This is a simple scenario building excercise for a Telecommunications & Information Technology which I thought of conducting online. This is just an experimnent and the results of this could lead us to opportunities and warn us about coming Threats. I invite one and all, related with it to participate in it. The book "The Art of Long View" by Peter Schwartz the master scenario-builder said that in such an excercise, it is important to learn the opinion of everyone related to the focus of the scenario...and so here we go....
BOSTON (CBS.MW) -- Nathan "Nate" Most, who invented the first U.S. exchange-traded fund and spawned a growing $190 billion industry, died Friday at the age of 90.
In his most recent position Most served as a board member on the iShares Trust at ETF player Barclays Global Investors.
"Financial services has lost a real innovator and a true gentleman," said Tom Taggart, a managing director at BGI who worked with Most for several years. "Besides serving as the first chairman of the iShares board, he was a positive influence on so many people. He will be missed."
-- ADVERTISEMENT --
Before embarking on a long and fruitful career in finance, Most worked as a physicist and engineer specializing in acoustics for the U.S. Navy during World War II.
Most credited this early background, along with later stints trading and managing international commodities at the Pacific Commodities Exchange, as key experiences that helped lead to his development of the first U.S. ETF.
He later joined the American Stock Exchange in 1976 and worked in new product development on the derivative side of the Amex's business. There, Most cultivated an idea he hoped could bring new trading volume to the exchange.
In the mid-1980s Most asked to meet with John Bogle, then the head of index-fund giant Vanguard Group, to try and sell Bogle on an innovative concept of mutual funds that would trade like stocks.
"I started thinking about a warehouse receipt holding the shares in the fund, which could then be divided up into pieces," said Most in a June interview with
Most said Bogle, who at Vanguard brought index mutual funds to individual investors, didn't like ETFs because traders moving in and out of the funds would drive up costs.
Undaunted, Most instead came away from the meeting with the seed for the structure that would become the ETF.
"That conversation got me thinking about a product where you don't go in and out of the fund," Most said.
The answer he hit on was a large block of shares called a "creation unit" (normally 50,000 shares) that institutions could sell in individual pieces to investors. Investors would not interact directly with the fund but would instead trade shares with each other on the secondary market, and trading costs would be diminished at the exchange. Institutions could create and redeem ETF shares "in kind" based on investor demand.
Most also designed an arbitrage mechanism that keeps the price of an individual ETF share in line with the net asset value of the underlying portfolio. This feature prevents the premiums and discounts often seen in closed-end funds.
However, after this epiphany it took six years before Most's idea reached fruition.
The first U.S. ETF, the SPDR 500 Trust , was launched on the Amex in 1993 tracking the S
"I never thought they would be this big," said Most. "But the ETF was designed with the investor in mind, and they have low fees. Also, ETFs are a natural fit for stock exchanges, which have gotten behind them."
Before his death, Most looked forward to ETFs branching out to cover new areas of the market.
"An ETF is designed to handle any type of security, provided the individual components are liquid, which allows the arbitrage pricing mechanism to work," he said.
In an ironic twist, Most never received a dime in royalties for the popular financial product he invented. But true to form, Most was quick to joke about his situation.
"Gosh, I wish I did," Most said with a laugh. "If I had a tenth of a basis point of the ETF business, believe me I'd be out there sailing a yacht."
IT Facts
The Honorary Award for Peace and Prosperity goes to Symantec
E-NEWSLETTER SERIES