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Statement in Support of OMB Memorandum: Cumulative Effects of Regulations
Commissioner Scott D. O’Malia
March 20, 2012--I am pleased that the Administrator of the Office of Information and Regulatory Affairs released a memorandum today providing guidance to all executive agencies on the appropriate manner in which to conduct rigorous cost-benefit analyses and to consider the cumulative impacts of their regulatory actions in light of new and existing regulations.
I believe this directive is responsive to my letter of February 23, 2012 to the Office of Management and Budget requesting a review of the Commodity Futures Trading Commission’s conduct of cost-benefit analysis.
Specifically, the Administrator’s memorandum clarifies that, among other things, executive agencies should: (1) avoid unnecessary and inconsistent requirements; (2) improve regulatory outcomes by engaging in early and close consultation with affected stakeholders; and (3) coordinate the timing, content and requirements of multiple rulemakings that are contemplated for a particular industry or sector, so as to increase the net benefits.
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Source: CFTC.gov
S&P Indices, ISDA Launch Two New CDS Indices Measuring the Credit Quality of U.S. and European Finance Sectors
Indices Track the Most Liquid, Relevant Issues within Each Sector
March 20, 2012--S&P Indices and the International Swaps and Derivatives
Association, Inc. (ISDA) announced today the launch of the S&P/ISDA CDS U.S. Financials Select 10 Index and the S&P/ISDA CDS European Banks Select 15 Index.
The Indices provide a day-to-day measure of the credit quality of the U.S. and European banking sectors.
The S&P/ISDA CDS Sector Index family seeks to reflect the credit default swap market for corporate credits, increasing transparency for market participants. Today’s launch coincides
with the scheduled role for the existing indices in the S&P/ISDA CDS Index family.
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Source: ISDA
New Study Evaluates BXM and Other Indexes: Returns, Standard Deviations and Risk-Adjusted Returns Since Mid-1986
March 20, 2012--A new study, "The CBOE S&P 500 BuyWrite Index (BXM) — A Review of Performance," was released last week by investment-advisory firm Hewitt EnnisKnupp.
The study, commissioned by Chicago Board Options Exchange (CBOE), compares the performance of "traditional" indexes and CBOE S&P 500 BuyWrite Index (BXM(SM)) since mid-1986.
Summary of Results of the Study:
From June 1986 through January 2012, the BXM Index produced a:
Similar return, but lower volatility, relative to the S&P 500 Index
Return in excess of all other comparative indexes
Standard deviation lower than all other equity and commodity indexes covered in the study
Standard deviation lower than the 30-Year Treasury Index
Sharpe ratio (a measure of risk-adjusted returns) that was superior to that of other equity and commodity indexes evaluated.
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Source: CBOE
DB Equity Research Equity Research-North America-US ETF Holder Demographics Understanding ETF Usage
March 20, 2012--A CAGR of 27.3% in assets and inflows of $816bn underpin ETF’s 10Y growth
The US ETF industry has experienced a meteoric growth over the last 10 years. Assets grew at a CAGR of 27.3%, net inflows were $816bn, and the number of products increased almost 11 times.
In contrast, Long Term Mutual Funds grew at a CAGR of 6.7% with inflows of $1,606bn. On a relative basis, ETFs grew from 1.8% to 10.5% of LTMF assets in the 10Y period; and ETFs also represented 29% of all US cash equity $ volume in the past 3 years. At the end of 2011, there were 1,093 ETFs with assets of $939bn and $1,222bn traded during December 2011.
ETF Ownership was 53.0% Institutional vs. 47.0% Retail at the end of 2011
As of the end of Q4 2011, the ETF investor type ownership breakdown was 53.0% for Institutional Investor and 47.0% for Retail Investor. Investment advisers and brokers were the main ETF institutional users holding 47.7% and 38.0% of all institutional ETF assets, respectively; while mutual fund managers and hedge fund companies were the other significant duo with 5.2% and 4.1% of the institutional ETF assets, respectively.
ETF Institutional Ownership has increased steadily over the last decade
ETF Institutional Ownership has increased steadily from below 30% in the early 2000s to above 50% in the last couple of years, overtaking retail investors as the main product users. The number of institutions using ETFs has also surged from 405 back in the year 2000 to 2,545 at the end of 2011.
Institutional investors use some ETFs more than others
Although the breakdown between institutional and retail ownership is not significantly uneven at an aggregated level, there can be significant differences at an individual ETF level. Overall, we found that institutional participation was higher in ETFs offering exposure to equity or fixed income with no leverage, large AUM, abundant turnover, high flows activity, low TER, tight B/A spread, and high short interest-related figures.
Most ETFs are good for asset allocation, but only some are good for other portfolio functions such as cash and risk management
The high ETF ownership percentage and product usage exhibited by investment advisers (25.3%, 960 ETFs) and retail investors (47.0%, 1,068 ETFs) suggest that most ETFs are used for their primary function i.e. asset allocation, either strategic or tactical. Meanwhile, the more limited product usage, displayed by mutual fund managers (521 ETFs) and hedge fund companies (376 ETFs), suggests that the list of ETFs suitable for additional non-primary portfolio functions is more limited.
Multi-purpose ETFs can be identified by measuring ETF usage
ETFs used for additional non-primary activities such as cash management and risk management have most or all of the following characteristics: widely used benchmark as underlying, higher turnover, higher abs. flows activity, higher days to cover, higher SI as % of SO, higher institutional ownership, tighter B/A spread, and larger AUM Size; in addition to having brokers representing the highest institutional ownership, and hedge funds among the institutional holders. From these findings we elaborated a simple framework to measure the level of ETF usability, according to which about 50 ETFs can be considered "multi-purpose".
to request report
Source: Deutsche Bank-Equity Research-North America
FocusShares broadens its low-cost sales pitch
MArch 20, 2012--A year after launching its initial suite of US equity exchange traded funds, FocusShares is embarking on its first marketing campaign to raise assets and awareness among advisers of its low-cost products.
Since its inception FocusShares has looked to position itself as the price leader in the heavily commoditised world of domestic equity ETFs. Its large-cap ETF, for example, has an expense ratio of 5 basis points.
And he reiterated his pledge that Brazil will take tough action to combat the ill effects of such policies.
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Finance minister pledges bold action to safeguard economic competitiveness
March 17, 2012--Brazil’s finance minister Guido Mantega has stepped up his attack on rich country economic policies that he says have opened the flood-gates to harmful capital flows to the developing world.
Writing exclusively in today’s Emerging Markets, Mantega says the economic competitiveness of emerging nations must not fall victim to ultra-loose monetary policies being pursued by the US, Europe and Japan in response to the global crisis.
Source: Emerging Markets
