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So you must be against all synthetics and half the ETFs on the stock market. Interesting take and unironically I know some people who argue this with stocks too

So you must be against all synthetics and half the ETFs on the stock market. Interesting take and unironically I know some people who argue this with stocks too. Or fiat currency even - what is the collateral there? In the end maybe only gold can keep you safe ;)

blitzar 4y ago
> So you must be against all synthetics and half the ETFs on the stock market 11% of the ETF market is synthetic, and it is effectively illegal to launch one in the US now. So it appeaers that its a) not half the ETFs and b) the regulator aggrees. ETFs, hold the thing they are convertable to and are audited. the equivalent would be the stable coin having $1 in a bank account for every stable dollar they mint ... and be willing to be audited. The SPX etf holds the actual constituent shares 1:1 with what they are redeemable as so it is a terrible example from your side. It doesnt hold a bunch of chinese equities, or discount miami property on a punt that it will do better than their underlying asset. Stable coins have (not Dao as I agree they have a very nice fixed protocol) taken their 1:1 dollar backing, punted it on crypto, and when it went up and they were overcollateralised - paid themselves the excess personally. When crypto has gone down in value closed their eyes and eventually gone bust.
- trompetenaccoun 4y ago
  Most of the money is tracking indices, your 11% figure obviously can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index. That's called "sampling". Fully replicating ETFs are rarer and more expensive for obvious reasons. You can see the figures for the EU here¹, it's the exact opposite of what you're saying. Fully physically replicating ETFs are in the minority. The most common category is fully synthetic and together with the physically sampling ones and more exotic categories like derivative based, non-fully physically replicating ETFs constitute almost 3/4 of the entire market. The US is going to be similar but I invite you to look it up yourself. ¹ https://www.esrb.europa.eu/pub/pdf/asc/esrb.asc190617_9_canetfscontributesystemicrisk~983ea11870.en.pdf https://www.esrb.europa.eu/pub/pdf/asc/esrb.asc190617_9_cane...
  - blitzar 4y ago
    The federal reserve [0] and nasdaq [1] disagrees with your assesement - 2% of global etf assets are held in synthetic etfs - almost entirely in Europe and all but extinct in the US. [0] https://www.federalreserve.gov/econres/notes/feds-notes/synthetic-etfs-20170810.htm https://www.federalreserve.gov/econres/notes/feds-notes/synt... [1] https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021-09-22 https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021... > can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index Unfortunately they do hold the assets they purport to hold.
  - saryant 4y ago
    Sampling doesn’t imply synthetics. It just means that at the small end of their index they don’t bother to hold everything because the cost of doing so is too high. This is only an issue with niche ETFs or total market ETFs where the tail end of the index represents some tiny minuscule fraction of the fund. Nobody uses sampling for, say, an S&P500 fund.
    - trompetenaccoun 4y ago
      The user claimed: >ETFs, hold the thing they are convertable to and are audited. the equivalent would be the stable coin having $1 in a bank account for every stable dollar they mint ... and be willing to be audited. That is demonstrably false for the majority of ETFs, just read the above link. Holding some of the thing is not the same as being fully convertible. The user doesn't understand what sampling is and fixates on the word "synthetic" but it wasn't the original claim that most ETFs are fully synthetic in the first place. They don't have to be synthetic to not be 1-1 backed by all index constituents. That isn't a claim about this being good or bad, many investors consider it acceptable risk.
      - blitzar 4y ago
        jeez... fine so i rounded to the third decimal place (i am clearly retarded) 1:0.9994 You happy? https://www.marketwatch.com/investing/fund/spy/holdings https://www.marketwatch.com/investing/fund/spy/holdings And to further correct the reccord: the equivalent would be the stable coin having $0.9994 in a bank account for every stable dollar they mint not $0 (the $0.0006 was really the important bit in all this)

blitzar 4y ago

> So you must be against all synthetics and half the ETFs on the stock market 11% of the ETF market is synthetic, and it is effectively illegal to launch one in the US now. So it appeaers that its a) not half the ETFs and b) the regulator aggrees. ETFs, hold the thing they are convertable to and are audited. the equivalent would be the stable coin having $1 in a bank account for every stable dollar they mint ... and be willing to be audited. The SPX etf holds the actual constituent shares 1:1 with what they are redeemable as so it is a terrible example from your side. It doesnt hold a bunch of chinese equities, or discount miami property on a punt that it will do better than their underlying asset. Stable coins have (not Dao as I agree they have a very nice fixed protocol) taken their 1:1 dollar backing, punted it on crypto, and when it went up and they were overcollateralised - paid themselves the excess personally. When crypto has gone down in value closed their eyes and eventually gone bust.

trompetenaccoun 4y ago
Most of the money is tracking indices, your 11% figure obviously can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index. That's called "sampling". Fully replicating ETFs are rarer and more expensive for obvious reasons. You can see the figures for the EU here¹, it's the exact opposite of what you're saying. Fully physically replicating ETFs are in the minority. The most common category is fully synthetic and together with the physically sampling ones and more exotic categories like derivative based, non-fully physically replicating ETFs constitute almost 3/4 of the entire market. The US is going to be similar but I invite you to look it up yourself. ¹ https://www.esrb.europa.eu/pub/pdf/asc/esrb.asc190617_9_canetfscontributesystemicrisk~983ea11870.en.pdf https://www.esrb.europa.eu/pub/pdf/asc/esrb.asc190617_9_cane...
- blitzar 4y ago
  The federal reserve [0] and nasdaq [1] disagrees with your assesement - 2% of global etf assets are held in synthetic etfs - almost entirely in Europe and all but extinct in the US. [0] https://www.federalreserve.gov/econres/notes/feds-notes/synthetic-etfs-20170810.htm https://www.federalreserve.gov/econres/notes/feds-notes/synt... [1] https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021-09-22 https://www.nasdaq.com/articles/what-are-synthetic-etfs-2021... > can't be true because even most physically replicating ETFs don't 1-1 hold all of the assets they purport to hold according to the index Unfortunately they do hold the assets they purport to hold.
- saryant 4y ago
  Sampling doesn’t imply synthetics. It just means that at the small end of their index they don’t bother to hold everything because the cost of doing so is too high. This is only an issue with niche ETFs or total market ETFs where the tail end of the index represents some tiny minuscule fraction of the fund. Nobody uses sampling for, say, an S&P500 fund.
  - trompetenaccoun 4y ago
    The user claimed: >ETFs, hold the thing they are convertable to and are audited. the equivalent would be the stable coin having $1 in a bank account for every stable dollar they mint ... and be willing to be audited. That is demonstrably false for the majority of ETFs, just read the above link. Holding some of the thing is not the same as being fully convertible. The user doesn't understand what sampling is and fixates on the word "synthetic" but it wasn't the original claim that most ETFs are fully synthetic in the first place. They don't have to be synthetic to not be 1-1 backed by all index constituents. That isn't a claim about this being good or bad, many investors consider it acceptable risk.
    - blitzar 4y ago
      jeez... fine so i rounded to the third decimal place (i am clearly retarded) 1:0.9994 You happy? https://www.marketwatch.com/investing/fund/spy/holdings https://www.marketwatch.com/investing/fund/spy/holdings And to further correct the reccord: the equivalent would be the stable coin having $0.9994 in a bank account for every stable dollar they mint not $0 (the $0.0006 was really the important bit in all this)