In this episode, Douglas Yones, Head of Exchange Traded Products at the New York Stock Exchange, is joined by David LaValle, Global Head of ETFs at Grayscale, to discuss the current state of cryptocurrencies in ETFs, and Grayscale’s focus on developing a global ETF franchise.

Douglas and David discuss:
· The current state of the cryptocurrency markets
· Developing businesses for entry into ETFs
· Trends in the industry and opportunities in the global marketplace

ETF Central’s THE PODCAST:

TRANSCRIPT:

Douglas Yones:

Hello and welcome to ETF Central's The Podcast, where we bring the latest and greatest ETF industry perspectives directly to you, through in-depth conversations with key thought leaders from across the ETF ecosystem. I'm your host, Douglas Yones, the head of exchange traded products at the New York Stock Exchange, the Home of ETFs. Now, today I'm joined by none other than David Lavalle. He's the Global Head of ETFs at Grayscale.

Now, prior to joining Grayscale, Lavalle was the Chief Executive Officer of Alerian and S Network Global Indices. Previous to that, Lavalle was the US Head of SPDR ETF Capital Markets, and a member of the senior leadership team at State Street Global Advisors. Prior to State Street, Lavalle even spent an expansive amount of time at the Exchanges. He's done everything from leading the strategy and business development for ETF listings and trading businesses. Dave was even a member of the New York Stock Exchange and American Stock Exchange, where he managed trading businesses.

Truly built himself from the ground up. Dave, thank you so much for being here with us today.

David Lavalle:

Doug, it's awesome to be here. I'm thrilled to be here. This is always a great time and a good way to spend some time together.

Douglas Yones:

If you don't know Dave Lavalle, you should, although sometimes I consider you like the mayor of ETF world. You seem to be shaking a lot of hands and kissing a lot of babies. Dave is an aficionado of all things cookies, bakery products, ice cream, and pizza around New York City. We might get there today, but I want to start with what you're doing today.

Your background, you've kind of seen and done a lot, and now you're living in the digital asset cool world at Grayscale. For someone who might only know Grayscale, I don't know if they've heard of you, but they don't really understand. Tell us about your role and how you're spending your time each day.

David Lavalle:

Doug, I feel like I am taking this opportunity at Grayscale as the Head of the ETF business to merge two of the greatest financial innovations of our lifetime. You and I are so passionate about ETFs being a massive financial innovation that has really brought value to investors of all shapes and sizes, and I feel quite similarly, and as excited about what digital assets and the digital asset ecosystem are going to bring to clients as well.

One of our quests to convert our flagship product, GBTC, into an ETF, is really bringing Grayscale's expertise in digital assets with my expertise in ETFs. When I had the opportunity to come here and to build this business with Michael and the team, it was something I absolutely had to say yes to.

Douglas Yones:

We're going to get to that. I actually want to go back in time with you a little bit.

David Lavalle:

Yeah.

Douglas Yones:

Before we even do that, I got to dig a little deeper, right? I get what you're working on with GBTC, but you're doing more than that. When you come into the office in the morning, aside from probably smiling at everyone and checking in on everyone's personal life, because I know that's just you, what are you doing all day? What are you actually spending your time on?

David Lavalle:

We're tactically and strategically stretching ourselves to do as much as we can possibly do as an organization. I think the reality is people feel and are oftentimes surprised when they meet our organization that we look and feel exactly like other asset managers. People think crypto, they're not so sure about it. How are you organized? I think people are pretty surprised sometimes to hear that we have a registered broker dealer. We have a registered RIA. We've got our own series trust. We're focusing on a lot of tactical things that are important to keeping our business going very smoothly, issues around compliance, and making sure that we're tied to our policies and procedures.

We're also focused on new product development. We're focused on making sure that we're building our team, building our culture, building our organization. Our leadership team is constantly focused on ensuring that we're building the foundation of our organization to make sure that we can be a world-class asset manager.

Despite the fact that most people know us as the largest digital currency asset manager in the world, with really strong market share, and some really high quality innovative products, and the largest Bitcoin funded market, the reality is we think of ourselves and want to be thought of as a world-class asset manager. We're building the foundation in a way to ensure that we achieve that goal.

Douglas Yones:

Okay. Now, we'll go back in time. I'm stepping in. It's Dave Lavalle in college. He's, aside from running somewhere between probably five and 10 miles a day...

David Lavalle:

No, no, I wasn't a runner then. No, no, no, no, no.

Douglas Yones:

Okay.

David Lavalle:

I wasn't a runner. I didn't run until 2007, man.

Douglas Yones:

Okay. You're thinking one day, I might start running. Did you also say to yourself, "Hey, one day, I want to trade ETFs?" How did you end up in that trading world of ETFs?

David Lavalle:

Oh, my gosh. I thought I was going to be a doctor, Doug. Come on. I was a pre-med theology major.

Douglas Yones:

Okay. What kind of doctor did you want to be?

David Lavalle:

I thought I would be an ER doc.

Douglas Yones:

Okay.

David Lavalle:

That's what I thought would be cool. Fast-paced, never knowing what you're going to kind of walk into with your next shift, but also pretty defined time, so that it was built for a high quality work-life balance. I always knew I wanted a family, and I recognized that if you're working in some areas of medicine, you really don't define your clock. I was really a little bit uncomfortable with the thought process of being on 24 hours a day. ER medicine is pretty prescriptive and actually makes it a little bit easier to have a work-life balance. That's kind of where I thought, I drove an ambulance in college. I got my pre-meds done in the first two years. That was when I started to think about things a little bit differently.

I ended up deciding that, well, if I'm going to be doing math and science the rest of my life now would be the time for me to explore how to creatively read and write. I shifted the last two years of my undergraduate college experience to focus on philosophy, theology, all the soft sciences, and ultimately became a theology major, which was a really, really important decision in me shifting my brain from seeing the world in black and white, to seeing the world in a number of different shades of gray. My senior year-

Douglas Yones:

I have to interrupt you now. You go home to Mama and Papa Lavalle. You say, "Hey, I know you guys were super excited. I was going to be a doctor. Now, I'm going to just think about things and theorize." What's that conversation like?

David Lavalle:

My parents didn't say anything to me. They really didn't. There are things and times in my life where I behaved or made decisions for myself that my parents didn't say anything, and gave me the opportunity to be independent in driving my own decisions and path in my life that as a dad now, I struggle to figure out how they did that. Yeah, they didn't say anything to me. Remember, I was like, I'm pre-med, I'm done with my pre-meds. I'm going to medical school, but I'm going to explore a different major that's not math, science, biology, physics. Those were the things that I thought I was going to major in, and I wasn't inspired by it.

Douglas Yones:

Do you watch all the ER shows and the medical shows?

David Lavalle:

No, I don't care about that stuff, no.

Douglas Yones:

Okay. You threw it out the window.

David Lavalle:

No.

Douglas Yones:

I can come to you if I'm hurt?

David Lavalle:

I have some EMT skills. I don't jump in. If something really, really bad happened, I would obviously help out. I've helped two people who have been choking, really choking in public settings that has been rewarding. One actually happened. Wait, wait. One happened in the New York Stock Exchange restaurant upstairs. True story. Yeah, true story. Yeah. Yeah. She says I saved her life. It really was I just calmed her down. She was very, very nervous.

Douglas Yones:

By the way, Dave is talking about the New York Stock Exchange restaurant, currently named 1792. Bit historic, once in, I believe it was like New York Magazine or Wine Enthusiast, somebody did an article where it was the best cheeseburger in New York City that you're not allowed to have. I thought that was pretty funny.

If you're a listener and you're a client of the New York Stock Exchange, or you become a client of the New York Stock Exchange and you want to come and have the burger you're not allowed to have, please let us know. If you're choking, we would call Dave.

David Lavalle:

Hang on, hang on, hang on.

Douglas Yones:

Okay. You're a theology major.

David Lavalle:

I'm guessing that if you would consider being a client of the New York Stock Exchange, you might actually get the invite as well. I think anyone who has the opportunity to go eat in that restaurant should take advantage of it. It's great. I like the breakfast there.

Douglas Yones:

They should. It is wonderful. Okay. You're a theology major, you say. At what point are you like, "Hey, I want to go trade, I want to be with traders?"

David Lavalle:

No. Okay. This is what happened. My senior year, I took this class with a guy named Bernie McGinn. He was a hedge fund manager. He was essentially an adjunct professor who was giving back. Honestly, Doug, he has some of the kind of similarities in giving spirit to young professionals or young people that I think you and I share, and actually philosophically tie us as close as we are. He was the professor. He had this one day a week seminar. The class was two and a half hours. It was one of those 6-8:30 PM classes.

I had never put my math and science, problem solving type brain to work in finance, because being in the College of Arts and Sciences at Georgetown, you couldn't really take business classes. You could take an econ class, which I didn't, but if you were going to take a business class in the undergraduate business school, you would have to take that class after ad drop period was over. Who's going to walk into an intro accounting class two weeks in? That never made any sense to me. This was the first time I had an opportunity to explore finance or explore some of the principles of finance.

I got in there, and it was a little bit of a light bulb. I was like, "Holy cow, this is a great application of my math and science brain. This is a great application of my problem solving brain." I was doing math problems with discount cash flows, or pricing a bond, or looking at valuations of companies, and what's a PE ratio, and all these basic principles. Not having grown up in a family that really talked about stocks and bonds and investing a lot, this was a real eye opening experience to me.

That was the first time where I said to myself, "Hmm, maybe I should try something in finance out." That's really the first time I had a look at it.

Douglas Yones:

Then I think you and I met each other for the first time, you were at a trading firm and you got involved in ETFs. How did that kind of come to be? Was there a spot where you said to yourself, "Hey, these ETFs have popped up on the scene, and what do I do now?"

David Lavalle:

Yeah. I've told people that I'm in my 20 plus year, one year trial of Wall Street right now. I graduated school. I, long story short, kind of limped onto the floor of the American Stock Exchange, no experience, through some connectivity, became a trading assistant, and quickly was energized by that environment. That was kind of like the ER of Wall Street. You never knew what you were going to walk into. Things were really kind of vibrant. This is in the late nineties, and tech boom, and every dot-com coming to market and all sorts of things like that.

Up in the mezzanine at the New York Stock Exchange, there was a couple of trading crowds that were the most vibrant trading crowds. I was like, "What is going on up there?" I was trading small cap equities. I was trading small cap gold and mining in oil and gas stocks. I was like, "What is happening up there?" Quite frankly, all roads and ETFs lead back to those pits up there. Reggie, Hempstead, Capurso, all these guys were all coming from those pits. The smartest trading firms, the smartest traders, the greatest amount of capital that was being allocated were all happening up on the mezzanine in a couple of trading crowds.

I was fascinated by what was happening up there. I learned that that's where the ETFs were trading. That's where SPY and the sectors and the QQQs, MDY, DIA, that's where all of these ETFs that were less than 10 years old were trading.

Douglas Yones:

You're a young guy, you're pretty low on the totem pole, I'm guessing.

David Lavalle:

I was the bottom of the totem pole.

Douglas Yones:

You're the bottom of the totem pole. How did you break in? How did go find those people and say, "Hey, I want to be a part of this too?"

David Lavalle:

Well, a little further down the line, I actually walked up to Reggie Brown, and I knew him at this point in time, but I hadn't worked with him. I said, "I want to work on your team." He politely told me no. That's a funny story. We should talk about that another time. No, Reggie and I are close. He and I actually ended up working together at Kellogg. I was working for a teeny floor specialist firm, marketing firm. Then I transitioned to be one of the first hires to Kellogg Group. It wasn't called Kellogg Group in the beginning, but we endeavored to build a large scale trading firm on the floor of the American Stock Exchange.

We had an established footprint on the floor of the New York Stock Exchange. They needed somebody who knew the infrastructure of what was going on, and who's who in the zoo on the Amex. They hired me. We started with an options business. We built out a NASDAQ market making business on the floor of the Amex, which was a little bit unique at that point in time. Then we had an equity market making business, options market making business. We had an ETF market making business, and we grew to be the largest employer on the floor of the Amex. That was when we started to get into ETF market making.

That ETF market making business ended up being the largest ETF market maker when products were really, really flourishing in the early aughts. There was a real proliferation of products coming to market. You were at Vanguard, you saw that firsthand from the issuer's perspective. We were a really critical component to seeding and market making, lead market making those products that were coming to market. It was really, really exciting.

Douglas Yones:

I think about that time, well, I think about a couple things in that story. One is being told no. I think my first four jobs that I applied for throughout my career, I was all told no. Not only did it not accelerate me, it was the reverse. It accelerated me because I found that by going up and applying for things that were maybe a little bit past my capability, I woke up a few people that didn't know who I was. Then all of a sudden, they turned around and said, "Well, no, but I've got this other thing that just came up," and that worked out for me.

I kind of bring that up, is going and having that conversation might sound really scary, but it can yield unbelievable results, even though the result might not be the thing that you're actually asking for. Letting people know you're interested, and you can do more and you want to do more is the big thing that people don't realize how it can be. What got you then out of something-

David Lavalle:

Hang on. We got to hang on here for a moment. We got to hang out here for a moment.

Douglas Yones:

All right.

David Lavalle:

Look, you're a senior executive. I'm more senior in my career now. We're in positions to hire. I recently went back to something that I had heard and read, it's probably almost 10 years ago, which is someone always took a chance on you. You know the people who took a chance on you. I know the people that took a chance on me. I feel like I have a professional debt of gratitude to the people who I felt like took a chance on me. Now, if I confronted them and said, "Hey, thanks for taking the chance on me," they'd say, "I didn't take a chance on you. You worked hard, you showed up, you did your job, you advanced the business, you built a quality team," but still, you know the people who took a chance on you.

That point that you just made, about having the ambition to ask for that role, or ask for that opportunity, or ask to learn more about it, or ask to figure out what are the skillsets or what are the deficiencies that you need to work on to be able to achieve that potential role or that potential opportunity? Someone's going to take a chance on you, because everybody has someone who takes a chance on you in their career. I think it's always an interesting point of gratitude to think about the people that took a chance on you. When you are able to be senior enough to have the guts and to have the courage to take a chance on somebody, because that's really what defines people's careers.

You can't take a chance on everybody. Sometimes when you're teetering like, "Ah, I'm not quite sure," I think people who have the right composition and the right attitude and go about things the right way, taking a chance on them can not only be fruitful for your own business, because you bring a little grit into it, but it can be really, really beneficial and life changing for those individuals. That's the most rewarding thing.

Douglas Yones:

It's interesting, as you get older, you start to live on the other side of things, and you start to live on the other side of the hiring process. For any young people that are out there that are trying to get that shot, get someone to take a chance on them, do you have suggestions or advice how they raise their hand the right way? How do they get connected? How do they find the spot?

David Lavalle:

I don't know, be honest, be genuine, be curious. Meet people. I think the biggest misnomer that I believe young professionals have is that there is some pre-prescribed path that you need to take to get to that job that they ultimately want. For me, I'm like a screaming example of not taking that path. I always thought, oh, if I don't get the analyst job, and then I won't get the internship, and if I don't get the internship, then I won't get the associate position. I won't be, all these promotions at Big Bank, whatever, really prescribed paths.

If you meet someone who's senior and just ask the question, "How'd you get in the seat?" Just like you did to me, I think people are both enlightened, refreshed, and then also it kind of calms them down a little bit. Like, "Oh, I don't have to make every decision perfectly to get good opportunities."

Douglas Yones:

Absolutely not. Absolutely not. As long as you're challenged and learning, you will find a successful journey.

David Lavalle:

Yeah.

Douglas Yones:

One of the things that I find interesting is you're in the world of trading. Trading's booming during that time period. If you had asked the common person, "What's one of the most ideal jobs there are?" At that point in history, people would've pointed and said, "To be there, to be trading." Yet you saw something that said, "I know I'm in the middle of this, but this isn't going to last, and I'm going to shift. Now I'm going to flip over, and I'm going to go build ETFs." What is it that sparked that insight?

David Lavalle:

Well, honestly, the truth is, we sold our firm. I was a partner at Kellogg, we sold our firm to Knight. Then I had a decision to make. I was, at that point in time, felt incredibly high conviction about our ETF franchise at Kellogg. That was one of the key components of the kind of portfolio of businesses that Kellogg had that was really attractive to Knight. I felt, despite the fact that I wasn't running that particular business within Kellogg, I was very intrigued and had high conviction about the growth opportunity. That's when I was really fortunate to have the opportunity to lead a listings business, to basically sit in a seat like you're in.

That was really, really an amazing vantage point to be able to engage with issuers, and bring all of my trading and market making experience to bear. It was really valuable to the issuer partnerships that I was fostering. That was the platform through which I had the opportunity to get to State Street, and State Street in a capital markets role, which was leveraging all the experience that I had on the floor trading, and then all my exchange experience bringing new products to market. It was really something not in my control that gave me the opportunity to really springboard into ETFs in a really meaningful way. That was super beneficial and really fortuitous.

Douglas Yones:

Yeah. I think people underestimate the idea of taking the knowledge they know in one place, and recognizing that other firms that don't have that knowledge can find that extremely valuable. To me, that's one of the most powerful things that LinkedIn provides, which is a way for you to document all of your experiences, and capabilities, and backgrounds, in a way that then the next place can recognize that and say, "That might be useful for our business."

Dave, I want to talk now about Grayscale. We started there, we talked about GBTC. People know that name when they hear it. What's the latest news?

David Lavalle:

Well, I think it's pretty well known that we're working fever feverishly to convert GBTC into an ETF. GBTC is the largest Bitcoin product in the world, and our top priority is to convert GBTC into an ETF. It's also not a secret and very public that we applied for that product to convert into an ETF and the SEC denied us. We decided that we were going to challenge that denial and we ended up bringing that case into the DC Circuit Court of Appeals. In March, we had our oral arguments, and we're really just waiting for the courts to come back with their final decision.

We're really excited about it. We're very confident in our common sense compelling legal arguments. There's some uncertainty in kind of litigation timelines, but we've been advised that we should have a final decision by the fall of '23. We feel really, look, no one is going to take the decision to sue their regulator lightly. It was a very important decision for us, and it was one that we didn't take lightly, but we really feel strongly that investors deserve to have equal access to a Bitcoin Spot ETF that will do the best job of suiting their needs and giving them their Bitcoin exposure.

We believe that Spot Bitcoin product is the best way to have investors get exposure to Bitcoin in a wrapped product. There's a Bitcoin Futures product out there. We're not anti-Bitcoin Futures. We think that that's an important step in the right direction. The Bitcoin Futures product is a good product and serves the merits of certain investors, but we think that the best product would be a Bitcoin Spot product, and we're fully committed to getting that product converted.

Douglas Yones:

We're talking Bitcoin, but I want to go bigger than just Bitcoin, and I want to talk about cryptocurrency en masse. What does cryptocurrency do? Does it have a larger role to play in the economy? Does it have a role to play in the world? How do you see things?

David Lavalle:

I went from not having a very strong background in crypto to jumping into the deep end of a pool in a really, really fortunate way to be surrounded at Grayscale and part of Digital Currency Group as some of the smartest and brightest in the world on this topic. I quickly, the skepticism around, "Well, why would I ever use Bitcoin to buy a cup of coffee at Starbucks?" That dispelled very quickly. I realized very quickly that this is not about creating a new currency, and this is really about a next wave of technology disruption that we're going to all experience.

There's a couple of examples of that that I think are really palpable to guys like you and I, who have had some technology disruptions in our life. The first one was obviously the internet. In the late nineties, I was on the floor of the American Stock Exchange, listening to Jeff Bezos and laughing, and saying, "Why would I buy a book on the internet when there are two Barnes and Noble within a five-minute walking, and then a Borders books as well?" That was the difference in perspective I have now, which is we're kind of in the late nineties of the internet.

At that point in time, I didn't know how it was going to manifest itself, but I was really certain that there was something that was going to happen. The internet for me, the first experience of the internet for me to be valuable was to create communities and be able to communicate effectively with email, and to have the opportunity to chat with friends. Communication was the first way that disruptive technology kind of embedded itself into me and into my experience. Then that disruptive technology expanded into other areas of my life. Shopping, entertainment. Look, now it's like everything.

Now, from the seat that I sit in, I recognize that digital assets, digital currencies, cryptocurrencies are another wave of technology disruption. The first way that it's manifesting itself to most people is Bitcoin. For those of us who don't need a form of currency, look, we have a strong financial system. We have a strong currency, so we don't need to utilize Bitcoin to transact. For those people who are in countries or are in regimes that have hyperinflation, or can't trust their currency, or can't trust their government, or if you are an individual who really relies on cross border transfer of a fiat, nothing's really changed in 40, 50 years.

It's very costly, very time-consuming, very inefficient if I have come to the United States and I need to get money back to my family, wherever. Crypto is a disruptive technology. Bitcoin is the first manifestation of it. Bitcoin might not be the right tool for you and me to use to transact, but it's just the first wave of this technology disruption. The technology disruption is going to expand into different sectors of our lives in a way that I think is going to be really meaningful, just like the internet did in the late nineties.

How it's going to manifest itself, I don't know, but I have full conviction that it's going to, and that X years down the line, we're going to look back just like we do today and say, "You remember the world without the internet?" We're going to say the same thing about digital assets and applications of digital currencies.

Douglas Yones:

Yeah. The conversation around the world without internet is always hysterical when you're chatting with younger generation and including my kids. They sit there in shock that we were able to live our lives. Sometimes, I do too. Okay, so let's talk ETFs. Grayscale, you launched your very first ETF in the US as well as Europe in 2022, just last year. What do you feel like the firm has learned, and what's next for the ETF business over there?

David Lavalle:

Oh, my gosh. Listen, when I came into this organization, we were really fluent in digital assets, and we were not fluent in ETFs and other kind of registered products that are exchange listed in the way that an ETF is. Look, we built a team, we launched an RAA, we launched a broker dealer, and we partnered with a lot of high quality service providers, because we needed to educate ourselves on what it meant to be an ETF issuer. We learned a ton about that. It was really, really exciting to build something from zero. You and I have been a party to, I don't know, collectively between the two of us, thousands of ETF launches sitting in different seats.

This was the first time that I ever really had the opportunity to launch a product with zero infrastructure. It was really, really kind of exhilarating, professionally. We learned a lot about investor behaviors in the US market. We learned a lot about ensuring that we launched a compliant website, and that we were paying attention to all the Fed rules, and making sure that we had all of our service products lined up, and making sure we had market making, and an exchange partner. NYC is a great exchange partner, and you guys were fabulous.

Then we decided to expand into Europe and learn about the dynamics of a European expansion, and launching a version of our product in UK, Germany, and Italy. Look, in the US, you talk about a European expansion, and I think we learned very quickly that no one speaks Europe. They're very different markets with very different investor behaviors. We were able to get in market and learn a bit more about what it's like and how a British investor thinks, and how they're going to make allocations, and a little bit more about a German market, and the Italian market as well, and those different investor behaviors.

Ensuring that you're showing up, and not only as a product, but as a brand, and making sure that you're behaving in a way that's going to be attractive to those clients, and put yourself in the best position to garner assets. It was a great learning experience, it was a great professional experience, and I think the team really showed up. We're excited and proud about it.

Douglas Yones:

Really, really smart. Smart's not the right word, brilliant colleague of mine, when I lived and worked in Hong Kong, he used to always say Asia is not a place, it's a region. That's the same for Europe. It's not a place, it's a region. Those that are thinking about expanding their ETF business overseas, they should do just like they did in the US, they should reach out through, whether it's through us, through the New York Stock Exchange or others, let us connect you to the right people to have a lot of conversations and do a lot of research.

You're dealing with multiple jurisdictions, multiple countries, rules, regs across these regions, and they differ. Having a really good strategy is so important to become economically viable. We all see the growth rate of ETFs and we think, I just need to capture 1% of that, but when you back into the math, it's just not that easy. You want to make sure you're spending good time with good people.

David Lavalle:

You need perspective. You need perspective is what you need. If you haven't done it, you don't have that perspective. I think in just more generally, you might have an observation, but purporting observations as perspective can be a really dangerous thing if you're building a business. Find someone who has the perspective, and lean on those advisors and those partners to make sure that you're as intelligent as you can be.

Douglas Yones:

Fair. I think that's fair. By the way, if you're interested in what's happening globally on ETFCentral.com, everyone knows that that's that joint website where we're working with a number of different parties. There was a wonderful document that was published just this last month. It's the ETF megatrends, 2023 ETF megatrends. It's available for free. Go to ETFCentral.com, you can pull it down. You'll see what investors are thinking about globally. Wonderful opportunity if you're in corporate strategy or thinking about growing your ETF business globally, you'll get a big feel for where the opportunities are right now in the marketplace.

I want to stay on that topic. Dave, when you and your team are getting together, what are you looking at? What opportunities are you seeing in the marketplace today, whether it's for investors, for advisors, for asset managers? What are you focusing on?

David Lavalle:

Yeah, look, it's no secret that the broader crypto market has gone through a really challenging period of time. We continue to be the kids that are behaving the best in the sandbox, so to speak. Look, some of what happened in the marketplace and some of the fraud that has been purported, that stuff's bad and a lot of people lost a lot of money. We don't turn a blind eye to that. That has allowed us to lean further in and ensure that we are keeping our disclosures, and our communication, and focusing on transparency, and ensuring our clients know everything they can possibly know about our products.

The focus is really on ensuring that we're continuing to be a leading voice in the space and a trusted voice in the space. That's when we look at our home and keeping our house in order, it's making sure that we have the utmost transparency, the utmost disclosure, and that we're behaving in a responsible way and really in a leadership position, because we are the largest asset manager in the space. Now, that's not to say that we don't have a focus on expanding our business. We certainly do, and GBTC's a big part of our expansion plans, but we also have aspirations to further expand geographically.

We have aspirations to be a little bit more product wrapper agnostic, and thinking about the next way that we can bring an exposure to digital assets to market in a way that's going to be as beneficial as it can possibly be to the next wave of investors. I think people are surprised to hear that GBTC was brought to market in 2013. We're coming up on a 10-year anniversary. On that day, it was always envisioned to be an exchange created product that mimicked GLD in the market. We were 10 years ahead of the plan. We're trying to figure out what we can create today that's going to be really, really attractive in five to 10 years.

There's a lot of innovation that's happening in our shop. There's a lot of really, really thoughtful, really, really high quality thinking going into our product roadmap and our product strategy. We're not a short term thinking firm. We're really tactical and really good at running our products and running our business for today. We're really excited about focusing on what we're going to build for five and 10 years. When people come around and realize that they need to have an allocation to this asset class, we're going to have the products that are going to be the receptacles to receive that investment. That's really, really motivating to me.

Douglas Yones:

Yeah, for sure. You and I, we've been in this space for a long time. People look at these monstrous ETFs in terms of AUM today, and they seem to forget the sometimes decades it took to just get a footing. It just amazes me where they're like, "Oh, no, they were successful out of the gate." It's like, "No, no, you forgot the first eight years where we had no assets in that ETF," but I guess...

David Lavalle:

Yeah, when everyone thought that ETFs were the next financial weapon of mass destruction, and guys like you and I were very commonly explaining the merits of the product, and the transparency of the product, and the cost benefits of the product, the tax efficiency of the product, and all these benefits that were really, really useful to investors.

I feel there's some similarities in the seat that I'm sitting in now, where I'm hoping to be a very calm voice of reason and a voice of transparency about some of the merits of putting an allocation to digital assets into your portfolio.

Douglas Yones:

Yeah. It's easy to have hindsight 20/20 in the ETF space, and I launched my first ETF 2001. Somewhere around 2010, 2011, so 10 years in, there was an advertisement on TV, I think it was T-Mobile, and they were going to be the first cell phone company where if you canceled your relationship with them early, they got rid of early transaction fees, they removed early transaction. Their big ad was no ETFs, early transaction fees, and no joke, my in-laws were like, "I don't really understand how it connects, but I saw a TV ad and I think I understand what you do now."

David Lavalle:

That's amazing.

Douglas Yones:

That's 10 years in.

David Lavalle:

That's amazing.

Douglas Yones:

Hopefully it's different today, and they understand ETFs a little bit better. Do you look back at all the ETFs you've helped launch across your career? Is there a favorite in there?

David Lavalle:

Oh, man. Do you have a favorite kid? No, I'm kidding. I'm kidding. The thing that I'm probably most proud about, there's two things I'm most proud about. They're a little bit ETF geeky, but I'm going to talk about them, 'cause why not? They're not ticker product specific, but they are kind of product specific. Despite not being the most successful in terms of the asset raising, I'm really, really proud that my team got the first regulatory approval for not fully transparent actively managed ETF.

That was a ton of work. It was a ton of regulatory engagement. It was a ton of really creative thinking. It was a ton of high quality legal thinking, and product thinking, and strategy. That was something that I think I'm really proud of. Similarly, when I started working on trying to enhance the liquidity profile of ETFs and trying to make it as attractive as possible to get market makers to be interested in supporting new ETFs, I embarked on trying to get an exemption from an age-old FINRA rule, FINRA rule 52-50, which prohibited market makers from being paid.

That was another regulatory battle in my career that I'm really, really proud of. Look, at the end of the day, we got approval for it, and not a lot of ETF issuers kind of stepped up to take advantage of the program, but it was really innovative. I went to FINRA, I explained why it didn't make sense to have this prohibition for ETFs, because you couldn't manipulate an ETF as a market maker. Sure, a market maker shouldn't be able to get paid to support and make markets in a small cap equity product, because they could just pin the price at, let's say, $10. Well, you couldn't do that in an ETF. FINRA said, "You know what? That makes sense to us. Go to the SEC, have an engagement with the SEC, file a rule filing, get their blessing, and then come back to us."

We did it. That was really an awesome thing that I'm really proud of. I know those are two kind of geeky, really nuanced examples in my career. The truth of the matter is, the thing I'm most excited about and going to be most proud of is happening right now, Doug. It's converting this product into an ETF, and it's taking a couple decades of experience, and showing up in a real way, and partnering with a lot of high quality members of the industry, and being at a firm that's committed to it, and going to bring something to market that's really going to be beneficial to investors.

You and I both know that the people that launched GLD and the people that launched SPY are really proud of it decades later. I think that I'm going to feel the same way when we get this thing over the finish line.

Douglas Yones:

I will be excited to celebrate with you. Maybe we'll find a new favorite pizza or cookie place that we can celebrate. Dave, for those that are out there, whether it be investors, advisors, how should they think about connecting with you, with your team? How should they be really engaging with Grayscale?

David Lavalle:

Yeah, going to our website, we have a tremendous amount of education. The research team that we have is really incredible, and they're kind of creating content, and writing, and generating information that we get really, really high quality feedback from. Recently, we've started to do some continuing ed as well, and that has been really, really well received for advisors out there. We're constantly a resource and a source of content for the marketplace, and we're really proud about that. We're credible and we're transparent. You should go to Grayscale.com, and you can learn a bunch about it.

Look, not every issuer and not every product is created equally. I always implore investors of all shapes and sizes, and advisors, to reach out to their asset manager, ask questions. It's a great way to see the level of transparency and the level of resource that you're able to glean in just reaching out. You're a client, so reach out. I'm really proud to work for a firm that supports their clients and is really transparent and generates as much content as we do. We're really passionate about it, and we do a really good job of it.

Douglas Yones:

Yeah, I agree. I'm a follower of both you. I think I watch everything and every interview that Michael Sonnenshein participates in, he's unbelievably an incredibly bright individual, who somehow, who's way past my knowledge set, can put it all back into layman's terms and make me walk away, feeling both better educated, as well as not feeling bad about myself along the way. For anyone who's not following Michael Sonnenshein, please do. Go to Grayscale.com. Follow Dave. He's on all the social media, the whole team. They produce an incredible amount of content.

Also, if you want to beef up your ETF education, if you are not aware, there is a FINRA designation, it is a certified ETF CETF FINRA designation. It's now available on ETFCentral.com. Just go there, go under ETF Institute. Me, my entire team, we have all been certified within the last four weeks. I invite all of you to learn more about the industry via the certification on ETFCentral.com. Now, that is a wrap on this edition of ETF Central's, The Podcast.

As a reminder, you can find this episode as well as many other episodes, and spend time utilizing that free ETF screener on the website, ETFCentral.com. Thank you, Dave, for being here to share your insights, your passion, and your history with us. Stay tuned for upcoming episodes featuring thought leaders from across the ETF ecosystem. I'm Douglas Yones, your host today, head of exchange traded funds at the New York Stock Exchange, the Home of ETFs.