Americas ETP News
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Morgan Stanley Report-ETF Tracking Error
February 11, 2011--Tracking error declined across all market segments
and virtually all providers for US-listed ETFs in 2010 and averaged 74 bps. We define tracking error
as the difference in total return between an ETF’s net asset value (NAV) and its underlying index.
In our view, the most common sources of tracking error include fees and expenses, portfolio optimization, and
index changes. Additionally, compliance with IRS/SEC diversification requirements can lead to extreme
tracking error for select ETFs as they may be forced into material weighting and holding deviations from their
stated benchmarks.
We found a narrower range and magnitude of tracking error in 2010 versus 2009. In 2010, the range of tracking error fell 1,125 bps to 584 bps and 67.7% of ETFs exhibited lower tracking error year-on-year with an average decline of 88 bps. In addition, the percentage of ETFs with tracking error greater than 100 bps decreased from 37.1% in 2009 to 22.0% in 2010. Conversely, the percentage of ETFs with tracking error less than or equal to 25 bps increased from 22.6% to 26.4%.
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Source: ETF Research-Morgan Stanley
CFTC.gov Commitments of Traders Reports Update
February 11, 2011-The current reports for the week of February 8, 2011 are now available.
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Source: CFTC.gov
Northern Trust hs filed with the SEC
February 11, 2011--Northern Trust has filed an applicatiom for exemptive relief with the SEC.
view filing
Source: SEC.gov
Increased Treasury yields and fears over inflation lift dollar
February 11, 2011--The dollar advanced this week as raised US Treasury yields, worries over emerging-market inflation and continued turmoil in Egypt boosted the US currency.
Analysts said the rise in US Treasury yields – the yield on 10-year Treasuries hit its highest level since April – reflected rising optimism over the US economy
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Source: FT.com
2011 Outlook: U.S. Leveraged Finance Sector Profiles
February 10, 2011--Rating Outlook
Improving Credit Fundamentals:
Fitch Ratings anticipates credit profile improvements broadly across corporate sectors and rating categories. Fitch expects that modest top line growth and continued cost containment should support moderate margin expansion
in 2011.
Expanding EBITDA and steady debt levels should continue to drive leverage
down even as more FCF is likely to be dedicated toward shareholder friendly actions. Liquidity is expected to remain healthy as most companies addressed their near term
maturities in recent years.
Low High-Yield Bond Default Rate: As a result, Fitch expects more upgrades than downgrades in 2011. The HY default rate is expected to remain well below historical averages, in the 1.5%?2.0% range for the year. Fitch recognizes the concentration of several very large ‘CCC’ rated issuers has the potential to influence the default rate in 2011.
Favorable Market Supply/Demand Dynamics: The benign credit environment and low interest rates continue to support significant issuance activity. While more bond and loan issuance will likely be used for dividend deals and acquisitions, much of the issuance will predominantly be recycled into refinancing activity as issuers attempt to redistribute their maturities beyond the concentrated refinancing cliff.
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Source: Fitch Ratings
ProShares Launches First Inverse TIPS ETF
Expands popular lineup of geared Treasury ETFs
February 10, 2011-- ProShares, a premier provider of alternative exchange traded funds (ETFs), today announced the launch of the first ETF that provides inverse exposure to U.S. Treasury Inflation-Protected Securities (TIPS).
The ProShares UltraShort TIPS (NYSEArca:TPS - News) seeks to provide -2x of the daily return of the Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index (Series-L), before fees, expenses and interest income. The ETF lists on NYSE Arca today.
“Fueled by expectations of rising long-term interest rates, our inverse Treasury ProShares have garnered more than $7 billion since launching less than three years ago,” said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares’ investment advisor. “Our new fund, the first inverse TIPS ETF, is a new tool for investors considering hedging against or seeking to benefit from declines in TIPS prices.”
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Source: ProShares
US regulators set to miss Dodd-Frank deadline
February 10, 2011--US regulators will miss a July deadline set by Dodd-Frank legislation for some of the rules on newly policed swaps markets, the head of the main derivatives regulator has said.
Gary Gensler, chairman of the Commodity Futures Trading Commission, said the regulator was still working towards the deadline.
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Source: FT.com
Regular Review Results for the Dow Jones U.S. Contrarian Opportunities Index
February 10, 2011--Dow Jones Indexes, a leading global index provider, today announced the results of the semi-annual review of the Dow Jones U.S. Contrarian Opportunities Index. All changes will be effective after the close of trading on Friday, February 18, 2011.
With 63 additions and 62 deletions, the number of components in the Dow Jones U.S. Contrarian Opportunities Index will increase to 125 from 124. The top five components by free-float market capitalization that will be added to the index are: Exxon Mobil Corp. (United States, Oil and Gas, XOM), Google Inc. (United States, Technology, GOOG), Hewlett-Packard Co. (United States, Technology, HPQ), Conoco Phillips (United States, Oil and Gas, COP) and Honeywell International Inc. (United States, Industrials, HON). The top five components by free-float market capitalization that will be deleted from the index are: AT&T Inc. (United States, Telecommunications, T), Cisco Systems (United States, Technology, CSCO), NetApp Inc. (United States, Technology, NTAP), Coach Inc. (United States, Consumer Goods, COH) and Salesforce.com Inc. (United States, Technology, CRM).
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Source: Dow Jones Indexes
DB Index & ETF Research: US ETF Market Weekly Review : Markets Up, Flows Down. Bottom Line: AUM Up $17 bn
February 10, 2011--Fantastic week for the equity market, but not as good for equity ETP flows
Good week for the market, but not too good for the ETP flows. Last week we saw the S&P 500 recording their best weekly run for the year with a 2.7% increase, however Total ETP flows shrank driven by equity outflows.
Total US ETP flows for the last week registered $1.8 bn of outflows vs $2.8 bn outflows the previous week, setting the YTD weekly flows average at +$1.9 bn. US ETPs AUM remained firm above the trillion dollar mark at $1.02 trillion supported by a strong equity market.
Most of the decline in flows came from outflows of EM assets (-$3.4 bn), while US ETPs experienced a step back (-$1 bn), and the global and other developed markets experienced inflows ($1.1 bn). New allocations within EM still favor individual countries over broad regional indices, especially after last week’s asset flight from broad EM benchmarks. YTD EM countries flows sat at around $0.9 bn at the end of last week, while EM broad flows sank to -$6.6 bn. Among sectors, Energy products were ‘on fire’ with $1.3 bn of inflows.
Fixed Income ETP flows started to flatten and lose steam (+$155 mm). Corporates reached an inflexion point in their upward trend (+$318 mm), and Sovereign began to bleed assets (-$347 mm).
Investors are looking beyond precious metals within commodities, total flows into the asset class were positive at $739 mm, distributed generously among sectors (Overall, 27%; Agriculture, 25%; Precious Metals, 24%; Energy, 23%). Please see the weekly commentary section for more details.
New Launch Calendar: LatAm equities and Natural Gas
Last week saw two new products come to market. The new products listed at NYSE Arca, provide investors with new choices to access Latin American equities and Single-exposure commodity returns.
Turnover Review: On Exchange activity dropped by 11%
Total weekly turnover drop by 11% to $311 bn vs. $349 bn in the previous week, and a 7% down from last year’s weekly average. Equity ETPs took the hardest hit with a same-size plunge which drained $32 bn from on exchange trading, mainly driven by Large Cap ETPs (-$22.5 bn). Within Fixed Income products, turnover increased by 11% WoW, and reached a 48% increase from last year’s weekly average, with Sovereign turnover leading the activity (+$1.4 bn WoW; +$4.3 bn from last year average). Finally Commodity ETPs, saw their activity drop by 24% WoW, however on exchange activity remains 30% above 2010’s weekly average.
Assets Under Management (AUM) Review: assets added $17 bn
Fueled by a better-than-average week in the equity markets, and in spite of weekly outflows, overall ETP assets increased by 1.7% from the previous week, adding $17 bn and reaching $1.02 trillion at the endof the week. Year to date US ETPs AUM have increased $25 bn or 2.5%.
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Source: Deutsche Bank Global Equity Index & ETF Research
SEC Proposes First in Series of Rule Amendments to Remove References to Credit Ratings
February 9, 2011-- The Securities and Exchange Commission today voted unanimously to propose amendments to its rules that would remove credit ratings as one of the conditions for companies seeking to use short-form registration when registering securities for public sale.
Section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires federal agencies to review how existing regulations rely on credit ratings and remove such references from their rules as appropriate.
This marks the first in a series of upcoming SEC proposals in accordance with Dodd-Frank to remove references to credit ratings contained within existing Commission rules and replace them with alternative criteria.
“Over-reliance on credit ratings has been one of the factors cited as contributing to the financial crisis,” said SEC Chairman Mary L. Schapiro. “I look forward to hearing from companies that are currently eligible for short-form registration as to whether there are alternative criteria that would preserve their eligibility.”
The SEC’s proposal focuses on the use of credit ratings as a condition of so-called “short-form” eligibility. Companies that are “short-form eligible” also are allowed to register securities “on the shelf.” Shelf registration provides companies considerable flexibility in deciding when to access the public securities markets.
The SEC’s proposed rule amendments would remove the NRSRO investment grade ratings condition included in SEC forms S-3 and F-3 for offerings of non-convertible securities, such as debt securities. And instead of ratings, the new short-form test for shelf-offering eligibility of companies would be tied to the amount of debt and other non-convertible securities they have sold in the past three years
Public comments on the SEC’s proposal should be submitted by March 28, 2011.
view proposed rule-SECURITY RATINGS
Source: SEC.gov
