Q-705.2. The Investment Committee at your endowment just analyzed the historical performance of its asset allocation to hedge funds, which was 20.0% of the fund. It has determined that net of fees these hedge funds did not outperform the S&P 500 on a risk-adjusted basis. Consequently, the Committee wants to re-allocate this portion to a fund that tracks the S&P 500 index, and the Committee is comfortable mirroring the index with minimum tracking error. An outside consultant proposes an exchange-traded fund (ETF) such as the "Spider" (ticker SPY), but some members want to compare the ETF to an open-ended or closed-ended mutual fund that tracks the S&P 500. In addition to highlighting the fact that the expense ratios tend to be lower for ETFs than mutual funds, the consultant offers the following arguments in favor of an ETF:

I. In contrast to an open-ended mutual fund, advantage of the SPDR ETF can be traded at any time, can be shorted, and does not have to be partially liquidated to accommodate redemptions
II. In contrast to a closed-ended mutual fund whose price tends to trade at a discount to its fair market value, there is never any appreciable difference between the traded price of the SPDR EFT and its fair market value.

Which of the consultant's argument(s) is (are) TRUE?