The True History of the Evolution of ETFs Around the World

The first purpose of this article is to increase awareness for a thorough and extensive piece of research documenting the creation and rise of ETFs as a sociological phenomenon within the investment industry,

"Building Blocks: A Historical Sociology of the History of Exchange-Traded Funds in the United States from 1970 - 2000. " This is a great research thesis paper from Dr. Sarah M. Ruggins when she was at the University of Edinburgh Business School. This project empirically traces the emergence of the ETF by compiling an account of precursory strategies, concept development, regulatory negotiations, and early product marketing.

Excerpt: "The concept of agencement is used to frame the historical narrative of the ETF as a product of two distinct assemblages that formed in the U.S. between 1970 and 2000: first, the socio-technical integration between humans and their technologies that affected trading strategies, and second, the collaborative relationships that were formed between innovators and regulators. The mixed qualitative research consists of 36 interviews triangulated with archival records, documents sourced through Freedom of Information Act requests, private collections, and government files. Concluding analysis suggests that strategies foreshadowing the ETF began to emerge as early as the 1970s, and innovator-regulator collaborations were integral to early product qualification - a process not yet explored in literature on financial regulations."

One major undertaking of the Ruggins paper to tell the origin story of the ETF. As she states, "Of the plethora of books and media that focus on the U.S. ETF industry, none provide a wholly accurate analysis of the precursory innovations and infrastructure that enabled this 4 As of April 2015. In addition, much of the information available to the public is not correct. For example, some of the large investment companies in the United States and Canada state that the Toronto Stock Exchange produced the first ETF in the world in 1990.

However, as the SPY ETF is arguably the most well known ETF, it is commonly (though incorrectly) referred to as the first ETF even though it launched in 1993.

A quick glance at some of the most popular investment books and newspaper articles reaffirms these industry claims as the authors equate the launch date of these products as the beginning of the ETF industry.

While this project does not dispute that the ETFs produced by the Toronto Stock Exchange and the SPY ETF were the first of the modern day ETFs (for they exhibit the ETF structure most commonly seen in markets today), their launch did not mark the inception of industry. Instead, as (the study shows), the first ETF was launched in Philadelphia in 1989 - one year before the Canadian ETF and four years before the SPY. The environment surrounding the emergence of early ETFs and their immediate precedents is little known outside professional circles." (More to come soon)