Well, on one hand it is certainly good for Wall Street because it means about $9 billion in revenue from making markets based on the asset-weighted average bid/ask spread of 0.05 percent, which is the difference between what a market maker will buy and sell an ETF for. This is compared to the $6 billion in estimated annual revenue that ETF issuers make based on the asset-weighted expense ratio of 0.30 percent.
But is it good for Main Street? It depends. If retail investors can fend off the temptation to trade, then all that increased activity is — perhaps rather ironically — a good thing for them, because it brings down the round-trip cost by tightening up the bid/ask spread. This can be seen in the fact that there are now well over 200 ETFs with an average bid/ask spread of 0.03 percent or less. That, combined with a low fee for a product that kicks out virtually no capital-gains taxes, and you have a sweet deal.
But if individual investors can't resist the temptation to jump into the fray and trade themselves silly, then they will just be making Wall Street richer, as well as justifying John Bogle’s famous claim that “an ETF is like handing an arsonist a match.”