Yie-Hsin Hung: Lynn, welcome. Thank you so much for joining us.
Lynn Martin: Thanks for having me, it’s great to be here with you guys.
Yie-Hsin Hung: So just to start us off and perhaps to give our viewers a little more context on your role within the industry. Can you talk a bit about how the New York Stock Exchange Group operates and how influential was the Amex acquisition specifically as it relates to ETFs?
Lynn Martin: Oh gosh, super impactful. So, New York Stock Exchange is the world's largest stock exchange, home to 2400 listed companies, home to over 2,000 ETFs. And I really feel as though our role is to be a platform, a platform that really celebrates entrepreneurship, it celebrates innovation. And to your point Yie-Hsin, the Amex acquisition was just an example of how we celebrate innovation and entrepreneurship every day. If I think back on one of the greatest innovations in the market, it really has been the development of the ETF. And time and time again, we see the benefits that the ETF market brings to not just securities, not just equities, but less transparent asset classes. So Amex and acquiring the Amex, given that is the birthplace of ETFs, alongside all the great work that SSGA has done over the years and the innovation that you all brought to market, it's really the cornerstone of how we think about some of the financial innovation that has happened in the last 25, 30 years and beyond.
Yie-Hsin Hung: That's right. It's been a remarkable journey, I would agree.
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text: ETF impact on stock exchanges
Yie-Hsin Hung: So when you think about growth and the ETF trading volume. How has that impacted the stock exchanges just in terms of other securities, other stocks in recent years?
Lynn Martin: There's two different dynamics to look at from my seat. Number one is just the growth in listings. Now that could be operating companies as tends to be the NYSE hallmark, but if you look at the growth in listings of ETFs, that has been an area that has continued to grow. We've not seen a slowdown at all of the amount of ETFs that have continued to come to market. In terms of trading, ETF trading continues to be an incredibly important part and growing part of our trading side of the business and the shares that get transacted on the New York Stock Exchange every day. We offer a couple of different models. We offer the fully electronic market, which is NYSE ARK. But more recently at the end of last year, for the first time, we allowed ETFs to be traded on the floor. And we were really excited to work with the issuers on that innovation, mainly because we saw the bid offer spread narrow, the size on the inside significantly increase for some of the ETFs in particular that had less liquid underlying. So you think about an asset class like fixed income, for example, and all of the great liquidity that the ETF market is adding to that asset class in particular at the moment.
Yie-Hsin Hung: I agree, that's such a growth area. We think that's a multi-year trend for sure.
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text: Market volatility and ETFs
Yie-Hsin Hung: Do you see much correlation between market volatility and ETF trading volumes?
Lynn Martin: Typically, when you see volatility, you see trading volumes go up, full stop. That's true across all asset classes. It's true across equities, fixed income, commodities, derivatives markets, ETF markets, options markets, whatever the case may be. So volatility certainly increases the amount of volume. But when I take a step back and look at volatility, one of the most important hallmarks that I'm looking for is transparency. Are people able to transparently see the activity that is happening in markets? And ETFs, I can't think of a more liquid, more transparent product, which allows the investor to get exposure to, at times, some pretty challenging asset classes to get exposure to when you look at the constituent base that underpins an ETF. Coming back to the fixed income example, in 2020, during the height of the pandemic, I was operating our fixed income and data services business. The individual securities weren't trading. What was trading were the ETFs. The ETFs were the main source of price discovery and transparency during a really challenging, dislocated market. You saw that definitely in fixed income, but you even saw that in the most liquid markets, the US equities market, where the ETF markets were very much the main source or leading the price discovery process in a really challenging and hyper-volatile time for the underlying securities.
Yie-Hsin Hung: I think that is a big part of the value proposition of ETFs for sure.
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text: The pace of ETF issuance
Yie-Hsin Hung: Now you talked earlier about the number of listed companies, which I think was 2,400, 2,000 ETFs listed. Do you see any signs of the pace of ETF issuance slowing down?
Lynn Martin: Absolutely not, unequivocally not. Like I said earlier, there haven't been a whole lot of operating company IPOs, certainly since I've been in this seat, but the amount of ETFs that get issued and listed don't seem to be slowing down at all. And it's happening across all asset classes. So I would have thought that in the more established asset classes, like equities, maybe that would be slowing down as opposed to the newer asset classes for ETFs like fixed income, but quite the opposite. We see new equity ETFs coming to market pretty regularly alongside the other asset classes too. And you know, we're really excited about this type of instrument continuing to prove the value that the founders, yourselves, had saw in the late 80s, early 90s, 30 years ago when you first brought this product to market.
Yie-Hsin Hung: Yeah, like you said, it is pretty incredible the growth and the value there that propels the continued pace.
Lynn Martin: It's not even just the amount of products coming to market, it's also the AUM that continues to flow into these products. I think there's what, seven and a half trillion now across all asset classes, about five and a half trillion in equities alone, and those numbers just keep increasing. With no signs of slowing down, it just shows the value that continues to be ascribed by institutional investors and by retail, by the moms and pops who don’t want to necessarily own the underlying basket of constituents, but yet gain access to a specific sector, a specific risk profile. It's a great hedging tool for one's portfolio, so that it continues to have applicability in a variety of investing trends.
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text: The next big thing in ETFs
Yie-Hsin Hung: So one last question for you: what is the next big thing in ETFs?
Lynn Martin: The next big thing in ETFs, I keep watching the developments across a variety of asset classes. I keep watching with interest, the money that comes into the more opaque asset classes, such as fixed income. 2020 was super instructive from my personal seat as to how an ETF can really be a great form of price discovery. And more recently you’re starting to see that with crypto as well and people are saying, well, maybe ETFs can be a good form of price discovery for the crypto market. We were the exchange that launched the first cash settled crypto ETF, but I know a variety of folks are looking to see, well, is that a way to add some transparency to a really illiquid, non-transparent, still to be defined regulatory framework for that asset class? So, I think you are just going to continue to see new and interesting asset classes leverage the innovation that SSGA brought to market 30 years ago that has time and time again proved itself through incredibly volatile circumstances as a tremendous form of price discovery and transparency.
Yie-Hsin Hung: Well, thank you so much, Lynn. We really appreciate you joining us today and lending your expert insights on the ETF perspective and the industry from where you sit. So thank you.
Lynn Martin: Thanks so much for having me. It's great to spend time with you as always.
Yie-Hsin Hung: Likewise.
