Jingle Heimer Schmidt

There is an interview with John Jacob, CEO of Nasdaq Financial Products Services, on Marketwatch about what the Nasdaq is planning for new ETFs.

There were two ideas that seemed to be the most important. One was enhanced indexing. He did not qualify exactly what he meant but the implication is usually that the manager applies some sort of screening process to an index to weed out some laggards and hopefully add some alpha.

The other type of ETF he envisions are very narrow sub-sector funds. I am thinking this may be like the Regional Bank HOLDRs (RKH).

I don't know whether either type of product will be popular. An enhanced index ETF would have to demonstrate superior returns vs the benchmark otherwise what's the point? So there may not be any immediate need for someone to buy that type of ETF.

As for a sub sector ETF I could see that being useful for mid sized institutional investors as a way to pair long and short strategies within S+P groups. For example going long medical devices and short big pharma if that was a trade someone wanted to do.

I think a lot of the new ideas are good but I doubt there will be urgency for an individual to be the first one it. One aspect of the latest what is coming articles is that I am not immediately realizing no differentiation like with the NY and NYC ETFs or the ETFs from Morningstar. It was clear right away that those fund offered no innovation. The ideas be written about now are not that easily discarded so I am encouraged.