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SEC Approves New Rules Prohibiting Market Maker Stub Quotes
November 8, 2010--The Securities and Exchange Commission approved new rules proposed by the exchanges and FINRA to strengthen the minimum quoting standards for market makers and effectively prohibit "stub quotes" in the U.S. equity markets.
A stub quote is an offer to buy or sell a stock at a price so far away from the prevailing market that it is not intended to be executed, such as an order to buy at a penny or an offer to sell at $100,000. A market maker may enter stub quotes to nominally comply with its obligation to maintain a two-sided quotation at those times when it does not wish to actively provide liquidity. Executions against stub quotes represented a significant proportion of the trades that were executed at extreme prices on May 6, and subsequently broken.
"By prohibiting stub quotes, we are reducing the risk that trades will be executed at irrational prices, and then need to be broken, if the markets become volatile," said SEC Chairman Mary L. Schapiro. "While we continue to look at other potential obligations for market participants, this is an important step in our effort to improve the functioning of the U.S. markets, and restore investor confidence following the events of May 6."
view SEC Order Approving New Exchange and FINRA Rules
Source: SEC.gov
JP Morgan files with the SEC
November 8, 2010--JP Morgan has filed an application for exemptive relief with the SEC. The Future Funds may include one or more exchange-traded funds (“ETFs”) which invest in other investment companies and/or ETFs (“Fund of Fund ETFs”).
The Initial Fund and the Future Funds together are referred to herein as the “Funds.” Each Fund relying on the exemptive relief will operate as an actively managed ETF.
view filing
Source: SEC.gov
CDS Spreads and Default Risk
U.S. Broker-Dealers
November 8, 2010--In response to interest received from several market participants, Fitch Ratings is following up on its recent study analyzing the performance of credit default swap (CDS) spreads as indicators of default risk for U.S. sectors that incurred pronounced market volatility during the financial crisis.
More specifically, this report analyzes the CDS spread history and implied annual probability of default (PD) for the U.S. broker-dealers over the past several years.
The prior study, which focused on the North American bank, insurance, monoline insurance, real estate investment trust, and homebuilder sectors, did not address U.S. broker-dealers given their small sample size. In effect, only two out of five entities within this sector continued to operate independently after year-end 2008.
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Source: Fitch Ratings
New Report Outlines Causes of Market Distortions Choking Recovery and Preventing New Growth Companies from Going Public
Report provides recommendations for SEC to mitigate ETF dangers
November 8, 2010-- A form of indexed securities known as “exchange traded funds”—or ETFs—are distorting the markets to such an extent that they are threatening the growth of new companies by effectively curtailing their access to capital, according to a provocative new report issued today by Harold Bradley and Robert Litan of the Kauffman Foundation.
Moreover, it is these derivatives and not the phenomenon known as high-frequency trading (HFT)—commonly critiqued as contributing to the “flash crash” of May 6, 2010—that pose serious threats to market stability in the future.
Numerous factors have been pointed to as contributing to the significant downward trend in IPOs over the past decade, some of which, like the higher regulatory costs of going and remaining public under the Sarbanes Oxley Act of 2002, are widely agreed to as one of the main culprits.
But, as Bradley, Kauffman’s chief investment officer, and Litan, Kauffman’s vice president of research and policy, argue, ETFs represent a far more important and heretofore unrecognized deterrent to companies going public because they are artificially distorting stock prices and thereby dissuading new growth companies – on which the growth of our economy depends – from going public.
view report
Source: Ewing Marion Kauffman Foundation
Opening Statement, Meeting of the: Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues
Chairman Gary Gensler
November 5, 2010--Good morning. I am pleased to join Chairman Schapiro in welcoming the members of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues to our fourth public meeting. I would like to thank Chairman Schapiro, her fellow Commissioners and the staff of the SEC for all they’re doing on the review of the unusual market events that took place on May 6, 2010, as well as our strong collaboration with regard to the Dodd-Frank Act.
I also would like to thank the staff of the CFTC for all of their hard work planning this meeting, reviewing the circumstances surrounding May 6 and releasing their thorough report on the contributing factors.
I also want to recognize and thank my fellow CFTC Commissioners, Mike Dunn, Jill Sommers, Bart Chilton and Scott O’Malia.
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Source: CFTC.gov
Global X Funds Adds Uranium ETF to its Cleantech Fund Suite
November 5, 2010--Global X Funds, the New York based provider of exchange traded funds, launched today the Global X Uranium ETF (Ticker: URA). The launch is the latest expansion in the ETF issuer's cleantech commodity funds.
Uranium is seen as the clean resource alternative for electric generation. One pound of uranium can generate as much energy as 20,000 pounds of coal, and leaves behind a fraction of the carbon footprint. Almost all the uranium mined today is used to produce electricity, and that provides about 16% of the world's electricity. Since the bull market for uranium in 2006-2007, many new nuclear plant development projects have been initiated around the world. However, uranium supply is forecasted to be in deficit for every year from 2010 onward. RBC Capital Markets estimates that the price of uranium will peak at $80/lb within three years.
"The Uranium ETF, like the successful Lithium ETF launched last quarter, provides access to a commodity in the renewable energy space," says Bruno del Ama, CEO of Global X Funds. "These resources are key for the future of clean technology."
The Global X Uranium ETF tracks the Solactive Global Uranium Index, which is designed to track the performance of the largest and most liquid listed companies globally in the uranium mining industry. As of November 1, 2010 the three largest components were Cameco, Paladin Energy and Uranium One.
This launch follows the issuer's listing yesterday of the Global X Gold Explorers ETF (Ticker: GLDX), the latest addition to the fund family's global commodities suite. "We are committed to identifying novel but relevant investment themes that appeal to sophisticated investors," del Ama said.
Source: Global X Funds
BlackRock * New Report * ETF Landscape Canada Industry Review, End Q3 2010
November 5, 2010--This report is a review of the Exchange Traded Funds (ETFs) and Exchange Traded Products (ETPs) industry in Canada through the end of Q3 2010. This report for the first time includes net flows for ETFs in Canada.
Twenty years ago on 9 March 1990, the first ETF was listed in Canada on the Toronto Stock Exchange (TSX): the TIPs (Toronto 35 Index Participation Fund) tracking the TSX 35 Index. It was followed by the HIPs (Hundred Index Participation Fund) tracking the TSX 100 Index on 26 September 1995.
Ten years later, on 7 March 2000, the TIPs and HIPs ETFs were merged into the iUnits S&P/TSE Index Participation Fund (XIU CN): an ETF that was originally listed on 4 October 1999 and has since been renamed iShares CDN S&P/TSX 60 Index Fund (XIU CN).
At the end of Q3 2010, there were 153 ETFs/ETPs listed in Canada with 199 listings, assets of US$35.3 Bn from six providers on one exchange. Since the end of 1999, assets in Canadian ETFs/ETPs have increased 8,634.7%, which represents a CAGR of 51.6%.
Assets in ETFs/ETPs listed in Canada have increased by 23.7% YTD to US$35.3 Bn, which is more than the 6.4% increase in the MSCI Canada Index in US dollar terms over the same period.
Year to date, ETFs/ETPs listed in Canada have seen net inflows of US$3.1 Bn, with US$1.8 Bn of net new assets going into fixed income ETFs/ETPs and US$1.4 Bn into equity ETFs/ETPs. In 2009, ETFs/ETPs listed in Canada had net inflows of US$7.1 Bn, of which US$3.2 Bn went into ETFs/ETPs tracking equity indices.
to request report
Source: Global ETF Research & Implementation Strategy Team, BlackRock
CFTC.gov Commitments of Traders Reports Update
November 5, 2010--The CFTC.gov Commitments of Traders Reports has been updated for the week of November 2, 2010 and are now available.
view updates
Source: CFTC.gov
U.S. Department of the Treasury Economic Statistics - Monthly Data Update
November 5, 2010--The U.S. Department of the Treasury Economic Statistics - Monthly Data has been updated and is now available.
view update
Source: U.S. Department of the Treasury
Treasury Announces Build America Bonds issuances Surpass $150 Billion
Recovery Act Bonds Program Provides Infrastructure Financing to State and Local Governments, Saving Billions Compared to Tax Exempt Bonds
November 5, 2010--The U.S. Department of the Treasury today released its comprehensive monthly update on Build America Bonds issuances, including state-by-state data, showing that more than $150 billion have been issued through October 31, 2010. Build America Bond issuers benefit from substantial savings in borrowing costs when compared to issuing tax-exempt debt.
"In the beginning, Build America Bonds helped fill a critical hole in the municipal finance market left by the financial crisis. Now, Build America Bonds have now become an important source of financing to help state and local governments undertake much-needed infrastructure projects," said Alan B. Krueger, Assistant Secretary for Economic Policy and Chief Economist at the Treasury Department. "That state and local governments have now issued more than $150 billion of Build America Bonds and saved billions of dollars in financing costs in the process is a testament to their success and further evidence that the program should be extended."
Market reception for Build America Bonds has been very positive. Between the program launch on April 3, 2009 and October 31, 2010:
There have been more than $150 billion in Build America Bond issuances; Build America Bonds now constitute about 21 percent of the municipal bonds market; and
There have been a total of 1,912 separate issues of Build America Bonds by local or state governments in all 50 states, the District of Columbia and two territories.
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Source: U.S. Department of the Treasury
