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ETFs Mark 20th Anniversary (STT, SPY)

January 29th, 2013

tomlydonOn a cold January day 20 years ago, with the Dow Jones Industrial Average hovering at about 3,300, a team of investors from State Street Bank (NYSE:STT) unveiled their new creation to the denizens of Wall Street: the SPDR S&P 500 ETF (NYSEArca:SPY). They now describe the launch of the first exchange-traded fund (ETF) on this day in 1993 as “the one that started it all,” calling the debut of the Spider (short for S&P Depositary Receipt) “an investment product that gave people a more precise way to buy and sell an entire index, but could be traded like a stock.”

It took some time for ETFs to catch on, but when they did the once lonesome Spider paved the way for what is now a $1.4 trillion industry with more than 1,400 different funds.

“This little group — little think tank — at State Street said, ‘Let’s create this thing that might help trading the S&P 500,’” says Tom Lydon, editor of ETF Trends.com, in the attached video. Despite its catchy name, he says ETFs took a long time to catch on, “years and years and years.” Today investors not only know what ETFs are, but they love them to the point where Lydon says they’re “threatening mutual funds to a great degree.”

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