Regulation and advisory shifts drove US ETF growth

The US ETF industry has evolved from a low-cost alternative for tracking indexes into a central portfolio-construction tool. During a panel on the global development of ETFs, Joe Markovitch of VettaFi and Rohan Reddy of Global X ETFs identified regulatory, commercial and technological changes as the main drivers of this expansion.

Markovitch highlighted the SEC’s Rule 6c-11, adopted in 2019 and commonly known as the ETF Rule. The regulation created a standardized framework that made it faster and more efficient to launch ETFs. Products that had previously taken one or two years to reach the market could be developed more quickly, opening the door to active, thematic and derivatives-based strategies.

Reddy identified two additional changes in distribution. The first was the transition of the US financial-advisory industry from commission-based compensation to fee-based models, which increased demand for lower-cost instruments. The second was Charles Schwab’s decision in 2019 to eliminate trading commissions for stocks and ETFs, followed by other brokerage firms.

Active ETFs capture a larger share of flows

The expansion of the ETF structure has allowed asset managers to convert established investment strategies into exchange-traded products. Active ETFs accounted for 37% of all US ETF flows in 2026, up from 10% in 2020.

Growth has not been limited to leveraged or complex products. Demand has been distributed across strategic-beta, fundamentals-based, thematic and derivatives strategies. According to Markovitch, durability and a clear role within portfolio allocation matter more than launching products tied only to short-lived market trends.

This principle also applies to index construction. A methodology must be investable, repeatable and compatible with the liquidity of its underlying assets. Weighting, concentration limits, rebalancing, tracking error and regulatory compliance need to reflect the exposure that the ETF is designed to deliver.

Liquidity depends on the underlying portfolio

An ETF’s liquidity is not determined solely by the trading volume of its shares. It also depends on the liquidity of its underlying assets, the activity of market makers and the creation and redemption mechanism operated by authorized participants.

Reddy described the capital-markets function as the backbone of the ETF structure. Bid-ask spreads, premiums or discounts to net asset value, and liquidity in the primary and secondary markets directly affect trading costs.

The discussion also established a practical limit to product innovation. Although many strategies can technically be placed inside an ETF, not every asset is suitable for a vehicle offering intraday liquidity. This is particularly relevant when the industry considers including private-market assets or other investments that are difficult to trade.

Brazil has opportunities in fixed income and model portfolios

The panel identified opportunities in Brazil across fixed income, income strategies, model portfolios, digital platforms and liquidity provision. Product development must account for the challenge of competing in a market where local interest rates remain high.

Model portfolios were presented as a potential distribution channel. In the United States, banks and brokerage firms use predefined combinations of ETFs to simplify asset allocation, establish portfolio weights and offer different risk profiles. This market remains at an early stage in Brazil.

Model portfolios also allow advisers to spend less time selecting and trading individual products. Asset allocation can be partially outsourced, while advisers focus on financial planning, client relationships and other higher-value services.

Tokenization could extend ETF trading hours

Tokenization was identified as another possible stage in the development of ETFs. Luiz Masagão of B3 said the exchange intends to launch tokenized infrastructure for equity trading, including ETFs, in cooperation with Brazil’s Securities and Exchange Commission.

The first intended use case is continuous trading. Under the plan discussed during the panel, tokenized infrastructure could eventually allow ETFs to trade 24 hours a day, seven days a week.

The panelists also argued that tokenization could support fractional ownership, faster transactions and broader access in markets where investors do not use traditional brokerage accounts. The structure may also make it easier for issuers to understand who holds their products.

Education becomes part of ETF distribution

Investor education was presented as a necessary condition for expanding ETF adoption among individuals, advisers and institutions. In a crowded market, a strong investment strategy does not guarantee commercial success if investors do not understand its purpose or role in a portfolio.

More than 1,000 ETFs were launched in the United States in 2026, and the country now has more listed ETFs than listed stocks. In this environment, research, educational content and clear communication have become integral parts of distribution.

For Brazil, the central lesson is that growth requires a combination of regulation, investable products, market liquidity, efficient distribution and education. The US experience indicates that expansion did not result solely from launching more funds. It also came from reducing the barriers that prevented investors and institutions from using ETFs as permanent portfolio-allocation tools.