The Nasdaq stock exchange is embarking on a significant hiring spree, bolstering its team in anticipation of a potential flood of new listings. This strategic move comes directly after U.S. regulators signaled they will permit asset managers to create exchange-traded funds (ETFs) as share classes of existing mutual funds, a landmark decision for the financial industry.
A Watershed Moment for Asset Management
This regulatory shift, initiated by the Securities and Exchange Commission (SEC) in late September, is poised to be a transformative event in the world of asset management. The approval was granted to Dimensional Fund Advisors, with approximately 80 other competitors reportedly awaiting similar green lights. This change is forecast to unleash potentially hundreds of new ETF listings into the massive $13 trillion U.S. ETF market, where Nasdaq is a key player.
Strengthening Teams for Incoming Demand
In preparation for this expected deluge, Nasdaq is actively expanding its workforce. According to Giang Bui, Head of U.S. Equities and Exchange-Traded Products at Nasdaq, the company is looking to add staff not only within its exchange-traded product group in the coming weeks but also on the legal and compliance side. This proactive approach aims to ensure the exchange can handle the increased volume efficiently.
"We are staffing up our team to really ensure that depth," Bui stated during an appearance on Bloomberg Television's ETF IQ on Monday. "We want to make sure that we’re never the slow point in the listing process." This commitment was further demonstrated by the recent hiring of Kristian D’Agostino as senior director of ETFs just last week.
Overcoming Technical and Market Challenges
While the regulatory approval has opened the door, the path forward is not without its challenges. In the weeks since the SEC's decision, industry experts have raised questions about the technical complexities of implementing the new ETF share class structure. A May report from JPMorgan Chase & Co. cautioned that launching a successful ETF strategy is more complex than simply adding a share class to a mutual fund.
Furthermore, some market onlookers have warned that a large-scale, simultaneous launch of numerous ETF share classes could strain the market-making ecosystem, which is vital for ensuring liquidity and smooth trading. Despite these potential hurdles, Nasdaq is confident in its readiness. Bui assured the market, "Whenever we come to market, we’re going to be able to support the issuers’ timeline for launch."
This strategic expansion by Nasdaq highlights the significant ripple effects of the SEC's policy change, setting the stage for a new chapter of innovation and competition within the North American ETF landscape.
