ETF Prime: Crigger on ETF Flows, Spot Ether, and More

To begin, Geraci and Crigger discussed what has stood out to her when examining ETF flows for the year. Crigger noted that as of the end of May, over half of the new funds flowing into ETFs has gone to U.S. equities. As for what is driving these flows, Crigger assessed that “stock markets hitting new highs” has led to “people wanting to participate in that juicy performance.” As evidence, Crigger added that the “low-cost, broadly diversified” funds such as the Vanguard S&P 500 ETF (VOO A) and the SPDR S&P 500 ETF Trust (SPY A-), among others, have seen strong flows.

Along with resonating support for the U.S. equity market, Crigger noted a strong amount of inflows heading towards U.S. fixed income. In particular, high-yield bond and Treasury ETFs have seen robust flows, according to Crigger. “People are really excited about the fact that they can get yield in the fixed income market now,” she added.

Additionally, Crigger noted that active ETFs are seeing growing momentum and acceptance in the ETF space. Crigger added that much of the innovation being witnessed in the ETF market is happening within the active space. The influx of innovation indicated that these active strategies are not simply legacy mutual fund products being ported over into the ETF wrapper, according to Crigger. “It’s been interesting and exciting to see as more issuers come to the market with some really creative and differentiated ideas.”

Moving on, Geraci asked Crigger what she thought of the SEC’s decision to approve spot Ethereum ETFs. Crigger noted that what she finds most interesting is “what comes next.” Specifically, when looking at when the individual ETF filings will be approved. These approvals will require “some back and forth with the SEC.” She also observed a few predictions expecting the ETFs to come to market at some point next month. Though nothing is set in stone.

Once spot Ethereum ETFs hit the market, however, Crigger expects more filings for cryptocurrency assets to begin crossing the SEC’s desk. “I think Solana is likely next in line, given its relative popularity among crypto enthusiasts.” However, Crigger expressed disbelief that the SEC is going to approve altcoins for trading. Why? Because of Solana’s lack of futures market and the lower evidence of investor demand.

Geraci then asked Crigger what she thought of a new report from The Wall Street Journal about a group backed by BlackRock and Citadel that aims to start a new national stock exchange in Texas. Crigger noted that she found the story “absolutely fascinating” adding that innovation is the backbone of capitalism. She also assessed that the potential launch of an exchange in Texas could have “big implications” for the region as a whole. However, she noted the difficulty in launching a new exchange and making it work correctly. As of now, Crigger viewed the U.S. stock market as largely a “duopoly” between the NYSE and Nasdaq. She added that it would be a “tall task” to compete with those exchanges.

Crigger also dismissed the “red versus blue state” narrative that drew some of the attention to the story. She added that Texas is a “massive financial hub” for the United States. Additionally, if individual states counted as individual economies, Texas would have the eighth largest economy in the world. “I know people up north think Texas is all cowboys and barbecue and tumbleweeds. But you really ignore Texas and its economic might at your own peril.”

To close out this week’s podcast, Geraci was joined by Robert Marrocco, Cboe Global Markets Vice President and Global Head of ETF Listings. Cboe is seeking approval from the SEC to approve the listing and trading of ETF share classes. So, Geraci asked Marrocco what the structure could mean for the ETF industry going forward.

“This is the next iteration of market structure enhancement for the U.S., point blank,” asserted Marrocco. He added that international markets such as Canada, Australia, and Europe allow issuers to add an existing share class to an unlisted product. Marrocco viewed the ETF share classes as a new method to offer investors choice on how they wish to access a fund manager or strategy. He added that it would enhance the U.S. market’s ability to be competitive on the world stage.

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