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DB-Synthetic Equity & Index Strategy-North America-US ETF Market Monthly Review-US ETP assets continue moving forward driven by Equity ETPs
June 6, 2013--US ETP assets added $10bn in May for a total growth of 11.1% YTD
ETP assets in the US rose by $9.7bn to $1.48 trillion (YTD +11.1%) last month. Global ETP industry assets closed at $2.01 trillion (YTD +9.1%)
Flows Review: still interested in equities, but avoiding defensives
US ETP experienced strong inflows of $18.1bn during May (+1.2% of the previous month’s AUM).
Within long-only ETPs, total flows were +$17.6bn in May vs. +$8.1bn in April. Equity, Fixed Income, and Commodity long-only ETPs experienced flows of +$17.5bn, +$3.8bn, and -$4.0bn, respectively.
May flow trends were similar to April, with the main difference being the rotation away from defensives into domestic cyclicals. Long-only Equity ETP flows experienced a strong month, gathering $17.5bn in new cash and setting the YTD flows at +$75.5bn. Developed markets (+$18.7bn) flows, with special emphasis in the US (+$12.3bn) remain in uptrend while EM equity flows saw outflows of $2.0bn. Japanese ETPs continued to amass new assets (+$3.8bn, +$13.5bn YTD); meanwhile, Dividend ETPs kept capturing investors’ attention, with $2.2bn in fresh cash. Sector wise investors rotated backed into domestic cyclicals (+$5.9bn) and away from defensives (-$1.5bn) during last month. Fixed income ETPs experienced decent inflows of $3.8bn (+$18.4bn YTD), with a tilt towards quality and a strong preference toward medium-termed debt; Last but not least, Long-Only ETPs which offer exposure to commodities saw another bad month, with outflows of $4.1bn, mostly due to Gold ETPs (-$3.4bn) outflows.
New Launch Calendar: income, EM debt, and leverage
There were 9 ETFs and 2 ETNs launched during May. Most of the new ETF listings continue to focus on income strategies; some of the themes cover senior loans, free cash flow to shareholders, high yield with interest rate hedging, fundamentally-screened EM debt, global dividends, and dividend growth. Other strategies also included daily leverage bear exposures to Brazil and Korea, inflation protection, Euro-hedged Germany exposure, and levered custom equity strategies in the case of the two ETNs.
Turnover Review: Floor activity edged lower by 3% in May
ETP turnover totaled $1.349 trillion last month, -2.8% (-$38.9bn) lower than the previous month figure of $1.388 trillion, and 15.5% above last year’s monthly average of $1.168 trillion. Equity and Commodity ETPs turnover decreased by 1.9% (-$22.5bn), and 31% (-$28.8bn) during May; while Fixed Income ETPs turnover rose by 15.9% (+$13.9bn).
ETP trading made up 26.8% of all US cash equity trading in April, down from last year’s peak of 28.8% in June, and still below its 3-year monthly average of 28.4%.
IMF-Brazil: Technical Note on Stress Testing the Banking Sector
June 6, 2013--This note summarizes the stress tests undertaken for the Brazilian banking system as part of the Financial Sector Assessment Program (FSAP) Update. The focus was on tail risks and medium-term structural trends.
The stress tests, which were run in a top-down (TD) manner based on granular supervisory data, were undertaken in close cooperation with the Central Bank of Brazil (BCB).
All banks were assessed against solvency, liquidity, and contagion risks. The solvency tests assessed the resilience of the system under three adverse macroeconomic scenarios as well as baseline conditions for the period from 2012 till 2016. The tests considered different definitions of capital adequacy (total capital, tier 1, core tier 1), and simulated the impact of upcoming changes in the regulatory rules (Basel III). Bank behavior conditional on stress conditions was captured by profit retention and credit growth. The liquidity tests simulated banks’ resilience against a sudden withdrawal of funding and, to some degree, maturity mismatch. Contagion risk was analyzed by simulating potential knock-on effects through interbank exposure.
view the Brazil: Technical Note on Stress Testing the Banking Sector
SEC Proposes Money Market Fund Reforms
June 5, 2013--The Securities and Exchange Commission today voted unanimously to propose rules that would reform the way that money market funds operate in order to make them less susceptible to runs that could harm investors.
The SEC’s proposal includes two principal alternative reforms that could be adopted alone or in combination. One alternative would require a floating net asset value (NAV) for prime institutional money market funds. The other alternative would allow the use of liquidity fees and redemption gates in times of stress. The proposal also includes additional diversification and disclosure measures that would apply under either alternative.
IndexIQ Announces May 2013 Performance of Its IQ Hedge Family of Investable Benchmark Hedge Fund Replication Indexes
June 5, 2013--IndexIQ, a leading developer of index-based alternative investment solutions, today announced the performance of its proprietary family of hedge fund replication and alternative beta indexes.
Designed as investable benchmarks that replicate the performance characteristics of sophisticated hedge fund strategies, the IQ Hedge™ benchmark indexes were originally introduced on March 30, 2007, and have been calculating live since that date. IQ Hedge is the first family of investable benchmark indexes covering hedge fund replication/alternative beta strategies.
Federal Reserve Board approves interim final rule on treatment of uninsured U.S. branches and agencies of foreign banks under section 716 of Dodd-Frank
June 5, 2013--The Federal Reserve Board on Wednesday approved an interim final rule clarifying the treatment of uninsured U.S. branches and agencies of foreign banks under the so-called swaps push-out provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Section 716 of Dodd-Frank generally prohibits the provision of certain types of federal assistance, such as discount window lending and deposit insurance, to swaps entities. The provisions of section 716 become effective on July 16, 2013.
view the Prohibition Against Federal Assistance to Swaps Entities (Regulation KK)
Fed Grants Foreign Banks Leeway in Dodd-Frank Swap Rule
June 5, 2013--Foreign-based banks won leeway in Dodd-Frank Act requirements to separate swaps trading from their U.S. branches under a Federal Reserve policy released yesterday.
The central bank said in an interim final rule that the banks will be eligible to apply for a transition period of 24 months in rules taking effect July 16. The Institute of International Bankers, a lobbying group representing Credit Suisse Group AG (CSGN) and Deutsche Bank AG (DBK) among others, urged the Fed to grant foreign banks the same phase-in process U.S. banks like JPMorgan Chase & Co. (JPM) received earlier this year
AltaVista-Sector SPDR Analyzer + Equal Sector Weight ETF (EQL)-June 2013
June 5, 2013--This month's Select Sector SPDR and Equal Sector Weight ETF Analyzer reports are ready for download.
view the Select Sector SPDR funds June 2013 report
view the ALPS Equal Sector Weight ETF (EQL)report
ProShares files to launch ETFs backed by credit default swaps
June 5, 2013--ProShares has filed with the Securities and Exchange Commission to launch a number of exchange-traded funds backed by credit default swaps, as new regulations for the privately traded contracts reduce some of their risks and open the market to new types of investors.
Derivatives markets are adapting to new regulations designed to reduce the risks these contracts pose to the financial system after their opacity, high concentration among the world's largest banks and lack of collateral pledged against the trades were cited as key factors behind the 2007-2009 financial crisis.
Empirical Finance files with the SEC
June 5, 2013--Empirical Finance,
LLC., has filed a application for exemptive relief with the SEC for the Empiritrage ETF Trust-actively-managed ETFs.
view filing
TMX Group Consolidated Trading Statistics-May 2013
Toronto Stock Exchange, TSX Venture Exchange, TMX Select, Alpha, Montreal Exchange, NGX Montreal Exchange Achieves Two Monthly Trading Volume Records
June 4, 2013--TMX Group Limited today announced May 2013 trading statistics for its diversified group of exchanges-Toronto Stock Exchange, TSX Venture Exchange, Montreal Exchange (MX), Natural Gas Exchange (NGX), TMX Select and Alpha.
Trading volume on Toronto Stock Exchange in May 2013 increased 1% compared to April 2013 and increased about 1% year-over-year. Volume on TSX Venture Exchange decreased 9% from April 2013 and decreased 17% compared to May 2012. TMX Select trading volume experienced a decrease of 4% from the previous month, but increased 19% compared to the same month last year. Alpha trading volume for May 2013 decreased 38% compared to the previous month and was down 49% compared to the same month a year earlier.
Stock Exchanges Seek Curbs on Dark Pools to Fight Exodus
June 4, 2013--Three large U.S. stock exchanges are lobbying for new limits on dark pools and other competitors, arguing that too much trading has become hidden on private venues that create more cost and volatility in public markets.
Chief executive officers of NYSE Euronext (NYX) Inc., Nasdaq OMX Group Inc (NDAQ). and Bats Global Markets Inc (BATS). have met in Washington over the past two months with lawmakers and the Securities and Exchange Commission. They’ve asked for a rule that could divert more orders to exchanges rather than trading in dark pools or within a broker’s inventory.
New Barron's 400SM ETF (BFOR) On The Market
Funds Seeks Results Corresponding to Underlying Index of 400 Stocks, ALPS Announces.
June 4, 2013--The Barron's 400SM ETF (NYSE Arca: BFOR) launched today under the ALPS ETF Trust, based on the Barron's 400 IndexSM, a rules-based index intended to give investors a means of tracking the overall performance of a collection of companies with strong fundamentals based on a methodology jointly developed by Barron's and MarketGrader.com.
“All index components are selected on the basis of their fundamental strength,” said Carlos Diez, President of MarketGrader.com. “The Barron's 400 IndexSM is built from the ‘bottom-up’ using a methodology that is quite different from most traditional market benchmarks.”
Market Vectors Emerging Markets Local Currency Bond ETF Awarded Second-Highest Rating from NAIC
Rating allows EMLC to receive favorable risk-based capital treatment when added to portfolios of state regulated insurance companies
June 4, 2013--Market Vectors(R) Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC) has received a risk-based capital designation of "2" from the Securities Valuation Office (SVO) of the National Association of Insurance Commissioners (NAIC), it was announced today.
SVO ratings range from 1 to 6, with 1 being highest available.
The Market Vectors Emerging Markets Local Currency Bond ETF (EMLC) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the J.P. Morgan GBI-EMG Core Index (GBIEMCOR). The underlying Index provides exposure to local currency bonds issued by emerging market governments. As such, the Fund is subject to the risks of investing in emerging market debt securities.
CME Group Volume Averaged 14.7 Million Contracts per Day in May 2013, Up 11 Percent from May 2012, Marking Highest Month since August 2011
All-time daily volume record of 26.9 million contracts traded on May 29
Record monthly Treasury futures and options volume up 42 percent
Monthly average daily volume records achieved for futures and options on 30-year Treasury Bonds, 10-year Treasury Notes and 5-year Treasury Notes
Interest rate volume up 31 percent
June 4, 2013--CME Group, the world's leading and most diverse derivatives marketplace, today announced that May 2013 volume averaged 14.7 million contracts per day, up 11 percent compared with May 2012, and up 27 percent sequentially.
Total volume for May 2013 was more than 324 million contracts, of which 88 percent was traded electronically.
In May, CME Group interest rate volume averaged 7.8 million contracts per day, up 31 percent from May 2012, and the highest monthly average daily volume since August 2011.
DB-Synthetic Equity & Index Strategy-North America-US ETF Trade Alert-Long Gold vs. Short JPY & AUD
June 4, 2013--Implementing the Commodity Research weekly trade idea
Using ETPs to gain access to non-USD gold exposures
Long Gold in USD Short JPY & AUD
While our Commodity Research colleagues maintain a bearish view for Gold denominated in USD, they believe that a long exposure to Gold denominated in Japanese Yen and Australian dollar is expected to perform strongly on the back of "Abenomics" and expected weakness in the bulk commodity sector affecting the iron and coal Australian exporting industries.
ETP Trade: Long GLD short FXY & FXA
We believe that a combination of ETPs can offer an efficient way to gain access to gold denominated in JPY or AUD. More specifically, we recommend a long position in GLD to gain access to physical gold in USD and equally weighted short positions in FXY and FXA to achieve the exposure to gold in Japanese yen and Australian dollar.
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