Americas ETP News
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Opening Statement, Public Meeting on Proposed Rules Under Dodd-Frank Act
Commissioner Michael V. Dunn
December 9, 2010--Thank you all for joining us today for this important meeting regarding the implementation of the Dodd-Frank Act. Today’s meeting will address proposed rules regarding:
Business conduct standards for swap dealers and major swap participants with counterparties;
End-user exception to mandatory clearing of swaps; and
Governance requirements for DCOs, DCMs and SEFs.
The business conduct standards for swap dealers and major swaps participants is of particular interest to me, because I believe that strong standards for swap dealers and MSPs are necessary to prevent another financial crisis. By implementing strong business conduct standards, the Commission can establish meaningful protections for counterparties and hopefully prevent the types of behavior that necessitated the passage of Dodd-Frank.
An inherent conflict of interest exists when a swap dealer acts as both an advisor and counterparty to its customers. The business conduct standards proposed today provide meaningful protections to counterparties, and I support them, but I believe more can be done. I am particularly interested in public comment on this rulemaking, specifically whether the proposed rules go far enough in protecting counterparties.
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Source: CFTC.gov
Opening Statement, Seventh Series of Proposed Rulemakings Under the Dodd-Frank Act
Commissioner Scott O’Malia
December 9, 2010--The holidays are right around the corner, and as many of you know, I have three daughters, and therefore, three wish lists. My youngest daughter, Macey, spent the weekend scouring the various catalogs that haven’t made it to the recycling bin in search of the perfect gift to top her list. And you know what she came up with? A towel warming rack. She had no idea why she wanted it, but it was in the catalogue, and thus had equal opportunity with a lot of other items to make it to the list.
I didn’t think much of the towel rack until I read today’s proposal relating to swap execution facilities (“SEFs”), namely, the parts that aim to further define what a SEF is. And I thought to myself that this SEF rule is very similar to the towel rack episode: no reason, just because.
I’m not buying a seven year-old a towel warming rack, and I’m not supporting this proposed rulemaking today
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Source: CFTC.gov
CFTC to Hold Open Meeting on Eighth Series of Proposed Rules under the Dodd-Frank Act
December 9, 2010-- The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Thursday, December 16, 2010, at 9:30 a.m. to consider the issuance of proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act on the following topics:
Position limits for physical commodity derivatives;
Confirmation, portfolio reconciliation and portfolio compression requirements for swap dealers and major swap participants;
Risk management requirements for derivatives clearing organization; and
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Source: CFTC.gov
DB Global Equity Index & ETF Research : US ETP Market Weekly Review: ETP assets reach record high driven by equity market rally
December 9, 2010--Market Review
Last week began with bearish flavor as global economic issues kept weighing the equity markets down. However after positive jobs and economic related data released in the US, and the European Central Bank delaying its withdrawal of emergency liquidity measures by purchasing more government bonds, the markets were able to recover the lost ground towards the second half of the week ending on positive territory. The S&P 500 was up by 2.97%, the MSCI World increased by 3.04% and the MSCI EM rose by 3.77%. At the same time, Gold price in USD was up by 3.69% and the USD depreciated 1.3% against the EUR. Total US ETP flows experienced meager inflows of $0.3 bn vs $4.1 bn inflows the previous week. The weekly average ETP flows stands at $2.2 bn year to date. US ETPs AUM reached an all-time high of $969 bn.
Equity ETP flows: Investors look for sector edge over diversification
Equity ETPs recorded $1.1 bn in outflows vs $4.5 bn in inflows in the previous week. Inflows received in the last two days of the week were not enough to offset the flight that preceded the end of the week pick up. Within Long Equity ETPs, US-focused products saw $2.4 bn being swept from their accounts, while EM and Other Developed countries/regions ETPs received inflows of $805 mm and $632 mm, respectively .
The previous week’s flight into Mid and Small Cap was reverted ($2.7 bn outflows) last week as these segments’ returns realigned with the Large cap segment’s return, the S&P MidCap 400 and the S&P SmallCap 600 returned 3.18% and 3.06% for the week, respectively.
The inflow highlight of the week came from Sector ETPs, which totaled $2.3 bn in new money, out of which most went into the Energy ($1.4 bn) and Materials ($0.7 bn) sectors
For more insights on equity ETP flows see our special commentary titled: “The SPY December Effect” on Page 4.
Fixed Income ETP flows show some sparks of life
After a couple of weeks of being either looked down or forgotten, Fixed Income ETPs recaptured the attention of investors, which poured in $542 mm of fresh cash vs almost-flat $22 mm inflows in the previous week, for a total of $35 bn year to date. Corporates led the inflows with $293 mm, followed by Sovereign with $177 mm.
Commodity ETP: Precious Metals (PM) rule, but are we talking about the same PM?
Commodity ETPs helped to keep the US ETP flows on positive ground contributing with $961 mm in inflows vs $205 mm outflows in the previous week. Precious Metals (PM) products dominated the inflows with $960 mm, while Crude Oil products stood alone on the negative-flows side of the field with $156 mm outflows.
A closer look at the flows into PM sub sectors reveals new dynamics within this sector. Until Q3 PM used to be mostly gold, both in terms of AUM and flows activity, however since the end of Q3 we have seen growing interest into the white (ex gold) sectors within the PM range. Figure 3 shows the AUM market share breakdown for PM products as of the end of Q3 vs last week, at the end of Q3 Gold dominated with 87.4% of the assets, however in about 2 months it has lost 4.6% of market share towards the rest of the PM products, mainly Silver. A look at the flows market share during Q4 so far, provides additional information regarding the dynamics shift within the PM sector, Figure 4. During the first two months of the current quarter, Silver ETPs have received almost 70% of the net flows coming into PM products, while Gold has been distantly competing for a second place with other relatively new PM products such as Platinum and Palladium.
New Launch Calendar
After a couple of very quiet weeks, the US ETP launch calendar is back in full. Last week there were 7 new ETPs launched in NYSE Arca by 4 different providers. The products include Equity sector, physical commodity baskets, inflation-linked Treasuries and Active Fixed Income products.
AdvisorShares launched a fund employing an active strategy to profit from High Yield debt securities. PowerShares came out with a range of four financial equity ETFs aiming to replicate different sub sector allocation returns including income generation, international companies, and insurance business. BlackRock unveiled a Fixed Income ETF tracking short and mid term inflation-linked Treasuries. Last but not least, ETF Securities Ltd launched the first “white” physical metals basket, which offers exposure to precious metals ex-Gold (Silver, Palladium and Platinum). See Figure 16 on page 8 for further details.
Turnover Review
US ETP Avg. Daily Turnover picked up during last week, rising 5.2% and totaling $65 bn at the end of the week. Equity ETPs registered the largest absolute increase with $2.9 bn or 5.1% week over week.
Assets Under Management (AUM) Review
Although flows were almost flat, the market momentum was enough to add $26 bn to the US ETPs AUM. Assets for US products rose by 2.7%, reaching an all-time high of $969 bn at the end of the week. Year to date US ETPs AUM has increased $188 bn or 24.0%.
To request a copy of the report
Source: Deutsche Bank Global Equity Index & ETF Research
Russell survey: 59% of financial advisors optimistic about capital markets, but only 7% believe clients share their outlook
Disparate views underscore challenge in getting clients to move off the sidelines, into the market and on track to a more secure retirement
December 8, 2010--Financial advisors appear to be significantly more optimistic about the capital markets than their clients.
According to the Financial Professional Outlook (FPO), a quarterly survey of U.S. financial advisors by Russell Investments, only 7% of advisors believe their clients are optimistic about the capital markets over the next three years. This assessment is in stark contrast with the advisors' own outlook — 59% of advisors are optimistic over that same period of time.
Commenting on the findings, Phill Rogerson, managing director, consulting services for Russell's Private Client Services business, said: "Advisors know that the global financial crisis has left many of their clients fatigued, jaded and distrustful. That skepticism means advisors must now work harder to rebuild their clients' trust in the capital markets. That trust is of paramount importance because most individual investors will almost certainly fail to achieve financial security in retirement unless they choose to engage in a sensible savings and investment plan."
Advisors believe that their clients' lack of confidence in the markets has also become a major concern as their clients consider whether they will be able to achieve their financial goals. Seventy-eight percent (78%) of financial advisors responding to the latest survey say that clients see economic uncertainty (slow economic growth) as an impediment to reaching their financial goals. Sixty-one percent (61%) think that market volatility concerns their clients.
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Source: Russell Investments
Testimony of Chairman Gary Gensler, before the Senate Committee on Banking, Housing, and Urban Affairs, Subcommittee on Securities, Insurance, and Investment and Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on Inv
December 8, 2010--Good afternoon Chairman Reed, Chairman Levin, Ranking Member Bunning, Ranking Member Coburn and members of the Subcommittee on Securities, Insurance, and Investment and the Permanent Subcommittee on Investigations. I thank you for inviting me to today’s hearing. I am pleased to testify alongside Securities and Exchange Commission (SEC) Chairman Mary Schapiro. This is our seventh time testifying together, and our third on issues related to the May 6 market events.
Since we last testified before the Subcommittee, staff from the Commodity Futures Trading Commission (CFTC) and SEC released a supplemental report on October 1 on the unusual market events of May 6, 2010. As outlined in the joint staff report, there were three chapters of the May 6 market events:
very fragile and uncertain markets due in part to the unsettling news concerning the European debt crisis;
a liquidity crisis in the E-Mini S&P 500 futures contracts (E-Mini) and related index securities; and
a liquidity crisis in individual securities.
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Source: CFTC.gov
Claymore files with the SEC
December 8, 2010--Claymore has filed a post-effective amendment, registration statement with the SEC for
Guggenheim Enhanced Short Duration High Yield Bond ETF.
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Source: SEC.gov
Direxion Adds Two Leveraged ETFs
New Funds Offer Leveraged Long and Short Exposure to the Gold Mining Industry
December 8, 2010--Direxion, a pioneer in providing alternative investment strategies to sophisticated investors, announced today the launch of two new Direxion Daily Shares 2x ETFs to its existing line up of multi-directional, leveraged funds. The new ETFs are leveraged Bull and Bear funds that seek 200% of the daily performance, or 200% of the inverse of the daily performance (before fees and expenses), of the NYSE Arca Gold Miners Index (“Index”).
The Index is a comprised of publicly traded companies that operate globally in both developed and emerging markets, and are involved primarily in the mining of gold and silver.
“Direxion’s leveraged ETFs are extremely athletic investment tools designed to provide sophisticated investors with a vehicle to take advantage of short-term market opportunities,” said Direxion President Dan O’Neill. “By providing exposure to select markets on the long and short side, we help investors hedge positions and respond to cyclical pricing movement as part of their overall active investment strategies. Gold mining stocks are essentially a play on gold and the stock market. Investors trade the miners instead of the metal because, as the price of gold goes up, miners' higher profit margins can boost earnings exponentially, and vice versa. Of course, traders have to get the direction right, but the Direxion ETFs provide a way to for investors to seek competitive returns in rising and falling markets.”
The new funds, and all Direxion Shares ETFs, are intended for use only by sophisticated investors who understand the risks associated with seeking daily leveraged investment results and plan to actively monitor and manage their positions in the funds. There is no guarantee that the funds will achieve their objective.
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Source: Direxion
Direxion Launches Airline Shares ETF
December 8, 2010--Direxion, a pioneer in providing alternative investment strategies to sophisticated investors, is pleased to announce the launch of the Direxion Airline Shares ETF (FLYX). This is Direxion’s first non-leveraged ETF, and is designed to seek investment results, before fees and expenses, of the price performance of the NYSE Arca Airline Index (“Index”). The Index is designed to measure the performance of highly capitalized and liquid U.S. and international passenger airline companies listed on developing and emerging global market exchanges.
“Direxion is focused on continually developing new investment tools that provide sophisticated investors with direct exposure to a multitude of sectors. We’re very pleased to offer our first non-leveraged ETF for the passenger airline space, which reflects our commitment to meeting market demands in a variety of forms,” said Direxion President Dan O’Neill. “As the passenger airline space experiences increased trading volume, this new ETF provides direct access for investors looking to execute institutional-style strategies within this market. With exposure to only one European airline and no exposure to Asian airlines, FLYX offers investors cost-efficient, focused access to some of the most actively traded airline stocks in the Americas, so they can take a more surgical portfolio position.”
The fund is different from the other Direxion Shares ETFs in that it does not seek a daily magnified goal. This makes it a more suitable investment to be bought and held without being exposed to daily compounding and other risks associated with leveraged ETFs. There is no guarantee that the fund will achieve its objective.
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Source: Direxion
BlackRock Announces Further Refinement to iShares Gold Trust
December 8, 2010--BlackRock, Inc. (NYSE: BLK) today announced that the iShares Exchange Traded Funds (ETFs) business, the world's largest ETF manager, has completed the final stage of planned refinements to the iShares Gold Trust (NYSE Arca: IAU). With this final refinement, IAU will begin daily valuation of the Trust's gold using the London PM Fix Price, which is a widely followed and recognized benchmark for the price of gold.
"This change marks the conclusion of our planned refinements to the iShares Gold Trust," said Noel Archard, Head of US iShares Product at BlackRock. "The IAU refinements we've undertaken during the past six months position our gold ETF as an instrument of choice in gold investing, and in response to investor feedback, focuses specifically on addressing key risk factors around gold custody, inspection and allocation."
During the six months ended November 30, 2010, IAU has seen an 84% increase in trading volume. "We believe that investors are applying rigorous standards in evaluating commodity ETFs and that standard is based on quality of exposure," said Archard. "We are very pleased with the recent flows into IAU and believe they represent sound due diligence during the ETF selection process."
Source: BlackRock
