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November 30, 2005

The cost of ETF's has just increased, Wed., Nov. 30, 2005, 12:21 PM

The New York stock Exchange has just bought and paid for Barclay's ETF listings. I am really disappointed that Barclays sold out. ETF traders will now pay dearly.

By promising to cover marketing costs of ETF vendors like Barclays Global Investors, the NYSE traders now get to see your order flow and trade against it. They did that before of course, but the time float in dealing between NYSE and AMEX made the exercise, let's say, less profitable to them, and fairer to us.

But the owners of the casino have decided that they want their piece, and more. Nothing stops these people.

The SEC should step in and just say on behalf of the public " the ones the SEC is supposed to be serving and protecting " that enough is enough.

Technology today would facilitate direct trading between owners of ETF's, totally bypassing the NYSE or any similar sell-side-operated facility for that matter. I really wish an EBAY or Wal-Mart would step up and give us such a facility.

Just think: our costs would drop; the most blatant of unfair trading practices would stop; and traders everywhere would be happier for it.

What Barclays Global Investors has done today is wrong. They have turned what was a good thing into something else. What that turns out to be, we'll just have to wait to see.

But mark these words; someday there will be a trading scandal at the NYSE over manipulating the trading of ETFs.

Increasingly I think the answer will be found in the buy-side organizing portfolio box purchases and sales, executed by single keystroke. That way you, the owner of capital, will be able to adequately diversify against risk, and you will be able to slot box components in and out based on exogenous events.

An exogenous event would have been the recent events in Venezuela, where silver miner Hecla Mining was operating. You could have seen that and dropped Hecla (NYSE: HL) from your silver box.

Really, there is no need to accept the b.s. these securities exchanges put to us.

Posted by Posted by Bill Cara on November 30, 2005 12:14:05 PM | Category: ETF