trade. They're not using a margin account.

That being said, the regulators serve a purpose. I'm a big believer in innovation. I'm a big believer in bringing different products to market, but in the right wrapper in the right context. And the regulators do have a responsibility to the market as a whole to not allow leverage to become such a driving force, of the market. It goes beyond the ETF wrapper, but right now we're, you know, we're seeing this across the board, whether it's, you know, perps, perpetual futures or whatever, wherever it may be.

Everybody wants to amplify returns, but the market itself can only handle so much leverage. And the more that gets built up out there, there needs to be a stop. I do think that there's probably a breaking point with respect to certain types of ETF stocks, trying to go into a levered wrapper in that the market makers and the brokers that are going to provide that leverage and exposure will take a step back. I think if you look through to some of the largest products out in the market, you're starting to see that where the cost to get that leverage has gotten so extreme or the risk to the counterparty of that leverage has gotten across a certain point. So I think the market to a certain degree can push back. Though I think the regulator does have

a responsibility to not create a scenario where, you know, the checks and balances exist to keep the market from getting too levered. All right. Alex, you had brought up the idea that sometimes there are different venues, types of products, exchanges that might be better suited to people who are looking to do different types of things in the marketplace, especially when it comes to leverage. This is not strictly a leverage conversation. This is kind of like a suitability and and whatnot type conversation. I guess my question to you is,

many of these types of products, you mentioned defined outcome ETFs, many of these lever type products, you have to use derivative instruments in order to achieve the goals that they have. In other words, you're not just having a fund with certain stocks in a portfolio

that you put in an ETF wrapper. Sometimes there are kind of more complicated structured type products that go into these types of investments that are then put in an ETF. wrapper. How much are derivatives something that we have to be a little bit more cognizant of and aware of? And to what degree do you think that they could lead to another kind of market volatility event that could have a destabilizing force on the global financial system?

But derivatives are a natural and good part of the market, right? Housing exists broadly in America because we're able to securitize those mortgages and push them out to the market to allow more demand for market mortgages and more supply that we can give them, right? And there's a right time and a place for everything. You, by the same token, can use ETFs to buy reits, which are real estate by any other definition, but sometimes you need to park your car outside something and go into it at night. So the reed isn't the right option for real estate for you personally. So there's a whole bunch of ways to do this. Market structure has evolved, though, to require derivatives. I think to the point that Mikewell makes isn't that they're inherently volatility

adding. They can actually absorb volatility and allow you to hedge exposures in a polite way. It's when you unbalance that where everyone is looking for the same side of the trade. I just wanted to amplify what I perceive as a guaranteed win as opposed to hedge some exposure and understand that sometimes you pay the premium expecting that the option will never pay off because you're trying to hedge against something else and you already own the counter. I think that's the issue for issuers and for consumers, frankly. When they start looking at these products, when five or six, or a dozen products all of a sudden are doing the same thing, and they're getting lots of inflows,

and they don't see anything else taking the natural counter to the trade, that's when you start to have to do your diligence and wonder, am I actually going to get the outcome that I want? And that's where that destabilizing factor starts to enter in. Now, it's hard to regulate all that away, right? The products are the products, and something that's a runaway success in an open-ended ETF structure can continue to be successful. It's hard to stop that train. That's not what were Nessly trying to do. Part of this really comes down to investor education, making sure that the issuer is doing this in a fair and good way, and then investors are well aware of what it is they're buying into, what the risks of owning that are, and what other things in their portfolio they probably

should have laying around in case this doesn't turn out quite as you might expect. When you traditionally have leverage, you get margin calls that are the natural break on that. But when you're long only 2x or more into a name, you could get a nav that starts to constantly approach zero. If you buy that and don't pay attention, you know, you think this is a three-year hold, you might find that the stock is up, but your position is net down. And that's an education issue. The math is complicated. Let's be clear. But when does it become a problem? Well, I guess it's the day it starts if you don't understand what you're doing. It becomes a problem for everyone when all of a sudden enough of the markets on that side of the trade

that we can't reasonably find more people to take the counter and stabilize the market. So Are the markets have proven ultra resilient? Retail investors seem to have a lot of appetite for this, which has allowed more of these products to come to market and to grow rapidly. But there is a natural limit. It's hard to guess exactly where that is, but I suspect the next market event, external from ETFs and external from leverage, are going to help us find it quite quickly.

It seems like that's been the playbook in the past, right? That once things really get going to the downside in a bad way is when you start to see things maybe snowball. We haven't had, thankfully, an event so massive like that, maybe since the great financial crisis, outside of the COVID pandemic, but there are some maybe subtleties between the two of those that are probably left for a broader discussion. Mike, because Alex brought that topic up, this idea that, you know, we could have many more of these types of instances where, you know, product innovation is maybe put to the test at some point

down the line. This is also an environment where ETF issuers, because of regulations and their evolution, to your point have been able to bring product to market quicker, to respond faster. These days, the news flow is pretty quick. Access to news and headlines is fairly rapid, much more so than it was 20, 30 years ago. For that reason, ETF issuers have been able to create product more quickly to capitalize on an iron is hot strike-while-you-can situation. I think about the record-breaking inflows that we saw for the DRAM ETF by Greenhill, right?

Those types of products, right? are stuff that are coming to market a little bit more rapid these days. Can we talk a little bit about just how much that is going to be something we have to watch for in the back half of this year? Yeah, I mean, so I actually look at DRAM, and I think that's kind of a continued evolution in a good way of the ETF market. From a standpoint of the goal of the ETF is to make it a simple trade, right? It's just a wrapper, it's just a tool. Whether I want a simple trade to own 500 stocks in the S&P 500, or a simple trade to own 2,500 companies across the world.

DRAM is just a much more focused. Hey, there's only 8, 10 true peer play memory stocks. And it turns out a couple of them are overseas, which most individual investors are not going to buy a company overseas because of the cost of the trade with their brokerage, the commission fee, just the process of doing that. So it's a great opportunity to do that. Now, with a concentrated portfolio like this, they have to use derivatives to stay within the regulatory requirements of diversification.

So I do think the popularity of it is something to watch. I think if you look at the underlying holdings, it has expanded a little bit in terms of the number of names. So I think they're doing a good job managing it. But there is a limit of that. And then, you know, we see something like, you know, S.K. Annex is going to have an ADR here in the U.S. Are we going to have a levered version of that here in the U.S. like they do in Korea, which is, oh, by the way, the largest ETF on the market over there is a single stock levered ETF.

So that's where I think the regulators have to step in and say, you have to meet the requirements of capacity and liquidity of the ETF. So the ETF wrapper is incredible, but there is a due diligence on the part of the issuer to say that we can handle the demand of this product inside of this wrapper. And that I think is where you have to look at single stocks being the obvious example of where it can get out of whack really quickly. But even things like DRAM, you know, I think Roundhill is doing a good job managing to it. So it's not it's a good trade. It made it possible for a lot of people to get into this. Whether it's still a good trade, that's for a different show.

But yes, I think we should watch it. But I think in that particular example, it's a good way the ETF is supposed to be used and that it's supposed to be giving you access into a trade that, you know, us here in the States, as an individual investor, may not have otherwise had. Alex, that's a good point here. And maybe my final question to you is going to be along the lines of whether as an ETF issuer provider, the CEO of an ETF and fund company,

do you take what Dave Mazza has done at Roundhill? Is that kind of like the new template or blueprint? Or do you find that there are different ways and styles for different companies to attack investor interest and demand for certain types of products beyond just what we've seen say

with Roundhill and the thematic ETF that it puts out there? I think there's a lot of room for all of us to do different things. I mean, certainly what What Dave has done with his business has been great. What we've seen in the growth of T-Bill and some of our stocks has been, and ETFs has been great. But this is a big marketplace.

No one product works all the time forever or for everyone. There's trillions of dollars that are flowing into the ETF market every year. A lot of trillions still housed in the mutual fund space that are making their way into ETFs and other interesting vehicles. So there's no one playbook. Certainly, if you can find a great idea that people connect with, you should do this. that's always been a tried and true way to succeed in capitalism. But there are lots of good ideas to be done. None of us have a monopoly on those good ideas.

And investors have constantly changing needs. So there'll always be room for new and exciting things beyond the hottest dot that you've seen. All right. And Mike, my final question to you is along the lines of what you think, thematically, investing-wise, will be the big things to watch in the second half of this year. I think it'll be much of the same. I think you kind of got a bifurcated market right now in the thematic space. And it's a good thing.

You're seeing, you know, we're having record flows in thematics, which were breaking the records of the 2020, 2021 craze of work from home. But it's a lot more broader than what we saw that, you know, that year where it was all about the work from home stocks. You're seeing, yes, obviously, anything with the word AI in it is getting a lot of attention. It's getting a lot of flows. But if you look downstream to infrastructure, to energy, you're seeing that trade play out. And really, the whole market's broadening out, in my opinion. So I think we'll see much of the same. I do think the disruptive tech or the AI trade will probably slow down in terms of flows

just because valuations are where they are in that area of the market. But the space has gotten so large. That's what makes it great. If you're a portfolio manager or an investor, you're able to allocate into these different areas. And I think infrastructure will continue to play a big part. I think that reshoring, I think those thematic ETFs that are playing down market in terms of size

will start getting a lot more attention. But for the foreseeable future, I think we're going to, the AI trade is going to be on everybody's mind for a while. And I don't think it's played completely out yet. All right. So the momentum is still there for the artificial intelligence trade overall. Now it's time to round out the conversation with some thoughtful analysis and perspective

to help you better understand ETFs with our Markets 102 portion of the podcast. Alex Morris, the CEO and CIO at FM Investments, continues with us now. Alex, I'd like to pick up this conversation, kind of along the lines of something that you had mentioned more prominently during the online show for ETF Edge. And that is this idea that ETF innovation has been great for the industry, but is now hitting a point where maybe regulators have to be a little bit more cognizant and conscientious of what's happening. Maybe from a CEO, CIO's perspective of an ETF issuer, what exactly does that look like to you? And what exactly are you doing differently or more similarly to what you've done in the past, given this kind of evolution of new ETF products? Alex. I think it's important. Maybe we step back for a second and just ask, how did we get here?

The sort of David Burns talking Ed's question. And ETF's 30-some-odd years young at this point, likely to continue for a long time, you know, came on the scene with large, broad indices, primary equities to start, when your alternatives were expensive mutual funds that traded once a day and, you know, sometimes had longer settlement cycles than you might like, with a limited number of issuers and higher costs. or trying to get a collection of, say, 500 securities together on your own when ticket charges were measured in the tens of dollars not free. So ETS came around to give folks mode choice, and for which we ultimately invented some interesting tax treatments that made them very popular and allowed them to grow pretty rapidly. Then along came some fixed income indices about 10 years later. Again, the most established broadest indices that were available. And eventually product innovators came in, but it was this passive product for a long time. Enter 6011 about seven years ago and all of a sudden active product can come to the market.

More interesting product can come to the market quickly. It's no longer a two to three year, a few hundred thousand dollar exercise. It's now a 75-day much more accessible exercise. So more people bring more ideas to market. All of which, you know, taking advantage of a 20-plus year history at that point of ETS having been very successful, not a lot of blowups, you know, high level of regulation working for investors. high levels of liquidity. Now, there comes a point where there's a lot of cool things we can do. And the question we have to start asking is, should we do them? And I think as an issuer,

we often start with, no, there's probably a better way to do this than us offering as an ETF. Then we try to convince ourselves that we actually need to do this. There's an investor-borne outcome. And I think that's the most important thing we like to put. Where is the investor in this? Does the investor need this? Are we serving some purpose that we can reliably provide? because most investors interact with our firm with T-Bill or our bill or X-Bill through the market makers or through their brokerage account first. They don't ring us up in place to trade. So we have this duty to try to keep all that going as to do all of my competitors in the space. The question we don't ask is, where's the speculator at this?

We don't ask, is this something that should be a bar bet and should it stay there? You know, we have the assumption there are some things that just don't work, however wonderful ETFs are, that just don't work. in that structure and we want to keep them in that position. But I get why more investors and more issuers want to put more in the ETF structure. It's because it's been so successful because its stability is taken almost for granted at this point. That's not a bug. That's a feature of ETFs. That's them working. But there is a natural limit where you have to ask, is this going to keep working if we do this? And I think we're starting to see the limits of that capability and that need? It's a fascinating discussion because your firm does specialized ETF products that

targets certain specific parts, as you point out, of say, the fixed income spectrum, points on the yield curve or anything else, things that weren't around necessarily, you know, 30, 20, 30 years ago, kind of in the early days of ETFs. We are entering maybe what some would call a brave new world because the SEC, just this past week, has opened up a kind of request for comment period to industry to investors with regard to novel ETFs. And that's something that they're kind of describing these days as ETFs that could be tied to things like prediction markets, outcome-based ETFs, and that sort of thing. And it's now up to investors. It's up to people who work in the industry like you do to provide these comments for the SEC about whether we do think that some

of these types of products, novel ETF related, things like prediction markets and an ETF wrapper, are good for the market, suitable for the market, and should actually be brought to market. What do you think? Do we think that that type of ETF innovation, vis-a-vis what you just said, is something that we should go about pursuing, because it is that next level of evolution for financial markets? Certainly innovation has been good to us, and I think it's been great to investors. You know, when we came out with T-Bell, U-2, U-10, the yield curve, folks could do that. it's just modestly to be more so inconvenient and expensive for folks to do. And the ETF is a great place to solve those type of investor problems.

Here's something where scale can benefit all, where securities lending revenue share with a fund can benefit all holders, things that we couldn't otherwise do on our own or would be more expensive for us to do, or frankly, just difficult. So why would we bother? The question I think the SEC is starting to ask is, well, what's the right way for us to tackle an industry that went from having just passive, low-cost, tax-efficient product to now having an entire spectrum of products, including some new ones that use investment vehicles, speculation vehicles, that didn't exist legally five years ago,

much less 30 years ago when the first set of regulations were there. And the SEC is taking a prudent approach of taking a step back and asking, how should we do this? Because the strategy that we saw happen in cryptos, both in crypto security ETFs that came out, which the SEC knowledge didn't have the smoothest role. out as they would have liked, as well as just crypto vehicles through the CFTC and other concepts that seem to reward first mover advantage that has some economic value and good reason to preserve, but also just allowed sort of unfettered products to come to market that had to be regulated after the water was over the dam and after investors had been harmed. So how do we balance this,

where we need some good rules of the road that are understanding of the new, brave new world we're in, but at the same time not stifling innovation because innovation like evolution is a kind of messy process, right? Somehow the Tyrannosaurus Rex lost the plodipus won. Go figure. So how do we do that? And I think the SEC is taking a prudent step of asking industry, you know, how should we go about this? We don't want to punish after the fact for things that you didn't know you shouldn't have done, but at the same token, how do we prevent some things that may be harmful to investors, somewhat obviously so, perhaps, from making it to market in the first place. And look, we think markets do a great job of solving all these ills.

The problem is, you know, the hurting one investor for the benefit of others in the long run is a trade that's just a bridge too far for us. And we think it makes sense to take a step back and work out, where should we stop? We've drawn those lines that some of the more complex products that we think are hard for folks to understand and we don't think we can explain very easily. Others have done a good job at that and been very successful, and we think they should carry on. But the SEC does have a duty to say, well, when does this end? What's the next interesting thing we might invent?

Because market participants, issuers are very smart, very clever people. They'll keep going until eventually something happens. And the SEC's job is to say, how do we stop that something happening from being bad? And by the way, maybe taking down at that point 35 years plus history of what has been a great financial success. Something you mentioned in just the last few moments here about the ETF business and everything else is product innovation vis-a-vis a so-called first-mover advantage. From your perspective, as the CEO of a fund company, how important is a first mover advantage in this kind of business environment for financial markets and fund management? Do you kind of have to have that first mover advantage in order to be successful? is the first move for advantage maybe oversold as a way of becoming successful in the fund business?

What do we think about being the pioneer of something and making that first move to bring that product to market? Having done a few of those for the firm, working with my colleagues, it's a brave thing to do. And I think there does need to be some reasonable protection from that. We like disclosure. We think that transparency in the application process is part of the reason why ETFs are successful. you know, maybe giving that some time to marinate so we can bring products to market, educate people, as opposed to everyone else who doesn't know exactly what we're going to do or the safeguards we've put in place jumping alongside us at the same time. You know, there might be some good thought put there and some products that make sense. First mover advantage is very real, particularly for novel ideas where those that come first tend to do well.

But the market's proven. We can look at the SpaceX, you know, Kentucky Derby start that happened. And lots of product of issuers offered identical products on the same day, and a lot of them got a lot of assets. We could argue if one went on Tuesday and the others went on Wednesday. One probably would have gotten more, and the others would have been fighting over what was left. But you've got to be in this as an issuer for the long haul. We're not putting together products that we think are good for investors for tomorrow. We're putting together for products for investors. We think they're good for a decade or a generation, and if not evergreen.

So we're less worried about that inherent advantage. can you then deliver what you told investors you would deliver for the next decade plus? And many of the hot dot bar bet products just aren't going to be able to do that. And I think that's where it makes some sense to maybe step in and put a little bit of logic to this and say, okay, well, what's really good for investors and what's good for speculators? And maybe there needs to be differentiating that marketplace. The options markets have understood that for a long time with different margin requirements for speculators versus natural consumers. wouldn't be surprised if we saw something similar come into this marketplace or additional disclosure

that has to be done for things that are truly complicated and have high levels of leverage or other things that investors may not readily understand and have adverse outcomes with. All right, Alex, one final question before we let you go. From your perspective, what are the types of things product-wise that you would expect to see maybe, if I ask you to put your speculator hat on or crystal ball type construct? What happens? What kind of products should we see? Maybe not just from you or from the industry overall in the next six to 12 months. We're certainly going to see more of the leverage, single, this, single that products. They've been too successful for people to stop. Raw capital says they should keep going. They will. I think what's been really successful is to find outcome ETFs. We saw, obviously, the innovator purchase from Goldman Sachs for a very large number. We're going to probably see that from other issuers in that space later this year or early into next year.

But I think what we'll see is more ways to define those outcomes, not just target date funds, but more active allocation management, more rotational for total return management, more understanding I'm buying a set of outcomes from either a financial advisor or from a series of advisors, whether they be ETF issuers or financial advisors themselves, that allow investors to buy a ticker not have to do lots of rebalancing and kind of more or less set and forget. but will still come with high levels of customer service and high levels of durability to the product. I think that's probably the next real wave

we see from ETF issuers is understanding the role in the ecosystem isn't just to put together a collection of other tickers, slap a clever ticker on it with an interesting logo and push it out to the market with high levels of marketing, but rather to really direct some of that focus to talking to the investors themselves. How are we doing, are we delivering on that promise,

how can we help you stay in investment? in this. Lots of issuers spend lots of time on marketing and on client retention. But I think we're going to see folks really switch from how do we help financial advisors and other intermediaries, deliver the advice they want to deliver, and then how do we, from the issuer side, help manage that experience and keep everyone in the process really well informed to what that defined outcome is going to be as we grow with investors over time. And of course, those products all come with kind of this evolution of the fee structure as well. So we'll see how much those fees, which are maybe relatively bigger for some of the newer products right now,

kind of get compressed as more entrants come to market. Alex, thank you so much for the conversation. Please come back and see us again soon. We appreciate it. Thank you. All right, that does it for the ETF Edge podcast. Thanks for listening. Join us again next week or just head over to etfedge.c.cnbc.com.

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