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CFTC to Hold Open Meeting on First Series of Proposed Rules Under the Dodd-Frank Act
September 22, 2010--The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Friday, October 1, 2010, to consider the issuance of the following rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:
an interim final rule relating to the time frame for reporting pre-enactment unexpired swaps to a swap data repository or to the CFTC;
proposed rules that would prescribe certain financial resource standards for derivatives clearing organizations including derivatives clearing organizations designated as systemically important by the Financial Stability Oversight Council under Title VIII of the Dodd-Frank Act and
proposed rules specifying requirements for derivatives clearing organizations, designated contract markets, and swap execution facilities on governance arrangements and mitigation of conflicts of interest.
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Source: CFTC.gov
Treasury Secretary Timothy F. Geithner
Written Testimony-
House Financial Services Committee
September 22, 2010--Chairman Frank, Ranking Member Bachus, and members of the Financial Services Committee, thank you for the opportunity to testify before you today about international regulatory issues relevant to the implementation of the Dodd-Frank Act, particularly reform of global capital standards.
Last week the Federal Reserve, the OCC, and the FDIC reached agreement with their principal foreign counterparts to substantially increase the levels of capital that major banks will be required to hold. As a result of this agreement, banks will have to hold substantially more capital. The new standards are designed to ensure that major banks hold enough capital to withstand losses as large as what we saw in the depths of this recession and still have the ability to operate without turning to the taxpayer for extraordinary help.
This agreement will make our financial system more stable and more resilient. By forcing financial institutions to hold more capital, we will both constrain excessive risk-taking and strengthen banks' abilities to absorb losses. This agreement is designed to allow banks to meet these more stringent standards gradually over time, so that they can continue to perform their essential function of providing credit to households and businesses.
These standards will help establish a more level playing field around the world. By moving quickly to recapitalize our financial system, we have been in a strong position to insist on tough standards abroad.
The Importance of Capital and Liquidity Excess leverage, a term that describes the amount of risk firms take relative to the financial reserves they hold against those risks, has played a central role in virtually all financial crises.
Capital requirements determine the amount of losses firms can absorb and the magnitude of the risks they can take without risking failure. They help the market provide discipline by forcing shareholders who enjoy profits in good times to be exposed to losses in bad times.
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Source: U.S. Department of the Treasury
Argentina, Panama May Join Combined Latin American Exchange, Hoyle Says
September 22, 2010--Argentina may join a combined Latin American securities exchange to compete for investors, said the head of Peru’s main stock exchange.
Panama also could become part of the planned integrated exchange, Lima Stock Exchange President Roberto Hoyle said yesterday in a telephone interview from Lima.
Chile, Peru and Colombia aim to start a system of cross- border transactions in stocks such as Cencosud SA, Southern Copper Corp. and Ecopetrol SA from Nov. 22, he said. In a second phase, the three exchanges plan to establish a common market by the end of next year that would surpass Mexico in terms of combined market value and narrow the gap with Brazil, as well as incorporating securities such as bonds.
“Panama has shown interest, but the three countries decided to go with the current model as they’ve made more progress adopting similar regulatory policies,” Hoyle said. “When the Argentine market recovers, the Merval could join the integrated market to compete with Brazil’s Bovespa.”
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Source: Bloomberg
Vanguard launches suite of Russell-based index funds and ETFs
September 22, 2010--Vanguard further expanded its passively managed fund lineup today, introducing seven equity index funds and seven exchange-traded funds (ETFs) based on Russell domestic stock benchmarks.
The new offerings feature Institutional Shares and ETF Shares and provide exposure to the value, growth, and blend segments of both the large-cap Russell 1000 Index and the small-cap Russell 2000 Index. A broad-market fund and ETF seeking to track the Russell 3000 Index are also being offered.
| ETF Shares | Institutional Shares | |||
|---|---|---|---|---|
| Benchmark | Ticker | Expense Ratio | Ticker | Expense Ratio |
| Russell 1000 Index | VONE | 0.12% | VRNIX | 0.08% |
| Russell 1000 Value Index | VONV | 0.15% | VRVIX | 0.08% |
| Russell 1000 Growth Index | VONG | 0.15% | VRGWX | 0.08% |
| Russell 2000 Index | VTWO | 0.15% | VRTIX | 0.08% |
| Russell 2000 Value Index | VTWV | 0.20% | VRTVX | 0.08% |
| Russell 2000 Growth Index | VTWG | 0.20% | VRTGX | 0.08% |
| Russell 3000 Index | VTHR | 0.15% | VRTTX | 0.08% |
"Russell benchmarks are well-constructed and well-recognized, and meet Vanguard's ‘best practice' standards for index construction. Institutional investors, consultants, financial advisors, and others with a preference for Russell indexes now have low-cost Vanguard options to consider," said Vanguard Chairman and CEO Bill McNabb.
Russell is a leading provider of U.S. equity indexes for institutional investors, with more than $3.9 trillion in assets benchmarked to its indexes (source: Russell Investments, as of December 31, 2009). Vanguard also offers complete suites of index funds and ETFs based on broad domestic benchmarks from MSCI and Standard & Poor's.
New products in the pipeline
Earlier this month, Vanguard launched eight new index mutual funds and nine new ETFs based on S&P domestic stock benchmarks.
In addition to ETF Shares of the flagship Vanguard 500 Index Fund, Vanguard introduced eight new equity funds and ETFs targeting the growth and value segments of the S&P 500 Index and the growth, value, and blend segments of the S&P MidCap 400 and SmallCap 600 Indexes. In the coming months, Vanguard will offer three new municipal bond index funds with traditional and exchange-traded shares, tracking benchmarks in the S&P National AMT-Free Municipal Bond Index series.
Vanguard has also filed for a new real estate fund, which will be benchmarked to the S&P Global Ex-U.S. Property Index. Vanguard Global Ex-U.S. Real Estate Index Fund will offer Investor Shares, Institutional Shares, Signal Shares, and ETF Shares.
Vanguard pioneered index investing for individuals in 1976 with the launch of the Vanguard 500 Index Fund. The company launched its first ETF in 2001—Vanguard Total Stock Market ETF (ticker: VTI), which is now one of the largest ETFs in the market, with $13.6 billion in net assets. Vanguard manages $713 billion in aggregate index fund assets.
Source: Vanguard
Can an ETF collapse?
September 22, 2010--Like many innovations in finance that emerge from nowhere to explode in popularity with unknown consequences, exchange-traded funds (ETFs) have gone from obscurity when they were first invented in 1993 to making up more than half of all the daily trading volume on American stock exchanges today. They also made up 70% of all the canceled trades during the Flash Crash on May 6, despite representing just 11% of listed securities in the United States, suggesting that ETFs remain poorly understood by both investors and regulators.
The extraordinary popularity of exchange-traded funds, open-ended mutual funds that trade like stocks on an exchange, is undeniable. However, the source of this popularity would seem to have two very different origins. ETFs are bought by many retail and institutional investors looking for low cost and highly liquid vehicles with which to buy whole indices in a single trade, and ETFs serve that noble function well. But, they are also extremely popular with and widely used by hedge funds and other traders looking for a simple way to mitigate broad-market risks, or neutralize beta, with a single trade. The appeal to a hedge fund manager of being able to short an entire market index or a whole sector with one transaction, instead of say 500 separate stock shorts to span the S&P 500 Index, makes ETFs very widely used as hedging vehicles by short-sellers. It increasingly looks like many new ETFs are now being designed for the purpose of marketing them to short-sellers.
These seemingly opposite interests in ETFs make for a large and lucrative market not just for the ETF operators like BlackRock’s iShares and State Street Global Advisors SPDRs, but also for the authorized participants--institutions that can create or redeem large blocks of new shares in an ETF (called creation units) for sale, and countless brokers that profit by trading ETF shares.
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Source: Bogan Associates, LLC
AdvisorShares files with the SEC
September 22, 2010--AdvisorShares has filed a post-effective amendment, registration statement with the SEC for
Active Bear ETF (Ticker:HDGE).
Total Annual Fund Operating Expenses After Fee Waiver And/Or Expense Reimbursement: 1.85%
view filing
Source: SEC.gov
Swaps trading rules to mirror equities
September 22, 2010--Mary Schapiro, the chairman of the Securities and Exchange Commission, said trading rules for the vast privately traded derivatives markets, which will soon be regulated under financial reform legislation, should be based on existing rules that govern equity markets.
Many derivatives market participants have argued that the relatively low turnover of derivatives such as swaps and the absence of retail investor participation in these markets should limit the amount of public disclosure of positions and trades
However, Ms Schapiro told a Securities Traders Association conference on Wednesday that derivatives rules should “reflect the virtues of the current equities market: competition, access, liquidity and transparency”.
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Source: FT.com
Remarks Before U.S. Chamber of Commerce
Remarks by Chairman Gary Gensler before the U.S. Chamber of Commerce
September 21, 2010--
Good morning. I thank the Chamber of Commerce for inviting me to speak today. The last time I was with you, the House of Representatives and the Senate Banking Committee had each passed Wall Street reform legislation. Now, six months later, we at the Commodity Futures Trading Commission (CFTC) are working to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act with regard to regulation of the swaps marketplace.
Before I discuss the details of reform, I’d like to thank my fellow Commissioners and CFTC staff for all of their hard work on the Dodd-Frank Act and on its implementation.
There are three critical reforms of the derivatives markets included in the Dodd-Frank Act. First, the bill requires swap dealers to come under comprehensive regulation. Second, the bill moves the bulk of the swaps marketplace onto transparent trading facilities – either exchanges or swap execution facilities. Third, the bill requires clearing of standardized swaps by regulated clearinghouses to lower risk in the marketplace. Each of these three reforms will lower risk and improve transparency for your members.
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Source: CFTC.gov
CFTC to Hold Open Meeting on First Series of Proposed Rules Under the Dodd-Frank Act
September 21, 2010--The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Friday, October 1, 2010, to consider the issuance of the following rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:
an interim final rule relating to the time frame for reporting pre-enactment unexpired swaps to a swap data repository or to the CFTC;
proposed rules that would prescribe (i) certain risk management standards for those derivatives clearing organizations designated as systemically important (“SIDCOs”) by the Financial Stability Oversight Council under Title VIII of the Dodd-Frank Act and (ii) standards requiring sixty (60) days advance notice of changes in SIDCO rules, procedures, or operations that materially affect the nature or level of risks presented by the SIDCO; and
proposed rules specifying requirements for derivatives clearing organizations, designated contract markets, and swap execution facilities on governance arrangements and mitigation of conflicts of interest.
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Source: CFTC.gov
PIMCO Launches 'Build America' and Investment Grade Bond ETFs
BABZ and CORP Broaden Firm's Lineup of ETF Solutions
September 21, 2010-- PIMCO, a leading global investment solutions provider, has launched two new exchange-traded funds (ETFs) providing investors efficient access to the firm's fixed-income expertise.
The PIMCO Build America Bond Strategy Fund (Ticker: BABZ) is an actively managed ETF offering access to taxable municipal bonds issued under the Build America Bonds (BABs) program.
The fund seeks to capture attractive yield opportunities in this sector while also avoiding securities from municipalities that PIMCO believes face deteriorating credit quality. The fund is managed by John Cummings, executive vice president and head of PIMCO's municipal bond desk.
The PIMCO Investment Grade Corporate Bond Index Fund (Ticker: CORP) is an index ETF that seeks to track its benchmark index with an optimized exposure to investment grade U.S. corporate debt issues that are primarily component securities of the benchmark. PIMCO's proprietary optimization process seeks to avoid those securities that the firm believes may be hard to trade or deemed to have the highest risk of credit loss. The fund is managed by Vineer Bhansali, managing director.
"These new funds broaden investor access to two important fixed income areas -- Build America Bonds and investment-grade corporate bonds -- using the efficient, transparent ETF format," said Tammie Arnold, managing director and head of PIMCO's global ETF business. "As with all PIMCO investment products, our ETFs benefit from PIMCO's nearly four decades of investment management experience, strong analytics and risk management expertise."
The PIMCO Build America Bond Strategy Fund provides access to the Build America Bond market with the added benefits of PIMCO's active credit and portfolio management expertise and institutional pricing capabilities. Build America Bonds are taxable municipal bonds that have increased in popularity since they were first authorized under the American Recovery and Reinvestment Act of 2009. (While the BABS program is scheduled to expire at the end of 2010, PIMCO is optimistic that the program will be extended.)
The PIMCO Investment Grade Corporate Bond Index Fund provides exposure to investment-grade corporate bonds that are primarily component securities of The BofA Merrill Lynch US Corporate Index(SM), while also seeking to closely match the index duration, curve and credit characteristics. The fund seeks to optimize trade execution, reduce transaction costs and minimize tracking error by avoiding bonds that are hard to obtain or at high risk of near term default, while emphasizing bonds that may provide liquidity and market access.
Source: PIMCO