Steve Oh
Director of ETF Business Development @ Nasdaq

Steve Oh, Director of ETF Business Development at Nasdaq, considered playing professional golf after college but decided he would take greater pleasure in a more academic route.

Since then, he has worked his way up through the ETF industry. From trading derivatives on the floor at Susquehanna to leading ETF development at one of the largest ETFs listings exchanges in the world, Steve Oh has learned the importance of maintaining good relationships in a small industry and is positive about future innovations that will continue to drive ETFs forward.

…the most knowledgeable people I admire in the industry have one common trait: they read everything!

Steve Oh spoke to Jobs In ETFs about the new role, why you should continuously seek opportunities to talk over coffee with knowledgeable people and the largest potential next area of growth: active ETFs.

Jobs in ETFs: How have you built up your career and what did you learn in each role?

Steve Oh: I started my career by trading ETF and options at Susquehanna in the late 1990s, one of the largest proprietary trading firms, and after a few amazing years trading, I left to go back to grad school. I considered going into the public sector after graduation, but there were not many opportunities at the time. A former colleague from Susquehanna who was starting up the ETF desk at LaBranche and asked me to join him and I worked there from 2006-2010 building up the ETF trading desk.

The reason for the switch from trading to asset management was primarily due to the industry changing very quickly. From the early 2000s, trading went increasingly off exchange and went upstairs to trading desks, whose systems were increasingly run by computer algorithms. Not having a background in that field, I realized this was not going to work long term for me.

Fortunately, I was recruited for a role in ETF Capital Markets with a new ETF issuer and even though I didn’t get the job after interviewing, I realised this was a good opportunity to make a lateral move, leveraging my knowledge and skills to the help ETF issuer community in areas where there was demand but a lack of knowledge.

I applied for and was hired by Vanguard in 2010 for an ETF Capital Markets job, funnily enough on, where they needed someone with deep ETF and options trading expertise. At Vanguard, I realized there were aspects of my professional development which I had been very naïve about. One was client relationships and another was salesmanship. I spent five years at Vanguard; it was a great company and I learned a lot to improve my skills in these areas. 

Two and a half years ago, VanEck was looking for a head of capital markets. I knew Adam Phillips, the Chief Operating Officer, from my trading days. We thought I’d be a good fit and it was a great opportunity for me to take on more responsibility as a department head. My two and half year at VanEck were memorable ones where I worked with some of the sharpest and hardest working professionals in the asset management industry.

A few months ago, a friend and former colleague from Vanguard, Paul Roland, reached out to me, and offered me a new role at Nasdaq to help build the ETF business there. My current role within ETF business development is multi-faceted. I work with the ETFs listing team, the index group, equity sales and marketing to discuss the entire ETF industry and look for opportunities to grow Nasdaq’s footprint within ETFs.

JE: You also had a brief foray into golf coaching after your first job. What brought you back to finance?

Steve: I grew up playing tournament golf in high school and college. I used to joke at Susquehanna that I wasn’t hired for academic skills but because the recruiting manager needed a good golfing partner. At one point I considered playing professionally; I was ranked in the top 25 at high school level across the country, but I wanted to take a more academic route. I come from a family of professors and academics and a commitment to professional athletics would hinder my pursuit of academic endeavors. 

JE: You mentioned realizing as a trader that the industry was changing and you needed to adapt. Are there equivalent risks, so to speak, for people entering the ETF industry now, as it changes so quickly?

Steve: There’s an economic theory which says that whenever there’s profit to be made, new competition comes in and drives profit to zero. Listed derivatives trading underwent a similar shift. In ETFs and options there was money to be made and then the increasingly technology-driven competition drove out a lot of people who couldn’t adapt their skillsets to that new environment.

In the ETF industry there are new entrants continuously coming into the game and whether you’re on the issuer side, the exchange side, or any firm that provides solutions for ETF firms, I really think the competitions means it’s not as easy for new people in this industry to grow today compared to 10 years ago.

Therefore, it’s important to not rest on your laurels. The industry will change at an even faster pace in the future: it’s going global, there’s more competition from smart and talented young people entering the market, so pay close attention to where the industry is moving. Work on your skillsets, such as people management, quantitative analysis, strategic accreditations and look at the way investment is moving too. Basically, don’t be complacent. During my trading days, I could have done a better job at seeing the writing on the wall and acquiring more technology-based skillsets to keep up with the trend.

The second piece of advice is about maintaining good relationships. Being cordial to and mindful of others is so important, as you never know what opportunities might come up. My jobs at Nasdaq and LaBranche significantly depended on a former colleagues at Vanguard and Susquehanna respectively, and even my job at Van Eck was dependent on two people that I’d known in the industry while I was trading.

I was very fortunate and appreciative to have had very good mentors at every job and at the same time have tried to make myself available to help others as well. I think finding one or a few senior industry leaders you trust to be a mentor is highly recommended and helps to spread the wealth of knowledge within the ETF industry.

JE: If someone doesn’t yet have such strong relationships, what advice can you give to people who want to take on more responsibility and prove to employers they can move up?

Steve: I think in terms of being self-sufficient, a curious mind and a curious intellect is the beginning. If you’re not comfortable taking the extra step and learning more about your industry or related businesses, it’s important to get out of your comfort zone and start developing this skill now.

The most knowledgeable people I admire in the industry have one common trait: they read everything. They subscribe to all newsletters, and if they see anything they fancy, they look for related reading material and do a deeper dive on it to see if there are opportunities or trends they can spot and make use of. 

Also, if you identify people who are very smart, I would recommend engaging with these people over coffee. They like sharing their knowledge and it’s a small industry. People tend to look after each other. Even if you’re not comfortable or too busy to do that, when you go to conferences or meet people at certain events, if someone strikes you as knowledgeable, reach out and make time with them.

JE: You talked about growth and opportunities. Is that a big part of what Nasdaq does?

Steve: The bread and butter for Nasdaq is based upon innovation and technology. The new CEO, Adena Friedman, is heavily focused and puts a lot of emphasis on growth opportunities. We have gone through the process of remarketing ourselves within the ETF industry: we have been recognized traditionally as an ETF listing exchange and index and data provider, but we always have been and want to focus on being an innovative technology company too.

A big part of my role is to try and see what’s the next step Nasdaq can take in ETFs, what do we have at our disposal and what can we create to help move things forward. Revitalize, a company-wide program, is designed to analyze and target the lethargy in capital markets in order to innovate. We want to explore technology, regulations, everything really, to inject more life into capital markets and ETFs are a part of that initiative.

JE: What are you enjoying most about your new role?

Steve: Nasdaq is my second lateral move within the ETF industry. Although on the surface this company is an ETF listings exchange, what interested me a lot about this role is that I can work within marketing regulations and technology and further complement my awareness of the ETF industry itself. Coming into Nasdaq and bringing my experience on the trading, issuer and market making side should hopefully be beneficial for Nasdaq too. I look at it in two ways – one is that the role is a huge growth opportunity for myself and for Nasdaq, but I also benefit from an intellectual curiosity perspective. It’s an area I haven’t been deeply immersed in before and I look forward to learning as much as I can.

JE: How would you respond to criticism that innovation is over, that all the big ideas have been done already, and any further moves in that direction are taking ETFs away from what they were designed to do?

Steve: I would respectfully disagree with that statement. For any innovation, there tend to be some bumps and valleys in periods of growth. The ETF industry has grown and innovated quite quickly over the years, but even from the 1990s it has had peaks and troughs along the way. You had the launch of the first generation of ETFs like SPY, the Diamond ETFs, which are still the big ETFs. But between the late 90s to the early and mid-2000s, ETFs went global and products like EFA and EEM were launched. After 2006 we were introduced to more thematic-based, creative products and fixed income ETF proliferation only started after 2010.

And from the trading side, people were trading on exchange floors for a long time. Then it changed very quickly. And now there are areas like machine learning, artificial intelligence and other potential innovations in terms of the different structures around ETFs. A potential huge area of growth is active, low cost, non-transparent ETFs. If that growth is realized, it will have an impact on other businesses which service these funds too.

One other important area to mention is regulation. MiFID II is coming up on 1 January 2018, and because of the regulatory requirements that are being put into markets, regarding due diligence, trade reporting and transparency, that’s spurred a lot of technology and data-based businesses to provide solutions for compliance with these regulations.

It might seem like because you have the fee wars between the Vanguards, iShares and Schwabs of this world that we might be getting into a mature phase of the ETF industry. I would say it’s too early to tell, as growth trends do not always play out in predictable, straight lines.  You never know when a new ETF innovation can pop up out of nowhere.

JE: Is the regulator going to provide a challenge to innovation given it has been slow to approve certain ideas and fund structures?

Steve: I would say there are dual headwinds that are making things more difficult for the industry. 

One is on the regulatory side it has been a fascinating experience in a new part of the ETF industry for me. Even though I am not anti-regulation, as an industry, I would say that there are pockets of lack of knowledge where we could be smarter about regulations, some of which are impeding growth. One example I can give is the regulations put on the banks that make anything associated with trading activity and with risk capital tighter and more expensive. Because of that, market makers are constrained in their ability to help ETF issuers launch, support and incubate new funds.

The other headwind is that because the ETF industry is growing so quickly, a lot of capital is needed to support the proliferation of these new funds and capital formation is scarce. That is proving challenging for new entrants with new ideas and who want to have a proper chance at success.