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Financial Stability Oversight Council Takes Critical Step to Carry Out Wall Street Reform, Prevent Future Financial Crises
October 11, 2011--The Financial Stability Oversight Council (“the Council”) today took a key step forward to monitor and mitigate potential threats to U.S. financial stability and protect the American taxpayer by releasing details on the proposed process it will follow to determine whether a nonbank financial company should be subject to enhanced supervision.
In the recent financial crisis, financial distress at certain nonbank financial companies contributed to a broad seizing up of financial markets. An important component of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”), this authority provided to the Council is one of a number of tools now available to help prevent a future financial crisis.
In its tenth meeting, the Council approved the following documents put forward during today’s session: a second notice of proposed rulemaking (NPR) and proposed interpretive guidance on the Council’s authority to require supervision and regulation of certain nonbank financial companies; Council budget information for FY2012; and the minutes of the July 18, 2011, August 8, 2011 and September 15, 2011 Council meetings.
Second NPR and Proposed Interpretive Guidance on the Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies
Section 113 of the Dodd-Frank Act authorizes the Council to require a nonbank financial company to be supervised by the Board of Governors of the Federal Reserve System and be subject to prudential standards if the Council determines that material financial distress at the nonbank financial company, or the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the nonbank financial company, could pose a threat to the financial stability of the United States.
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Source: US Department of the Treasury
Dow Jones Indexes And UBS Announce 2012 Weights Of Dow Jones-UBS Commodity Index
Brent Futures Contract Added to WTI Futures Contract to Comprise Index’s Crude Oil Component
October 11, 2011--New target weightings for the Dow Jones-UBS Commodity Index and the addition of the Brent futures contract as part of the index’s crude oil component were announced today by Dow Jones Indexes andUBS Investment Bank.
Changes to the index, scheduled to be effective in January 2012, were determined and approved by the Dow Jones-UBSCommodity Index (DJ-UBSCI) Supervisory Committee following consultation with the Dow Jones-UBS Commodity Index Advisory Committee.
The Supervisory Committee cited several factors for adding the Brent futures contract to the WTI (West Texas Intermediate) futures contract in comprising the crude oil component of the index: acknowledgment of Brent’s economic significance as a global benchmark, the liquidity of the Brent futures contract and the actual production of the commodity itself. WTI will comprise approximately two-thirds of the index’s crude oil weighting, with Brent accounting for the remainder.
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Source: Dow Jones
Dow Jones Indexes to Distribute Index-Constituent Data Through Morningstar Direct
Additional Data Enables Morningstar Direct to Expand Its Suite of Key Dow Jones Indexes Information
October 11, 2011--Dow Jones Indexes today announced that Morningstar, Inc., a leading provider of independent investment research, is now including constituent data on a range of Dow Jones Indexes' gauges through Morningstar DirectSM, its global web-based institutional investment analysis platform.
Morningstar Direct already provides Dow Jones Indexes' end-of-day index values; with the addition of constituent data, Morningstar Direct is now able to offer clients an expanded suite of key Dow Jones Indexes information.
"The addition of constituent data from Dow Jones Indexes allows Morningstar Direct subscribers access to a broader package of index constituents from a highly respected source," said Xiaohua Xia, president of institutional software for Morningstar. "By making our database more comprehensive, institutional investors, asset managers and investment consultants can now perform more in-depth performance and risk analysis of portfolios against a wider range of benchmarks."
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Source: Dow Jones Indexes
Federal Reserve Board Seeks Comment On Proposal To Implement Volcker Rule requirements of the Dodd-Frank Act
October 11, 2011--The Federal Reserve Board on Tuesday requested public comment on a proposed regulation implementing the so-called "Volcker Rule" requirements of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 619 generally contains two prohibitions. First, it prohibits insured depository institutions, bank holding companies, and their subsidiaries or affiliates (banking entities) from engaging in short-term proprietary trading of any security, derivative, and certain other financial instruments for a banking entity's own account, subject to certain exemptions.
Second, it prohibits owning, sponsoring, or having certain relationships with, a hedge fund or private equity fund, subject to certain exemptions.
The act also prohibits banking entities from engaging in an exempted transaction or activity if it would involve or result in a material conflict of interest between the banking entity and its clients, customers, or counterparties, or that would result in a material exposure to high-risk assets or trading strategies, in each case as defined by the rule. The act similarly prohibits banking entities from engaging in an exempted transaction or activity if it would pose a threat to the safety and soundness of the banking entity or to the financial stability of the United States.
The proposal, which was developed jointly with the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, clarifies the scope of the act's prohibitions and, consistent with statutory authority, provides certain exemptions to these prohibitions. It is anticipated these agencies will issue a comparable proposal today or in the near future.
Transactions in certain instruments, including obligations of the U.S. government or a U.S. government agency, the government-sponsored enterprises, and state and local governments, are exempt from the statute's prohibitions. Consistent with the statute, other activities exempted include market making, underwriting, and risk-mitigating hedging. The statute also permits banking entities to organize, offer, and invest in a hedge fund or private equity fund subject to a number of conditions.
The proposed rule would require banking entities that engage in these activities to establish an internal compliance program that is designed to ensure and monitor compliance with the statute's prohibitions and restrictions, and implementing regulations. The proposed rule provides commentary intended to assist banking entities in distinguishing permitted market making-related activities from prohibited proprietary trading activities.
view the Prohibitions and Restrictions on Proprietary Trading and Certain Interests In, and Relationships With, Hedge Funds and Private Equity Funds
Source: Federal Reserve Board
DB Global Equity Research: US ETF Market Weekly Review--ETP AUM up $12bn driven by market rally
October 11, 2011--Net Cash Flows Review
Equity markets in the US (S&P 500) had a decent rally last week and gained 2.12%. Other developed and emerging markets outside the US were also positive, the MSCI EAFE (in USD) and the MSCI EM (in USD) rose by 2.01%, and 0.42% during the week, respectively.
Moving on to other asset classes, the 10Y Treasury yield rose by 18bps; while the DB Liquid Commodity Index was up by 1.89% aided by strong gains in WTI Crude Oil (+4.8%) and Silver (+4.1%). Last but not least, Volatility (VIX) was down by 15.7% for the week.
The total US ETP flows from all products registered $0.68bn of outflows during last week vs $3.8bn of inflows the previous week, setting the YTD weekly flows average at +$1.9bn.
In spite of the equity market rally last week, ETP flows still resemble a risk off trade. Equity, Fixed Income, and Commodity ETPs experienced flows of -$2.6bn, +$2.1bn, and -$0.4bn last week vs. +$3.8bn, +$1.6bn, and -$1.3bn the previous week, respectively.
Within Equity ETPs, Leveraged products experienced the largest inflows (+$555m), followed by Short products (+$486m), while Large Cap vehicles experienced the largest outflows ($2.0bn).
Within Fixed Income ETPs, Sovereign products experienced the largest inflows (+$1.4bn), while Sub-Sovereign vehicles experienced the largest and only outflows (-$44m).
Within Commodity ETPs, Energy products experienced the largest inflows (+$134m), while Precious Metals vehicles experienced the largest outflows (-$259m).
New Launch Calendar: ETP launches keep the momentum
There were 10 new ETPs and 1 new ETN listed during the previous week. Seven of these products were listed on the NYSE Arca, while the remaining four were listed on NASDAQ. The new products cover four different asset classes offering access to a diverse range of exposures and return streams.
Turnover Review: Equity ETP turnover rose by $75bn
Total weekly turnover increased by 14.9% to $555bn vs. $483bn in the previous week. The largest increase was on Equity ETP turnover, which rose by $75bn or 17.8% to $498bn. Fixed Income ETP turnover increased by $6.0bn to $26.2bn last week. Finally, Commodity ETPs products turnover decreased by $10.6bn, totaling $26.1bn at the end of last Friday.
Assets Under Management (AUM) Review: market rally added close to $12bn US ETP AUM experienced an increase of $11.9bn or 1.2% in assets during last week. Total ETP assets were 2.4% down YTD by the end of last week, ending up at $981 billion. Assets for equity, fixed income and commodity ETPs rose by $8.5bn, $1.3bn, and $1.8bn during last week, respectively.
to request report
Source: Deutsche Bank - Global Equity Research
Georgetown Investment Management files with the SEC
October 11, 2011--Georgetown Investment Management (formerly Georgetown ETF Trust, has filed a amended application foe exemptive with the SEC for actively-managed ETFs.
view filing
Source: SEC.gov
ETF Assets Fall Below $1 Trillion
October 10, 2011-Assets in U.S. based exchange-traded funds (ETFs) fell below the $1 trillion mark in September, the lowest level since November 2010, according to a new report from Birinyi Associates.
Market pullback during the period caused overall assets to fall 8.3 percent to $972 billion. However, a net $4.5 billion in new money was added to a variety of ETFs in September.
"Even though the assets fell the money is still flowing into ETFs", says Kevin Pleines, an analyst at Birinyi Associates. "The market continues to grow."
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Source: CNBC
NASDAQ OMX to Launch UltraFeed
North American Equity, Options, Futures and Index Data Combined in a Single Feed
October 10, 2011--The NASDAQ OMX Group, Inc. today announced it will introduce UltraFeedSM, a highly-efficient data feed that aggregates all North American equity, options, futures and index data feeds.
Employing NASDAQ OMX state-of-the-art technology, UltraFeed will first be delivered to QUODD Financial Information Services – a full service market data provider. QUODD Financial Information Services will provide UltraFeed to its approximately 550 downstream client firms who, in turn, feed thousands of end-users.
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Source: NASDAQ OMX
ETFS US Precious Metals Weekly: Gold price decline attracts record turnover on Shanghai Exchange as retail buyers step up
October 10, 2011-Chinese ‘Golden Week’ sees strong demand for gold – volume on Shanghai Exchange at Record. China’s golden week holiday has attracted strong retail interest, as gold hovers near levels last reached at the beginning of August.
A spokesman for the Chinese Gold and Silver Exchange indicated that retailers would be ‘busy like crazy’ during the annual festivities. Weekly turnover in gold futures on
the Shanghai Gold Exchange (SGE) hit a record level, with heightened activity
around the national holiday celebrations lifting volumes.
Gold records first weekly gain in five weeks, rising 2%. Low or negative real interest rates in major developed economies and with central banks continuing to flood market with liquidity, investor appetite for gold is rebounding strongly. While European politicians have pledged to recapitalise the Eurozone banking system, central banks continue to inject increasing amounts of liquidity into financial markets to stave off short-term liquidity problems. Gold trading will likely remain choppy but the uncertain economic backdrop should be a positive influence for gold. More concrete details on the Eurozone recapitalisation plan, which are scheduled for release at the G20 meeting in early November, could trigger greater risk appetite.
Impala Platinum announces signing of 2-year wage deal for workers. Impala, the world’s second largest platinum producer, announced it had settled a two-year wage agreement with South Africa’s National Union of mineworkers. According to the company statement, workers will receive between 8.5-10% in the first year, and between 8-10% in the following year. The trend of rising costs on mining should provide price support for precious metals over the medium term.
CME hikes margins on futures contracts as volatility picks up. The CME increased margins on platinum futures contracts by around 29% last week, as weakening economic sentiment led to sharp falls for precious metals, thereby lifting volatility. After recent sharp declines in platinum, the margin increase is unlikely to trigger a sell-off akin to that when gold and silver margins jumped, but it could keep price action subdued this week.
What to watch this week. Relative value will remain in focus this week as the gold:platinum ratio remains at a record high and the gold:silver at an eleven-month high. Economic sentiment is fragile, as investors remain wary of the possibility of a disorderly default by Greece. Economic data will likely remain in the background, with market direction driven again by policymakers’ comments this week. Economic data from Eurozone is likely to be soft and highlight the potential divergence between the recovery path between the Eurozone and the US. The release of the latest FOMC minutes, as well as any details about the framework for the Euurozone’s plan to resolve the sovereign debt crisis will be closely watched. Initial market reactions from the Merkel/Sarkozy summit comments have been supportive to more cyclically-oriented silver, platinum and palladium prices, however volatility is unlikely to evaporate in the current highly uncertain environment.
visit www.etfsecurities.com for more info
Source: ETF Securities
ELX Announces 3RD Quarter U.S. Treasury Bond Records
October 10, 2011 – ELX Futures, L.P. (ELX), a leading electronic futures exchange, today announced its total volume for the first three quarters has surpassed 15 million contracts as trading activity for its 30-year and ultra-long U.S. Treasury bond futures contracts set new quarterly records
The 30-year bond volume in the third quarter exceeded 1 million contracts for the first time, with 1,167,171 contracts traded, surpassing the second quarter 2011 record of 964,534 contracts and bringing the total traded since launch to nearly 5 million. The average daily volume for the quarter was a record 18,237 contracts, with market share during the quarter rising to a record 4.3%.
The ultra-long bond set a quarterly record of 25,573 contracts, more than double the previous record of 10,299 set during the second quarter of 2010, and a monthly record for September of 13,436 contracts, after setting the previous record of 9,141 last month.
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Source: ELX Futures
