SPY was the world's first ETF, launched in January 1993, and remains the most actively traded equity security on US exchanges — institutional traders often prefer SPY specifically because of this liquidity, using it to execute large positions efficiently without moving the market. With over $650B in assets, it tracks the same S&P 500 index as IVV and VOO. The key difference for long-term investors is the expense ratio: SPY charges 0.0945% annually versus 0.03% for IVV and VOO — a difference that compounds meaningfully over decades. SPY's unit investment trust structure, unlike IVV's open-end fund structure, cannot reinvest dividends immediately and must hold cash until quarterly distribution, creating minor cash drag that slightly reduces returns versus the open-end alternatives. For long-term investors, IVV or VOO are structurally superior to SPY at lower cost. For active traders, institutions or investors who need to move large positions quickly with minimal market impact, SPY's exceptional liquidity — often hundreds of billions in daily trading volume — justifies the marginally higher cost. Options on SPY are the most liquid equity options market in the world, making SPY the standard vehicle for institutional hedging and derivatives strategies.
