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Opening Statement, Public Meeting on Proposed Rules Under Dodd-Frank Act Commissioner
Michael V. Dunn
October 26, 2010--Today we consider the next set of proposed rules that come before the Commission pursuant to the Dodd-Frank Act. As with other proposed rules, today’s set of rules offers a glimpse into the resource intensive re-engineering the CFTC will be going through to provide the regulatory framework to implement the many new responsibilities under Dodd-Frank.
As I have previously stated, I am very concerned about the CFTC’s budget situation and possible attempts to thwart implementation of Dodd-Frank by cutting off funding for this agency. Without the requisite level of funding, I see the possibility of several unfortunate outcomes coming to fruition:
First, without the necessary human capital to review new SEF, DCM and DCO applications, I can envision long waiting periods for potential registrants before their applications are approved to conduct business in the markets we regulate. This inability to quickly and efficiently process applications, through no fault of the CFTC, would undoubtedly prevent the immediate creation of a competitive market environment, at least in the OTC space, and may lead to greater systemic risk as positions become concentrated in the small group of SEFs, DCMs and DCOs that are the first to navigate the registration process.
Similarly, the lack of adequate resources would undoubtedly affect the agency’s ability to approve new products for trading. If the CFTC does not have the people to review new product applications to ensure that they are not violative of the act and are not readily susceptible to manipulation, the new products cannot be listed for trading. Again, I fear that a long queue will develop for new products waiting approval, and that the inability to get new products approved will prevent innovation and competition in our markets.
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Source: CFTC.gov
Opening Statement, Meeting of the Commodity Futures Trading Commission
Chairman Gary Gensler
October 26, 2010--Good morning. This meeting will come to order. This is a public meeting of the Commodity Futures Trading Commission to consider issuance of the following proposed rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:
Certification and approval of rules and new products for designated contract markets, derivatives clearing organizations, swap execution facilities and swap data repositories;
Removing any reliance on credit ratings in Commission regulations;
Amending CFTC Regulations 1.25 and 30.7 to provide greater protections for customer funds held by futures commission merchants (FCMs) and derivatives clearing organizations;
Process review and the designation of swaps for mandatory clearing;
Enhancing the Commission’s ability to protect against manipulation; and An advance notice of proposed rulemaking on disruptive trading practices.
Before we hear from the staff, I’d like to thank my fellow Commissioners for all their hard work on the Dodd-Frank Act and all of our existing authorities. I’d also like to welcome members of the public, market participants and members of the media to today’s meeting, as well as welcome those listening to the meeting on the phone or watching the live webcast.
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Source: CFTC.gov
Fundamentals: Hope is Not a Strategy
October 26, 2010--The asset management business involves its fair share of travel. Mechanical delays, cancelled
flights, inclement weather, hotel
overbookings, and traffic snarls are
just a few of the many things that can
get in the way of getting to a meeting
on time. But every once in a while,
we get lucky—security is a breeze,
the flight arrives 20 minutes early,
there’s no line at the cab stand, traffic is nonexistent, and the hotel gives us a free upgrade. These rare instances are a blessed welcome.
Of course, it is not prudent to
rely on good fortune, planning our
itinerary on the basis of everything
going right. Suppose we’re planning
a very important trip—one that will
determine the financial well being
of our company and our employees,
not just for the next few years but the
decades ahead. Most of us would be
ultra-conservative in building our
itineraries, with contingency plans
for anything that might go wrong.
We’d arrive not just the night before,
but the morning before.
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Source: Research Affiliates, llc
Exchange-Traded Funds: Strong ETF Net Cash Inflows of $32.6 Billion in the Third Quarter-Morgan Stanley
October 26, 2010--Strong ETF Net Cash
Inflows of $32.6 Billion in the Third Quarter
There were 53 new ETFs listed in the US during the third quarter of 2010. Two additional ETFs have been listed since the end of Q3, bringing total issuance this year to 155. However, 37 ETFs have
been closed, resulting in net new issuance of 118.
As of October 21, 2010, there were 33 issuers with 955 ETFs listed in the US
Inflows into US-listed ETFs were $32.6 billion during the third quarter of 2010. This represents continued strength from the second quarter in which
US-listed ETF net cash inflows totaled $32.1 billion. In addition, the $32.6 billion in net inflows is well
above the average quarterly net cash inflows of $25.6 billion over the past six years.
The largest net cash inflows went into ETFs tracking emerging market equity and fixed income. These asset classes had net cash inflows of $14.4 billion and $9.9 billion, respectively, in the third quarter of 2010. For the first three quarters of the year, emerging market and fixed income ETFs have had net cash inflows of $19.8 billion and $29.9 billion.
US ETF industry assets of $922 billion are 18% higher than their level at the end of 2009. Despite the growth of the ETF market, it remains concentrated with three providers and 20 ETFs accounting for roughly 80% and almost 50% of industry assets, respectively.
request report
Source: ETF Research-Morgan Stanley
BM&FBOVESPA prepares the launch of a market maker program for the stock options segment
October 25, 2010--BM&FBOVESPA is preparing a launch for the coming months of a market maker program for stock options. The Brazilian Exchange obtained global leadership in stock option contracts trading in September, for the second consecutive month, according to data from the World Federation of Exchanges (WFE).
In September there were 72.2 million stock option contracts traded on BM&FBOVESPA. In second and third place respectively came the Chicago Board Options Exchange (CBOE) at 58.4 million contracts and the International Securities Exchange at 53.7 million contracts.
The Exchange’s market maker program for options seeks to raise liquidity in the Bovespa segment’s options market and will come in two phases. The first phase will be for Ibovespa index options. The second phase will be for the ten largest caps, barring Petrobras and Vale which are considered the most liquid shares in the world. According to the current Ibovespa portfolio, for August to December, the ten largest caps in the index are: BM&FBOVESPA (BVMF3), Itauunibanco (ITUB4), OGX Petróleo (OGXP3), Gerdau (GGBR4), Bradesco (BBDC4), Usiminas (USIM5), PDG Realty (PDGR3), Banco do Brasil (BBAS3), Companhia Siderúrgica Nacional (CSNA3) and Itausa (ITSA4). BM&FBOVESPA is still studying the criteria selecting market makers.
Source: BM&FBOVESPA
DBX ETF Trust had filed with the SEC
October 25, 2010--DBX ETF TRUST
has filed registration statement with the SEC for
DBX MSCI EMERGING MARKETS CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XEMG
DBX MSCI EAFE CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XEAF
DBX MSCI BRAZIL CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XBRZ
DBX MSCI CANADA CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XCAN
DBX MSCI JAPAN CURRENCY-HEDGED EQUITY FUND
NYSE Arca, Inc.: XJPN
view filing
Source: SEC.gov
Emerging Markets Week in Review-10/18/2010 - 10/22/2010
October 25, 2010--The Dow Jones Emerging Markets Sector Titans Composite Index fell 1.22% last week. Technology, Consumer, and Health Care, the three best performing sectors this year, were the only positive groups for the week.
Utilities and Materials were the worst performers, down 3.18% and 2.89% respectively. Since reaching low on May 25, the Dow Jones Emerging Markets Composite index is up over 28%, led by the Consumer sector which as increased over 44% over that time.
view the report
Source: Emerging Global Advisors
DB Global Equity Index & ETF Research: US ETP Market Weekly Review: Equity Market Marches On
October 25, 2010--Cash Flow Review
The US equity market continued its September’s winning streak into the first half of October, with the S&P 500 up by 1.0% last week and 3.1% month to date. Similarly, Gold recorded a 1.91% increment for the last week and 4.6% for the first half of the month. US ETPs flows have been consistent with the rally and have contributed with $6.1 bn and $5.4 bn of fresh money during the last and the previous week, respectively.
Our figures suggest that investors are recovering interest in the equity market in an attempt to leverage their returns. Equity ETPs received $5.1 bn in new money vs $5.6 bn in the previous week.
As the risk/reward profiles of developed and emerging markets have moved closer, both Large Cap and Emerging Markets ETFs have become the two main drivers of the equity inflows surge, last week they recorded new flows of $2.2 bn and $1.8 bn, respectively.
With Fixed Income returns being squeezed by historical low rates and further concerns regarding the implications of a possible second round of quantitative easing, investors keep shifting positions towards sources of higher return. Fixed Income ETPs recorded $135 m outflows, mainly driven by an exodus from Sovereign ETFs (-$235 m). Nevertheless, other sectors such as Corporate ($83 m) and Sub-Sovereign ($110 m) ETFs still appeal to investors and have received positive flows consistently during the previous weeks.
Commodities received healthy inflows of $897 m last week, with Gold receiving inflows of $655 m vs $511m outflows during the previous week.
New Launch Calendar
There was one new listing in the first half of October. Van Eck Funds listed a China A-Shares focused ETF in the NYSE Arca. This fund (PEK) is the first of its kind in the US and, unlike other ETFs which track the China H-Shares market (Hong Kong listed), PEK will offer access to a broader Chinese market investing in stocks listed in mainland China exchanges.
On October 6th, Old Mutual Global Shares Trust liquidated all of their five US listed ETFs alluding that due to the US market condition, it was unlikely that their products would gain sufficient market share. The tickers of the funds were: GSW, GSR, GSZ, GSO and GSD. At the time of liquidation the combined AUM of these funds were almost $100 m.
Turnover
Overall, Avg. Daily Turnover increased by 4.1% and totaled $64 bn at the end of the week. Within the asset class level, Equity ETPs recorded an increased of $2.2 bn or 3.9%, while Commodity and Currency ETPs recorded a relatively significant weekly increase of 8.5% and 11.6%, respectively.
Assets Under Management (AUM)
US ETPs AUM rose by 1.8% reaching its higher level YTD, totaling $929 bn at the end of last week. This growth has been fueled by a rally in the equity and gold markets, accompanied by strong inflows - especially into the equity emerging markets.
To request a copy of the report
Source: Deutsche Bank Global Equity Index & ETF Research
TD Ameritrade Survey: ETFs Might Be Just What Investors are Looking for, Despite Current Lack of Understanding
While many investors seek the potential flexibility ETFs offer, the learning curve is holding them back
October 25, 2010--Nearly 20 years after they were first introduced, Exchange Traded Funds (ETFs) can still be considered unfamiliar territory for many investors, according to a new survey released by TD Ameritrade Holding Corporation. Just 34 percent of investors surveyed have heard of ETFs, fewer (25 percent) have a basic understanding of the product, and only 15 percent own ETFs in their portfolios.
But despite the lack of awareness, some ETFs may fit what these investors are looking for, according to the study. When asked about their most important requirements when choosing an investment product, the ability to reduce risk through diversification was ranked the number one feature among the nearly 40 percent of investors who said they are undecided about investing in ETFs. These investors also included lower expenses and fees and ability to trade commission-free in their top-five requirements.
While some investors may just be starting to dip their toes in the ETF pool, the results of educating self-directed investors about ETFs are clear. According to a similar survey among TD Ameritrade clients, 76 percent have heard of or owned ETFs and half (49 percent) have a better understanding of ETFs today compared to one year ago. Additionally, the survey reports that ETFs are being used more frequently in retirement accounts among TD Ameritrade clients, and usage has increased steadily by nearly 60 percent since early 2007.
This understanding was the impetus for TD Ameritrade's recent unveiling of a new ETF Market Center, which includes a list of over 100 commission-free ETFs -- from a variety of well-known providers-- that have been evaluated and selected by independent experts at Morningstar Associates, LLC, a registered investment advisor and unit of Morningstar, as well as easy-to-use tools and information to help long-term investors build better-diversified portfolios more cost-effectively.
"ETFs may fulfill many of the stated needs that investors have told us are important to them," said Mike McGrath, director of ETFs, TD Ameritrade. "It's a matter of awareness, education and simplifying the selection process. We are committed to helping investors create cost-effective, diversified long-term portfolios, and the more investors know and understand what options are available to them, the more confident they'll be in their decision-making. ETFs are still a relatively new asset class, and as awareness continues to increase, we believe the popularity of ETFs will increase as well."
For investors looking for more information on ETFs or other investments, TD Ameritrade has also made public a free series of online resources including an in-depth ETF Webinar aimed at helping investors explore the basics of ETFs and the potential they may have in their own portfolios.
Source: TD Ameritrade
AdvisorShares Set to Launch the Cambria Global Tactical ETF
GTAA Takes a Quantitative Approach to Global Tactical Asset Allocation
October 25, 2010--AdvisorShares Investments, LLC, an innovator of actively managed Exchange Traded Funds (ETFs), today announced that it will begin trading in the Cambria Global Tactical ETF tomorrow, October 26th. GTAA is sub-advised by Cambria Investment Management, Inc., a Los Angeles, California-based investment manager.
Cambria will invest in underlying ETFs spanning all the major world asset classes including equities, bonds, real estate, commodities, and currencies. The Fund will utilize a quantitative approach with strict risk management controls to actively manage GTAA's portfolio in an attempt to control downside losses and protect capital. GTAA will do this by following a trend-based model utilizing multiple asset classes and will either be invested or will get defensive by going into cash for a particular asset class. The wide diversification coupled with prudent portfolio management may allow for the Fund to perform well across a full business cycle.
Noah Hamman, CEO and Founder of AdvisorShares, said, "Cambria has done an outstanding job developing research and education related to a GTAA strategy via their popular white paper, 'A Quantitative Approach to Tactical Asset Allocation,' and their recent book, 'The Ivy Portfolio.' We are very excited to be able to offer this risk-managing strategy to investors in an actively managed ETF."
Mebane Faber, Chief Investment Officer of Cambria Investment Management, said, "We are very excited to launch GTAA as we believe that investors need to be more proactive in managing their risk. Investors will appreciate the fact that we make no effort to forecast future market trends or direction, but rather attempt to capture profits in these trends when and where they develop."
Source: AdvisorShares