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BM&FBOVESPA Sets New Trading Record For ETFs - The Number Of ETF Trades Hits New Historic High Of 4,737
September 29, 2010--BM&FBOVESPA hit a new historic high today with a total of 4,737 ETF trades. In just one day the BOVA11 registered 4,457 trades (872,200 shares at the average price of BRL68.54), reaching BRL59.8 million in total financial volume.
All of the other ETFs together registered a total of 280 trades. The previous record was set on August 3 of this year when a total of 2,247 ETF trades were registered, at that time 2,134 were from the BOVA11 and 113 were from all other ETFs.
Source: BM&FBOVESPA
CME Group Announces the Launch of NASDAQ-100 Weekly Options
September 28, 2010--CME Group, the world's leading and most diverse derivatives marketplace, today announced the launch of NASDAQ-100 weekly options beginning October 18, 2010. These contracts will be listed with, and subject to, the rules and regulations of the CME.
"Our customers continue to look for more precise ways to manage their financial risk tied to market movements that occur throughout the month," said Thomas Boggs, CME Group Director of Equity Index Products and Services. "The NASDAQ-100 weekly options will expand the number of expirations and provide our customers with more trading opportunities and increased flexibility for more efficient position management."
Standard and E-mini weekly options will be listed for trading and both will be European-style. Benefits include expanded trading choices, certainty of exercise, and the precision and flexibility of additional listings.
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Source: CME Group
Remarks Before EUROFI Financial Services Forum
September 28, 2010--Good morning. I thank the Belgian E.U. Presidency and Eurofi for inviting me to speak this morning on regulatory reform of over-the-counter (OTC) derivatives, or swaps, markets. I also want to thank Commissioner Michel Barnier for his open invitation to come to Brussels to continue our partnership and coordination on these issues. Lastly, I want to thank each of my fellow CFTC Commissioners and our staff for all of their hard work.
This is my third trip to Brussels since last September. As the crisis once again so proved, capital and risk know no geographic boundaries. We are partners in the global effort to lower risk throughout our economies.
In 2008, both the financial system and the financial regulatory system failed. Though there were many causes of the crisis, as evidenced by the $180 billion that U.S. taxpayers put into an ineffectively regulated AIG, derivatives did play a significant role. Over-the-counter derivatives – initially developed to help manage and lower risk – can actually concentrate and heighten risk in the economy and to the public.
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Source: CFTC.gov
CFTC Seeks Comment Regarding Agricultural Swaps
September 28, 2010--The Commodity Futures Trading Commission today published an Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment regarding the appropriate regulatory treatment of agricultural swaps.
The Dodd-Frank Wall Street Reform and Consumer Protection Act provides that swaps in an “agricultural commodity” (as defined by the Commission) are prohibited unless entered into pursuant to a rule, regulation or order of the Commission adopted pursuant to section 4(c) of the Commodity Exchange Act, the Commission’s general exemptive authority.
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Source: CFTC.gov
Joint Statement by CFTC Chairman Gary Gensler and European Commissioner Michel Barnier on the Financial Reform Agenda
September 28, 2010--United States Commodity Futures Trading Commission (CFTC) Chairman Gary Gensler and European Commissioner Michel Barnier spoke today and reaffirmed their strong determination to cooperate closely in strengthening the global financial system. Specifically, Chairman Gensler and Commissioner Barnier discussed regulatory reform of the over-the-counter (OTC) derivatives markets with respect to Dodd-Frank Wall Street Reform and Consumer Protection Act and the September 2010 European proposal for a Regulation on OTC derivatives, central counterparties and trade repositories.
Commissioner Barnier and Chairman Gensler discussed a number of issues pertaining to enhancing oversight and reducing risk in the OTC derivatives market including: (i) comprehensively regulating derivatives dealers for capital and margin, recordkeeping and reporting and business conduct standards; (ii) requiring standardized OTC derivatives to be cleared by central counterparties, imposing stringent prudential and organization rules for central counterparties and imposing risk mitigation standards for non-standardized contracts that are not centrally cleared; and (iii) increasing transparency of the OTC
Derivatives markets through trading, where appropriate reporting to data repositories and reporting to the public. Commissioner Barnier and Chairman Gensler emphasized the need for international co-operation to ensure global access to all data on derivatives transactions maintained by trade repositories.
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Source: CFTC.gov
iShares Announces Changes to Its Semiconductor ETF Including Changing to the PHLX Semiconductor Sector Index
September 28, 2010-BlackRock, Inc., today announced that the iShares Exchange Traded Funds (ETFs) business, the world's largest provider of ETFs, is changing the index, name, ticker and primary listing exchange of the iShares Semiconductor ETF. The changes will provide investors, for the first time, with an unlevered ETF that will seek investment results that correspond generally to the price and yield performance, before fees and expenses, of the PHLX Semiconductor Sector Index. The PHLX Semiconductor Sector Index is managed by NASDAQ OMX Group and known as the "SOX Index."
Fund shareholders are not required to take any action as a result of this announcement. The changes are effective October 15, 2010, and are generally summarized below.
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Current New
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Fund Name iShares S&P North American iShares PHLX SOX
Technology-Semiconductors Index Semiconductor Sector Index
Fund Fund
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Index S&P North American Technology- PHLX Semiconductor Sector
Semiconductors Index Index ("SOX")
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Ticker IGW SOXX
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Exchange NYSE ARCA NASDAQ
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Index Names 52 (as of 8/31/10) 30 (as of 8/31/10)
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Weighting Modified market cap Modified market cap
Methodology
----------------------------------------------------------------------------"There has been increased investor interest in a SOX based ETF with the ongoing evolution of the Index, therefore we're pleased to provide investors with the iShares PHLX SOX Semiconductor Sector Index Fund that will track such a well-known sector index," said Noel Archard, Head of U.S. iShares Product at BlackRock.
The PHLX Semiconductor Sector Index(SM) (SOX(SM)) is a modified
capitalization-weighted index composed of companies primarily
involved in the design, distribution, manufacture, and sale of
semiconductors. PHLX is a wholly owned subsidiary of the NASDAQ OMX
Group.
Source: BlackRock
BlackRock(R) Canada Launches the iShares(R) DEX HYBrid Bond Index Fund
The First ETF in Canada to Invest in both High-Yield and Investment-Grade Corporate Bonds
September 28, 2010--BlackRock Asset Management Canada Limited (BlackRock Canada), an indirect, wholly-owned subsidiary of BlackRock, Inc., today announced that the iShares Exchange-Traded Funds (ETFs) business, the world's largest provider of ETFs, launched the new iShares DEX HYBrid Bond Index Fund , the first ETF in Canada to invest in both high-yield and investment-grade corporate bonds.
XHB, which will begin trading on the Toronto Stock Exchange today, is a unique vehicle designed to provide investors with regular monthly income by investing in both BBB-rated corporate bonds and the high-yield bond market. XHB will invest exclusively in Canadian-dollar denominated securities.
"XHB is unique in Canada as the only ETF to give investors exposure to the expanding Canadian high-yield marketplace. Historically, we have had a relatively small high-yield market, with most high-yield issuers looking to raise capital in the US. However, over the last 18 months we have seen a number of new high-yield issues within Canada, and the number of issuers is expected to grow as the our marketplace becomes more established," said Oliver McMahon, Director of Product Management for iShares ETFs at BlackRock Canada.
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Source: BlackRock
What’s the Hoopla? Can an ETF Really Collapse?
September 28, 2010--Recently a short paper was written by Andrew Bogan, Brendan Connor and Elizabeth Bogan1 which
suggested an ETF could collapse due to the fact that the published short interest can be larger than the
shares outstanding of the ETF trust. Our point of view differs.
The authors proposed that if all the shares covering the short interest were to be redeemed at the same
time an ETF could be depleted of assets and therefore close. The authors suggested the remaining
shareholders of the ETF would be left with a worthless asset which isn’t backed by any underlying
assets. This is simply not possible.
The true focus of the article should be on the process of the securities lending industry, which
encompasses all equities, not just ETFs. First we need to examine how a short is established. If
someone wishes to sell a security short they must first “locate” the shares. They enter into a lending
agreement to borrow the shares from someone who is long. Once this agreement is in place the short
seller can sell the shares in the market. This agreement is open ended and the shares can be recalled at
any time. This recall forces the short seller to either find new shares to borrow or be forced to cover
their short in the market.
Let us now follow those shares. For every share sold, there is a share bought. The short seller has now transferred ownership to someone else. There are now two owners of the same shares. The original owner whose shares are being borrowed, and the new owner who bought the shares from the short seller. Now assuming the new owner was not covering a short, those shares can then be lent again in a new lending agreement. This process can continue on and on.
What the article insinuates is that short sellers are “naked short selling”, which is the process of selling short without a locate or a borrow. This activity would violate Regulation SHO which mandates that short sellers arrange to borrow the shares to make delivery. The ETF creation redemption process is a completely different process that can only be done by specific market participants called Authorized Participants (AP’s).
Authorized Participants are mostly large institutional brokerage houses that are self-clearing members of the Depository Trust & Clearing Corporation (DTCC.) AP’s are governed by specific rules on how they are allowed to interact with the ETF trust. When the authors suggest a run on the ETF by authorized participants trying to redeem the ETF without shares in hand, they are accusing them of naked short selling. The ETF trust has several provisions in it to protect itself from this “run on the trust”.
ETF sponsors have several ways to protect ETF shareholders from a malicious short redeemer from collapsing an ETF trust. First an authorized participant can only redeem with settled shares, meaning they must have the shares in their possession. This also requires those shares to be released from any stock lending agreement. Secondly, no one Authorized Participant can enter an order to redeem the entire amount of shares outstanding.
Lastly they have a provision specifically directed to ETFs that have or historically have had large short interest. If an Authorized Participant wishes to redeem more than 25% of the shares outstanding of the ETF, the AP must verify that the shares are in their possession before the redemption order is accepted.
A perfect case study can be found in the iShares Russell 2000 ETF, IWM. In June 2007 during the annual Russell rebalance, the IWM trust experienced massive redemptions on the trust. Over the period of a week the trust shrank from 136 million shares outstanding to only 150 thousand shares outstanding. In the week to follow, the trust grew an amazing 219 million shares outstanding in the same time period. During these two weeks, the net asset value of the IWM trust performed exactly as the Russell 2000 Index that it tracks.
Aaron Kehoe is a Director, Head of ETF Strategies at Knight Equity Markets.
1 Can an ETF Collapse? Andrew A. Bogan, Ph.D., Brendan Connor, and Elizabeth C.Bogan, Ph.D. Seeking Alpha,
September 21, 2010.
Source: Knight
U.S. International Reserve Position
September 28, 2010--The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets totaled $132,375 million as of the end of that week, compared to $130,249 million as of the end of the prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
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September 24, 2010 |
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A. Official reserve assets (in US millions unless otherwise specified) 1 |
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132,375 |
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(1) Foreign currency reserves (in convertible foreign currencies) |
Euro |
Yen |
Total |
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(a) Securities |
9,593 |
15,433 |
25,026 |
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of which: issuer headquartered in reporting country but located abroad |
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0 |
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(b) total currency and deposits with: |
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(i) other national central banks, BIS and IMF |
14,124 |
7,576 |
21,700 |
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ii) banks headquartered in the reporting country |
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0 |
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of which: located abroad |
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0 |
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(iii) banks headquartered outside the reporting country |
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0 |
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of which: located in the reporting country |
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0 |
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(2) IMF reserve position 2 |
12,370 |
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(3) SDRs 2 |
57,278 |
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(4) gold (including gold deposits and, if appropriate, gold swapped) 3 |
11,041 |
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--volume in millions of fine troy ounces |
261.499 |
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(5) other reserve assets (specify) |
4,960 |
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--financial derivatives |
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--loans to nonbank nonresidents |
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--other (foreign currency assets invested through reverse repurchase agreements) |
4,960 |
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B. Other foreign currency assets (specify) |
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--securities not included in official reserve assets |
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--deposits not included in official reserve assets |
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--loans not included in official reserve assets |
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--financial derivatives not included in official reserve assets |
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--gold not included in official reserve assets |
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--other |
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read more
Source: U.S. Department of the Treasury
FTSE 100 Index Futures: 7:00pm Opening Begins October 3rd
September 28, 2010--eginning on Sunday October 3rd, for the trade date of Monday October 4th, FTSE 100 Index Futures will open at 7:00pm Central time.
The contract will be available to trade from 7:00pm until 1:50am on the following day (Central time), when the market will enter a ten minute Pre-Open period from 1:50am to 2:00am.
During this period orders may be submitted, revised and pulled in the Central Order Book but no business will be transacted. Resting orders will remain in the market.
The contract will re-open at 2:00am Central time, the same time the UK cash market opens, and trade continuously until 3:00pm Chicago time.
Source: NYSE Liffe US
