Sometimes, out of negative, tragic occurrences comes the inspiration for positive, transformative solutions. In life, and in business.
That is the case in the development of Exchange Traded Fund, or ETF, which is now a $3 trillion industry in the financial services marketplace - but did not even exist not that long ago, in 1987.
That was the year the U.S. stock market crashed on October 19, experiencing a 23% market decline, enormous losses and widespread fear and panic on a day that was quickly coined, “Black Monday” in a nod to its predecessor event in 1929.
At the time, Murphy & McGonigle shareholder Howard Kramer was serving as Assistant Director of the Division of Market Regulation at the Securities and Exchange Commission.
Mr. Kramer recounts what he calls “the scariest day of my career” and, ultimately, the impetus for the birth of the ETF, in which he played an important role, in the first of a six-part podcast series on Bloomberg Businessweek, entitled, “The ETF Story.”
In Episode One of the podcast series, Mr. Kramer speaks about some of his recollections of the 1987 market crash and the SEC’s highly detailed, 840-page report investigating what had happened and what to do about it.
The second portion of the SEC’s report featured suggestions on how future stock crashes could be prevented, one of which was the creation of an instrument to trade a basket of stocks in a single transaction. On the podcast, Mr. Kramer, who worked diligently on several portions of the report, comments on that recommendation, which ultimately led to the creation of the ETF by the American Stock Exchange (“Amex”), as well as about the team at the Amex that worked on the project.
“The ETF Story” is available on Apple Podcast, and on Pocket Cast. Some of the future episodes of the podcast may contain additional recollections by Mr. Kramer.