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FINRA Issues Warning on Stock-Based Loan Programs
May 26, 2011-- The Financial Industry Regulatory Authority issued a new Investor Alert — Stock-Based Loan Programs: What Investors Need to Know — to educate investors about non-recourse stock-based loan programs, including the risks and rewards of these loans. Stock-based loans might be tempting for investors who need cash — or who want to tap the value of their portfolios without selling their investments.
However, as recent FINRA enforcement actions confirm, stock-based loan programs can be risky, especially when they involve non-recourse loans from unregistered, unregulated third-party lenders.
"Investors who want to tap into the value of their portfolio through a stock loan program should realize that these programs involve significant risk and cost, and may result in unintended tax consequences," said John Gannon, FINRA's Senior Vice President for Investor Education.
As Stock-Based Loan Programs: What Investors Need to Know explains, stock-based loan programs allow investors to pledge fully paid stock as collateral for non-recourse loans from third-party lenders, who are generally unregistered and unregulated. These programs, typically marketed by financial planners, investment advisers, insurance agents and others, supposedly allow investors to borrow money against a substantial percentage of their portfolio without giving up the benefits of owning the stock.
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Source: FINRA
CFTC Staff to Host Public Roundtable to Discuss Swap Data Recordkeeping and Reporting Requirements
May 26, 2011--Staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable on June 8, 2011, from 1:00 pm to 5:00 pm to discuss technical aspects of implementing infrastructures for issuance and maintenance of Unique Product Identifiers (UPIs), as they apply to CFTC’s proposed swap data recordkeeping and reporting rules, as well as other CFTC proposed rules, with a focus on the products and entities under the Commission’s jurisdiction. The roundtable will assist the CFTC in the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Unique Product Identifier (UPI) proposed by the Commission in the swap data recordkeeping and reporting rulemaking (Part 45) would categorize swaps according to the underlying products referenced in them. While the UPI would be assigned to a particular level of the taxonomy of the asset class or sub-asset class in question, its existence would enable the Commission and other regulators to aggregate transactions at various taxonomy levels based on the type of product underlying the swap.
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Source: CFTC.gov
Global X Funds Launches First Fertilizers/Potash ETF (SOIL)
May 26, 2011--Global X Funds, the New York based provider of exchange traded funds (ETFs), today launched the Global X Fertilizers/Potash ETF (Ticker: SOIL). SOIL offers targeted exposure to fertilizer producers around the world, giving investors access to a critical agricultural and commodity sector.
Global growth is predicted to drive food demand (especially high value foods such as meat, fruit and vegetables) in emerging economies, thereby strengthening demand for fertilizers (Food and Agricultural Organization, 2010). In India, for instance, grain yields are less than one half of those in the US, with improper fertilization being a key reason for lower yields. Farmers require these nutrients to increase crop yields, and fertilizer companies have become the primary producers of commodities that are critical for global food supply growth. China and India alone account for more than 40% of world fertilizer use and China’s annual consumption is expected to return to pre-2008 growth levels of nearly 10% per year.
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Source: Global X
Deutsche Bank and Invesco PowerShares launch two new Exchange Traded Notes
May 26, 2011--- Deutsche Bank and Invesco PowerShares Capital Management, LLC today announced the launch of two new Exchange Traded Notes (ETNs), which are designed to provide triple long and triple short exposure to futures contracts on the US Dollar Index® (USDX), an index designed to reflect the value of the US dollar compared with six of the world's most traded currencies.
The ETNs will be listed for trading on the NYSE Arca under the following symbols:
PowerShares DB 3x Long US Dollar Index Futures ETNs (“3x Long ETNs”): UUPT
PowerShares DB 3x Short US Dollar Index Futures ETNs (“3x Short ETNs”): UDNT
These ETNs expand upon Deutsche Bank’s popular PowerShares DB US Dollar Bullish Fund (UUP) and PowerShares DB US Dollar Bearish Fund (UDN), which are exchange traded funds that track the performance of the US dollar. The ETNs are the first exchange-traded products to provide investors with leveraged exposure to the USDX.
“We are delighted to provide investors an opportunity to further benefit from Deutsche Bank’s industry-leading* foreign exchange platform through exchange-traded products,” said Martin Kremenstein, a Director at Deutsche Bank. “These ETNs provide investors additional ways to express a view on the US Dollar.”
* Deutsche Bank has been ranked as the world's No.1 bank in terms of overall market share in foreign exchange trades by Euromoney for seven years running.
Source: Online News
PowerShares Adds Convertibles ETF to Lineup
May 26, 2011--The PowerShares Convertible Securities Portfolio (CVRT) was listed for trading yesterday (5/26/11), becoming the second ETF targeting convertibles. Convertible securities are bonds that the holder can convert into shares of common stock of the issuer. This feature tends to make them more correlated than non-convertible bonds to stock market movements.
CVRT will try to mimic the performance of the BofA Merrill Lynch All U.S. Convertibles Index, which is designed to track the performance of U.S. dollar-denominated investment grade and non-investment grade convertible securities sold into the U.S. market and publicly traded in the United States.
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Source: TMCNET.com
CFTC Staff to Host Public Roundtable to Discuss Protection of Cleared Swaps Customer Collateral
May 25, 2011--Staff of the Commodity Futures Trading Commission (CFTC) will hold a public roundtable on June 3, 2011, from 9:30 a.m. to 5:00 p.m., to discuss issues related to the protection of cleared swaps customer collateral. The roundtable will assist the CFTC in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The roundtable will be held in the Conference Center at the CFTC's headquarters at Three Lafayette Centre, 1155 21st Street, NW, Washington, DC. The discussion will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen by telephone and should be prepared to provide their first name, last name and affiliation
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Source: CFTC.gov
Strong demand for $35bn of 5-year Treasuries amid weak data
May 25, 2011--Investors aggressively sought $35bn of five-year Treasury debt sold on Wednesday at the lowest yield levels of the year.
In a sign of the demand, bid-cover ratio, or the measure of orders placed in relation to the auction amount, was 3.2 times, the highest since September 1994, when it was 3.29 times, according to Nomura Securities
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Source: FT.com
PowerShares files with the SEC
May 25, 2011--PowerShares has filed a post-effective amendment, registration statement with the SEC for the PowerShares Fundamental Pure Large Growth Portfolio (PXLG) and the
PowerShares Fundamental Pure Large Value Portfolio (PXLV)
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Source: SEC.gov
DTCC: Indemnification Provision In Dodd-Frank Could Create Unintended Negative Consequences
Provision Could Undermine Regulators’ Ability to See Unfragmented View of Market Data
May 25, 2011-- The Depository Trust & Clearing Corporation (DTCC) today cautioned in testimony before a House Agriculture subcommittee that the indemnification provision of Dodd-Frank could create unintended negative consequences, including undermining efforts to enhance transparency and mitigate systemic risk in the over-the-counter (OTC) derivatives market. The hearing was called to discuss global harmonization, extra-territoriality issues and technical concerns with the implementation of the Dodd-Frank Act.
"The underlying legislative intent of the Dodd-Frank Act could be subverted by the legislative language, preventing the exchange of information between regulators and frustrating efforts to identify and mitigate international financial risk and fragment regulatory oversight on a jurisdiction-by-jurisdiction basis," said Larry Thompson, DTCC managing director and general counsel, in testimony before the Subcommittee on General Farm Commodities and Risk Management.
Thompson said that foreign regulators are unlikely to grant US-based swap data repositories (SDRs) indemnification in exchange for access to data as required by the Dodd-Frank Act. Without an indemnity agreement, SDRs may be legally precluded from providing critical market data to regulators overseas. As a result, foreign jurisdictions could be incentivized to create their own local repositories to avoid indemnification—a move that would lead to data fragmentation.
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Source: DTCC
Bernanke May Resist ‘Noah’s Ark’ Approach on Systemic Risk
My 25, 2011--Bloomberg reports: Republican lawmakers and industry lobbyists are pressing a council of regulators including Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Timothy F. Geithner to reject a so-called Noah’s Ark strategy in choosing which non-bank companies to put under Fed supervision.
Under the Dodd-Frank Act, the Financial Stability Oversight Council must designate companies whose failure would threaten economic stability. The Fed could require the firms to raise capital and reduce risky practices. They also would have to file “living wills” so they could be unwound in an orderly way.
Source: Bloomberg
