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"Financial Reform, What's Next? A US and Global Perspective Examining the Opportunities and Challenges Ahead", Georgetown University
Commissioner Jill E. Sommers
October 26, 2010--Good afternoon. It is an honor to be here today to discuss the current state of regulatory reform at the Commodity Futures Trading Commission (CFTC), where I think the CFTC will be heading in the next year or so, and what I believe are some of the more difficult challenges that the CFTC and market participants will face as the Dodd-Frank Wall Street Reform and Consumer Protection Act is implemented.
But first, a little background. Commodity futures markets have existed in the U.S. since the 1800s and have been regulated at the federal level in one form or another since the Cotton Futures Act was passed in 1916. The Grain Futures Act of 1922 followed, which was replaced by the Commodity Exchange Act (CEA or Act) in 1936. At that time, futures markets were confined to agricultural products and so oversight logically fell to the Department of Agriculture. By the 1970s, when Congress created the CFTC as an independent regulatory agency, most futures trading was still limited to the agricultural sector and swaps markets had not yet developed. Exchange trading took place in open outcry pits where floor brokers wearing colorful jackets flashed hand signals and jostled each other for position. Back then, co-location meant that a firm’s trading desk was closer to the pit than another firm’s desk, or a firm’s broker was taller than other traders and more easily seen by potential counterparties. Although a small percentage of trading is still devoted to agricultural products and limited open outcry trading still exists, today’s global markets include a vast array of futures and options on financial, energy and metals products electronically executed at lightning speed. Over the past 20 years, trading in over-the-counter (OTC) derivatives or swaps also gained traction. And now these markets dwarf exchange traded futures.
As the markets have evolved, so has regulation. While the CFTC’s mission has always been to protect and foster the crucial risk management and price discovery functions of futures markets by detecting and deterring fraud, manipulation and abusive trading practices, Congress has amended the Commission’s mandate in significant ways over the years to respond to changing market conditions and prevailing regulatory philosophies.
read more
Source: CFTC.gov
Statement on Support of the Dodd-Frank Rulemaking of Chairman Gary Gensler
October 27, 2010--Statements for the record on each rule:
Anti-Manipulation Rulemaking
I support the proposed rulemaking to enhance the Commission’s ability to protect against manipulation. Today’s rule builds upon important new authorities that Congress granted the Commission to protect market participants in the commodities, futures and swaps markets. Together with the authority granted by Congress to prohibit disruptive trading, this proposed rule gives the Commission the broad new ability to effectively combat fraud and manipulation. The proposed rulemaking promotes fair and efficient markets, for the first time allowing the Commission to protect against fraud-based manipulation. I thank Senator Cantwell for her leadership in bringing this important new authority to the Commission.
Disruptive Trading Practices Rulemaking
I support the proposed Advanced Notice of Proposed Rulemaking concerning disruptive trading practices. Congress expressly prohibited three trading practices that it deemed were disruptive of fair and equitable trading. In addition, Congress granted the Commission authority to prohibit other trading practices that are disruptive of fair and equitable trading. Today’s advanced notice of proposed rulemaking asks 18 questions, the answers to which will inform moving forward with a proposed rule on this issue. Commission staff also will lead a roundtable on December 2 on disruptive trading practices. I am particularly interested in hearing from the public on algorithmic trading. In addition to the public comments and the December 2 roundtable, we will benefit from the input of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues.
read more
Source: CFTC.gov
Troubled Asset Relief Program (SIGTARP) Reports to Congress Update
October 26, 2010--The Special Inspector General for the Troubled Asset Relief Program has issued a Quarterly Report to Congress dated October 26, 2010.
view the Troubled Asset Relief Program (SIGTARP) Quarterly Report to Congress October 26, 2010
Source: U.S. Department of the Treasury
BlackRock Forms Global iShares Investment Strategy Group
Russ Koesterich Appointed iShares Chief Investment Strategist
October 26, 2010--BlackRock, Inc. today announced that its iShares(R) Exchange Traded Funds (ETFs) business, the world's largest provider of ETFs, has created the Global iShares Investment Strategy Group and appointed Russ Koesterich as Global Chief Investment Strategist to lead the team. The creation of the investment strategy group and the position of a dedicated ETF Chief Investment Strategist is in response to strong interest from clients about ETF investment trends and insights.
"Clients are increasingly asking us our views on markets around the world in which iShares offers access and liquidity, and our expertise on how to manage portfolios in various market conditions," said Michael Latham, Global Head of iShares at BlackRock. "The creation of the Global iShares Investment Strategy Group is a natural progression of our partnership with clients and our commitment to deliver to them the best services on top of the largest ETF offering."
The Global iShares Investment Strategy Group will provide clients with insights on a variety of economic and investment topics, covering the asset classes, sectors and markets in which iShares offers access to investors. The group is a key component of the business' effort to offer an investment platform that includes not only the largest ETF product lineup in the market, but also high-quality investment expertise ranging from broad market insights to customized investment solutions. The group will work closely with the wider iShares research, product and client teams, as well as the larger BlackRock organization to leverage the large collection of investment professionals for the benefit of iShares clients.
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Source: BlackRock, Inc
iShares files with the SEC
October 26, 2010--iShares has filed a Form S-1 registration statement with the SEC for
iShares Copper Trust.
view filing
Source: SEC.gov
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.
read more
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.
read more
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
