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US Institutional Equity Trading 2010—2011: Outflows, Outrage, and Balance
January 6, 2011--Executive Summary
US equity managers witnessed a challenging market environment in 2010 that once again impacted long term performance and reduced investor confidence. Focused attention on high-frequency trading, market structure challenges, and lower fee investment alternatives all contributed to new concerns. Looking back, it is fair to say the 2010 equity markets will be remembered unfavorably.
Specifically, 2010 will be remembered as the “Year of the Flash Crash”. Data shows the months of May and June were the most active due to higher volatility and increased selling pressures. Preventing another major market disruption is important to restoring confidence, but is not the only action being taken. New investments into front office capability are being made to address markets that are more complex, increasingly fragmented, and much faster.
A number of buy-side firms are spending more time and money on figuring out new ways to remove trading inefficiencies. They are looking for new ways to improve electronic trading capabilities and leveraging existing relationships to increase their opportunity for receiving best execution. Although there are some that feel they have reached a point of automation saturation, the majority of the buy side will be careful about investing any additional money into equity trading desks until conditions improve or volatility picks up again.
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Source: TABB Group
Brazil launches fresh currency controls
January 6, 2011--The Brazilian real fell sharply after the country launched a fresh attempt to rein in gains in its currency by imposing reserve requirements on domestic banks’ foreign exchange positions.
Brazil’s central bank said it would act to discourage short positions in US dollars against the real in a bid to curb speculative trading, which has pushed up the value of its currency in recent months.
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Source: FT.com
SEI Expands Middle-office Services with Enhanced Pricing and Valuation Capabilities
Independent Validation Meets Demand for Increased Accuracy and Transparency
January 6, 2011--
SEI today announced that it has extended its array of middle-office services by enhancing its asset pricing and valuation validation solution for investment managers. The solution, which leverages the independent valuation and pricing models of industry-leading third-party pricing providers, is designed to provide managers with more accurate and independent pricing verification.
The solution is the latest in a series of developments by SEI to help managers address the challenges they are facing in valuing their investments due to rapid changes in liquidity and volatility in global securities markets, while meeting the growing investor demands for conflict-free transparency in a climate of increasing global regulatory and investor scrutiny.
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Source: SEI Investments Company
Global X launches first aluminium ETF
January 5, 2011--Global X Funds, the New York based provider of exchange traded funds, today launched the Global X Aluminum ETF (Ticker: ALUM). The launch is the latest expansion in the ETF issuer’s global commodity producer funds and is the first ETF globally focused on aluminum.
Aluminum is one of the most heavily consumed metals in the world, its malleable and corrosion-resistant properties make it important for applications in energy, industrials, and consumer goods. In the last decade, the demand for aluminum has grown 38% compared to 20% for other metals, according to Bloomberg.
“We are pleased to offer the Aluminum ETF, which follows in the footsteps of our other highly successful industrial metal ETF, the Global X Copper Miners ETF (Ticker: COPX),” says Bruno del Ama, CEO of Global X Funds. “Aluminum has seen tremendous price increases as a result of increased global demand, especially from China and India. Its invaluable properties to various industries make it essential for future economic growth.”
The Global X Aluminum ETF tracks the Solactive Global Aluminum Index, which is designed to track the performance of the largest and most liquid companies globally active in some aspect of the aluminum industry. As of December 13, 2010, the three largest components of the index were Rio Tinto plc, Alcoa, Inc. and Norsk Hydro ASA.
Source: Global X Funds
CFTC.gov Financial Data for Futures Commission Merchants Update
January 5, 2011---Selected FCM financial data as of November 30, 2010 (from reports filed by December 31, 2010) are now available.
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Source: CFTC.gov
NSX Releases Expanded Year-End 2010 ETF/ETN Data Reports Showing Growth of ETF Market Over Past 5 Years:Assets Under Management (AUM) Top $1 Trillion
January 5, 2011--Highlights from the Year-End December 2010 report include:
AUM surpassed $1 trillion for the first time, an increase of approximately 28% over December 2009 month-end when assets totaled $790.9 billion.
December 2010 net cash flows totaled $19 billion, and 2010 net cash inflows totaled $119 billion, marking the fourth consecutive year of cash flows in excess of $100 billion.
ETF/ETN Share Volume averaged 1.46 billion shares per day.
ETF/ETN Notional Trading Volume totaled $18.2 trillion, representing 29% of all U.S. equity trading volume.
145 U.S. listed products have surpassed $1 billion in AUM and over 500 ETFs have surpassed $100 million in AUM.
At the end of December 2010, there were 1099 listed products, nearly a five-fold increase compared to December 2005, when the number of listed products totaled 221.
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Source: National Stock Exchange, Inc. (NSX®)
Van Eck Global Renames ETF to Market Vectors® Uranium+Nuclear Energy ETF
January 5, 2011--Van Eck Global has changed the name of its nuclear energy exchange-traded fund (ETF). The new name, Market Vectors Uranium+Nuclear Energy ETF, was selected to communicate to investors the relative weight of the uranium mining sub-sector among the seven nuclear energy sub-sectors represented in the DAXglobal® Nuclear Energy Index (the “Index”). The Fund’s ticker symbol, NLR, remains unchanged.
Launched in August 2007, NLR seeks to replicate, before fees and expenses, the price and yield performance of the Index. In addition to companies engaged in uranium mining, the Fund offers exposure to companies involved with uranium enrichment, uranium storage, equipment for nuclear energy generation, nuclear plant infrastructure, nuclear fuel transportation and nuclear energy generation. Uranium mining is the largest of these seven sectors, accounting for approximately 39% of NLR’s total market capitalization as of December 31, 2010. The balance of the Fund is diversified across the remaining six nuclear energy sub-sectors.
As of December 31, 2010, NLR had assets of $260MM, making it the largest nuclear energy ETF available to investors. Its gross expense ratio is 0.66 percent; its net expense ratio 0.62 percent.
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Source: Van Eck Global
WisdomTree Launches Industry’s First Managed Futures Strategy ETF
WisdomTree Managed Futures Strategy Fund (WDTI) Provides Exposure to Commodities, Currencies and Interest Rates through Long/Short Quantitative Strategy
Established strategy now available in ETF structure, another Industry first from WisdomTree
January 5, 2011--WisdomTree (Pink Sheets: WSDT), an exchange-traded fund (“ETF”) sponsor and asset manager, announced today the launch of the WisdomTree Managed Futures Strategy Fund (WDTI). WDTI is an actively managed ETF which employs a quantitative, rules-based strategy designed to provide returns that correspond to the performance of the Diversified Trends IndicatorTM. WDTI is listed on the NYSE Arca with an expense ratio of 0.95%.
WisdomTree President & COO Bruce Lavine commented, “WisdomTree is very excited to bring the first managed futures strategy ETF to the marketplace. Managed futures has been an increasingly important asset class as investors look for less correlated assets that can profit in many different market environments. We believe WisdomTree is adding substantial investor benefits by utilizing the ETF structure which provides full transparency of holdings, liquidity and relatively low cost – without the various limitations generally associated with traditional product structures such as sales loads, minimum investments and K-1 statements*.” (Ordinary brokerage commissions apply.)
The Diversified Trends Indicator or the DTI Index is a long/short rules-based, managed futures strategy developed by Alpha Financial Technologies (AFT) and its founder, Victor Sperandeo (“Trader Vic”). The DTI Index began live calculation in 2004 and incorporates a diversified group of 24 liquid components of exchange-traded commodity and financial futures contracts. WisdomTree’s new ETF, WDTI, is designed to provide returns that correspond to the performance of the DTI Index. WDTI seeks to provide:
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Source: WisdomTree
ELX Sets New Volume Record in US Treasury Futures with Over 100,000 Total Contracts Traded
January 5, 2011--ELX Futures, L.P. (ELX), a leading electronic futures exchange, announced today that it has established a new single-day total volume record for U.S. Treasury futures contracts with over 100K contracts traded on January 5, 2011.
The 30-year Treasury bond also set a new record with over 21K contracts traded. ELX’s end-of-day electronic market share exceeded 12% in the two-year Treasury futures contract and 5.5% in the 30-year Treasury bond. Overall market share was 4% at the end of the trading day.
These new records follow a solid 2010 year-end performance that showed a 14% jump in average daily volume (ADV) in U.S. Treasury futures contracts year-over-year and several record-breaking milestones in ELX’s Eurodollar futures contract, including a 38% increase in ADV per month since its launch in June 2010.
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Source: ELX Futures
CBOE To Apply VIX Methodology To Individual Equity Options
January 5, 2011--The Chicago Board Options Exchange (CBOE) today announced that for the first time it will apply its CBOE Volatility Index® (VIX®) methodology to options on individual stocks when it begins publishing volatility values on five highly active equities on Friday, January 7. CBOE will calculate values for Apple (ticker symbol: VXAPL), Amazon (ticker symbol: VXAZN), IBM (ticker symbol: VXIBM), Google (ticker symbol: VXGOG), and Goldman Sachs (ticker symbol:
VXGS).
The new benchmarks are designed to measure the expected volatility of the respective individual equities.
CBOE may expand the list of individual equities on which volatility values would be calculated in the future, depending on demand.
"As the leader in the volatility space, CBOE looks forward to expanding its suite of volatility benchmarks to individual equities, giving both personal and institutional investors the ability to track individual stock volatility for the first time," CBOE Chairman and CEO William Brodsky said. "CBOE has been extremely successful in developing highly-acclaimed volatility measures linked to stock indexes and to other asset classes including gold and oil. Applying our methodology to individual equity options is the next logical next step."
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Source: CBOE
