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“False Profits” Statement before the Third Meeting of the CFTC-SEC Joint Advisory Committee on Emerging Regulatory Issues
Commissioner Bart Chilton
August 11, 2010--All too often some look for an easy explanation of what took place in a disastrous circumstance. Ever since 1997 when Sebastian Junger’s Perfect Storm was released, that phrase has been used to explain calamitous circumstances. Hurricane Katrina’s impact on New Orleans was a perfect storm, and some suggest that the May 6th flash crash was a perfect storm. I don’t rule out that there were anomalous market circumstances that may have led to the flash crash. There could be a collection of culprits. We understand that there was great uncertainty about European financial conditions. There was a “flight to quality.” Investors were moving money to gold and government bonds, for example. But, as I have said, computer trading added to the volatility and that without this technology, the number of trades simply would not have occurred. The downward spiral of nearly 1,000 points would not have taken place, nor would the rapid rebound to a loss of 348 points have occurred.
There may in fact be an over-reliance on computer systems and high-frequency trading. Nevertheless, we should not accept that those were merely part of a collection of culprits and let it go at that. This matter is too important. We certainly need to continue to look deeper. Today is another effort in that regard.
One area that deserves additional attention is the matter of price feeds or price quotes. These feeds come in two forms: there is the general feed—the consolidated feed—that is offered to anyone. This feed is made available, for example, to myriad portals through which a trader might want to trade with an exchange, such as the New York Stock Exchange (NYSE). There are also premium feeds available directly from the exchanges. On May 6, during the 20 or so minutes in question, it appears that the consolidated feed that many portals were using was delayed from the real time quotes. At times, this delay amounted to more than 20 seconds. While 20 seconds may not seem like a lot to many folks, when markets are volatile, 20 seconds is a significant amount of time.
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Source: CFTC.gov
EGShares Launches Industrys First India Infrastructure Exchange-Traded Fund
August 11, 2010--EGShares, the first dedicated emerging markets sector ETF provider, today launched the EGShares India Infrastructure ETF (NYSE: INXX), the first ETF that offers investors exclusive access to Indian companies positioned to benefit from infrastructure development in India. The Emerging Global Shares Indxx India Infrastructure Index Fund invests in 30 of the largest locally traded Indian companies dedicated to the infrastructure industry.
“We are very excited about launching the world’s first India Infrastructure ETF,” said Robert Holderith, President and CEO of EGShares. “In our estimation, until today, India exposure through ETFs has been very limited and the offerings have been very similar. INXX can provide meaningfully different underlying holdings and industries from the handful of other India ETFs.”
The Indxx India Infrastructure Index is a 30 stock index with a mean free float market capitalization of $11.19 billion. INXX charges a net expense ratio of 0.85% (gross expense ratio: 1.58%). The top five industry weights of the Index, as of 6/30/10, were Electricity (23.26%), Construction & Materials (16.86%), Industrial Metals & Mining (13.71%), Industrial Engineering (12.03%), and Mobile Telecom (10.09%), followed by Industrial Transportation, Oil & Gas Producers, Real Estate Investment & Services, Electronic & Electrical Equipment, and Alternative Energy.
According to Richard Kang, CIO and Director of Research at EGShares, “investors are searching for returns at this time of great economic uncertainty. We believe that in developed markets, not only are return expectations low, but yields on bonds and dividends are low and correlations between various return sources remain high. We remain convinced that the fundamental factors underlying the global shift in favor of this new world are related to demographics and urbanization. We believe the demand for natural resources, specifically for infrastructure development in the emerging markets, is a strong case for the prolonged trend of rising commodity prices. Furthermore, there are many additional industries that, when combined, form the infrastructure theme. We see this play to be strongest in the emerging markets and like our recent product offerings related to China and Brazil, we believe that a similar story is being played out in India.”
The EGShares India Infrastructure ETF is the eighth ETF to be introduced by EGShares. Other ETFs include the EGShares India Small Cap ETF (SCIN), EGShares Brazil Infrastructure ETF (BRXX), EGShares China Infrastructure ETF (CHXX), EGShares Emerging Markets Metals/Mining ETF (EMT), EGShares Emerging Markets Energy ETF (EEO), EGShares Emerging Markets Financials ETF (EFN) and the EGShares Emerging Markets Composite ETF (EEG).
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Source: EGShares
Component Changes Made to Dow Jones U.K. Select Dividend 20 Index
August 11, 2010-- Dow Jones Indexes, a leading global index provider, today announced component changes in the Dow Jones U.K. Select Dividend 20 Index.
Tomkins PLC (United Kingdom, Industrial Goods & Services, TOMK.LN) will be deleted from the Dow Jones U.K. Select Dividend 20 Index and replaced by HMV Group PLC (United Kingdom, Retail, HMV.LN). Tomkins PLC is being removed due to the cancellation of its dividend payment. The changes in the Dow Jones U.K. Select Dividend 20 Index will be effective as of the open of trading on Monday, August 16, 2010
The Dow Jones U.K. Select Dividend 20 Index represents the country's top 20 stocks by dividend yield. Further information on the Dow Jones U.K. Select Dividend 20 Index can be found at http://www.djindexes.com.
Company additions to and deletions from the Dow Jones U.K. Select Dividend 20 Index do not in any way reflect an opinion on the investment merits of the company.
Source: Dow Jones Indexes
Fitch Reports-Credit Derivatives and Margin: Under the Radar?
August 11, 2010--Summary
The dramatic growth in the credit derivatives market over the past decade is, in part, a reflection of their utility to market participants in managing credit exposure. However, these instruments are also frequently cited as having amplified the global financial crisis. Criticism of credit default swaps (CDS) often focuses on the opacity of CDS markets, counterparty risk, and issues related to clearing and settlement.
In addition to these concerns, it is also important to consider the significant investment leverage obtainable through CDS. CDS leverage, which is driven to a large extent by the amount of margin required to collateralize these exposures, has several implications for financial markets more broadly.
The relatively low down payment (i.e. the initial margin rate) needed for investing in CDS, coupled with their generally high liquidity, enables investors to more readily express a credit view and build larger risk positions than in the cash bond market.
The high leverage of CDS and trading orientation of some market participants (e.g. hedge funds), combined with the impact of margining and re-margining, have the potential to distort pricing, which could result in disconnects between CDS spreads and credit fundamentals.
Since market participants often use CDS prices as a gauge of credit risk, dislocations in pricing can hamper funding access, particularly for issuers under stress.
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Source: Fitch Ratings
Emerging Global Advisors Lists EGShares INDXX India Infrastructure Index Fund on NYSE Arca
August 11, 2010-- NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the EGShares INDXX India Infrastructure Index Fund (Ticker: INXX). The ETF is sponsored by Emerging Global Advisors.
The EGShares INDXX India Infrastructure Index Fund seeks investment results that generally correspond, before fees and expenses, to the price and yield performance of the INDXX India Infrastructure Index.
Source: NYSE Euronext
Wisdom Tree files with the SEC
August 11, 2010--Wisdom Tree has filed an amended and restarted application for exemptive relief with the SEC.
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Source: SEC.gov
US trade gap swells to 21-month high
August 11, 2010--The sharp rise in the US trade gap in June was evidence that while demand in the US economy has so far held up reasonably well, a disturbing amount of it is leaking abroad.
The rise in the monthly trade deficit to $49.9bn (€37bn, £31bn), higher than analysts’ expectations, reflected a surge in imports of consumer goods and cars. Imports of capital goods, used in industrial production, also rose, but raw materials and components fell.
In a preliminary estimate of second-quarter gross domestic product released on July 30, which showed the expansion in GDP slowing sharply, net exports subtracted an annualised 2.8 percentage points from economic growth.
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Source: FT.com
NASDAQ OMX Welcomes NXP Semiconductors, NASDAQ's Largest European IPO of 2010, to The NASDAQ Stock Market
August 11, 2010--The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ), the world's largest exchange company, announced that the trading of NXP Semiconductors, (Nasdaq:NXPI) commenced on August 6 on The NASDAQ Stock Market. NXP Semiconductors, whose products are used in a wide range of automotive, identification, wireless infrastructure, lighting, industrial, mobile, consumer, and computing applications, is NASDAQ's largest European IPO of 2010, raising proceeds totaling $476 Million.
NXP Semiconductors was one of five companies to hold an IPO on The NASDAQ Stock Market last week. Gordman Stores (Nasdaq:GMAN), and healthcare companies, NuPath, Inc. (Nasdaq:PATH), Trius Therapeutics, Inc. (Nasdaq:TSRX), and D. Medical Industries, Inc. (Nasdaq:DMED) all also chose NASDAQ as their listing exchange. In 2010, NASDAQ has maintained a stronghold in the technology and healthcare sectors, capturing 67 percent and 86 percent of global IPOs respectively.
"NASDAQ is home to companies that offer innovative and groundbreaking products and services to their respective industries," said Bruce Aust, Executive Vice President, Corporate Client Group, NASDAQ OMX, "NASDAQ OMX is excited to welcome NXP Semiconductors and four other IPOs to The NASDAQ Stock Market this week that showcase that commitment to growth and innovation."
NASDAQ IPOs have raised more than $4.98 Billion in proceeds in 2010, and NASDAQ has captured 48 new listings across a variety of sectors. Other distinguished companies who have recently listed on NASDAQ include: SMART Technologies (Nasdaq:SMT), the largest IPO of 2010, which raised more than $660 Million in proceeds in its first day of trading, and CBOE Holdings, Inc. (Nasdaq:CBOE).
Source: NASDAQ OMX
Opening Statement, Meeting of: The CFTC-SEC Joint Advisory Committee on Emerging Regulatory Issues, Washington, DC
August 11, 2010--Good morning. I am pleased to open the third public meeting of the CFTC-SEC Joint Advisory Committee on Emerging Regulatory Issues. Today we will continue our examination of the market events that took place on May 6, 2010.
I thank SEC Chairman Mary Schapiro for co-chairing today’s meeting and the Committee. I look forward to continuing to work closely with Chairman Schapiro on issues relating to May 6 as well as implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The Dodd-Frank Act for the first time brings over-the-counter derivatives under comprehensive regulation. To best protect the American public, the CFTC will work closely and consultatively with the SEC on each of our rulemakings. Staff from both agencies have already begun meeting and working together on proposed rulemakings.
I would also like to welcome and thank the members of the Joint CFTC-SEC Advisory Committee on Emerging Regulatory Issues as well as our expert panelists. I look forward to hearing investor perspectives on the contributing factors to the May 6 market events.
I also would like to thank the staff of the CFTC and SEC for all of their hard work planning this meeting and reviewing the circumstances surrounding May 6.
Lastly, I want to recognize and thank my fellow CFTC Commissioners, Mike Dunn, Jill Sommers, Bart Chilton and Scott O’Malia.
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Source: CFTC.gov
Alps files with the SEC
August 10, 2010--Alps has filed a post effective amendedment, registration statement with the SEC for
ALERIAN MLP ETF (Ticker: AMLP)
view filing
Source: SEC.gov
