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Global Equity Index & ETF Research -- US Weekly ETP Market Review
July 28, 2010-New Listings and Delistings
There were 3 new listings in the previous week, all of them listed on NYSE Arca. AdvisorShares launched an active ETF seeking long term capital appreciation with exposure to the international markets. Global X Management Co LLC listed the first ETF focusing on Lithium; the ETF will seek to achieve its objective by investing in companies involved in the Lithium industry. Last but not least, Van Eck Funds listed a fixed income ETF offering access to Emerging Market Sovereign Debt in local currency
Net Cashflows
Total ETP inflows in the US add up to $3.8 bn during the previous week. Equity and Fixed Income ETPs had inflows of $3.5 bn and $1.0 bn, respectively. Commodity and Currency ETPs, on the other hand, experienced outflows of $621 mm and $123 mm, respectively.
Within Equity ETPs, US Sector ETPs received the largest inflows ($1.3 bn) followed by Small Cap ETPs, while Leveraged ETPs saw the largest outflows ($326 mm).
The Fixed Income ETPs space saw strong inflows again this week, with Corporates ETPs ($606 mm) and Overall ETPs ($147 mm) leading the positive flows.
Commodity ETPs experienced outflows driven mainly by Gold ETPs ($466 mm).
Turnover
Avg. Daily Turnover remained at around the same level. Turnover for this week was $71 bn.
Assets Under Management (AUM)
US ETPs AUM rose by 3.2% to $818 bn at the end of the week. Equity ETPs account for 73% of the assets with $595 bn, followed by Fixed Income funds with $139 bn and 17% of market share.
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Source: Deutsche Bank Global Equity Index & ETF Research
CBOE's Brodsky Says Options Exchange Can Expand Without a Merger Partner
July 28, 2010--CBOE Holdings Inc., operator of the largest U.S. options exchange that went public last month, has no need for a merger partner, Chief Executive Officer William Brodsky said.
“We’re not in need of someone else’s money,” Brodsky said in a July 26 interview. “We’ve shown we can run ourselves as an independent company, be profitable and produce a lot of cash. Other exchanges were new at managing themselves as for-profit companies” when they made initial public offerings, he said. Chicago-based CBOE has been a for-profit exchange since 2006.
CBOE sold shares on June 14 at a price that was 53 percent more expensive than NYSE Euronext and Deutsche Boerse AG after exchange operators saw at least $61 billion of acquisitions since 2007, data compiled by Bloomberg show. Nymex Holdings Inc., CBOT Holdings Inc. and International Securities Exchange Holdings Inc., which went public in 2005 and 2006, were all bought within three years of their IPOs after government regulations boosted competition.
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Source: Bloomberg
Horizons AlphaPro Launches Canada's First Actively Managed Balanced ETF
July 28, 2010-- AlphaPro Management Inc. ("AlphaPro"), the manager of the Horizons AlphaPro Exchange Traded Funds ("ETFs"), is pleased to announce the launch of the Horizons AlphaPro Balanced ETF (the "Balanced ETF"). The Balanced ETF will begin trading today on the Toronto Stock Exchange under the symbol HAA.
The sub-advisor to the Balanced ETF is Hillsdale Investment Management Inc. ("Hillsdale"), which has been managing private client and institutional money for more than 14 years using its innovative proprietary quantitative portfolio management process.
The investment objective of the AlphaPro Balanced ETF is to seek to provide a consistent rate of return balanced between current income and long-term capital growth. The Balanced ETF invests primarily in a balanced portfolio of publicly traded equity, income trust and debt securities located predominantly in Canada. In order to obtain direct or indirect exposure to these securities, the Balanced ETF may invest in exchange traded funds and exchange traded notes.
"Balanced mutual funds are easily one of the best selling mutual fund categories, because it's a simple default investment solution for retail investors. Investors who have embraced ETF investing have had few options in selecting a balanced mandate," said Ken McCord, President of AlphaPro. "The Horizons AlphaPro Balanced ETF is another step in the evolution of ETF investing; we're offering not only, in our view, one of the best actively-managed balanced mandates out there, but we're also offering it at one of the lowest management fees in the industry."
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Source:ALPHAPRO MANAGEMENT INC
United States Commodity Funds files with the SEC
July 27, 2010--United States Commodity Funds has filed an amendment to Form S-1.
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Source: SEC.gov
The Beige Book
July 28, 2010--Summary
Economic activity has continued to increase, on balance, since the previous survey, although the Cleveland and Kansas City Districts reported that the level of economic activity generally held steady. Among those Districts reporting improvements in economic activity, a number of them noted that the increases were modest, and two Districts, Atlanta and Chicago, said that the pace of economic activity had slowed recently
Manufacturing activity continued to expand in most Districts, although several Districts reported that activity had slowed or leveled off during the reporting period. Districts also noted improved conditions in the services sector. The five Districts reporting on transportation noted increased activity. Tourism activity also increased across the Districts, although the Atlanta District noted concerns about decreased leisure travel to the Gulf Coast. Retail sales reports generally indicated a continued rise in spending, and several Districts noted that necessities continued to be strong sellers, while big-ticket items moved more slowly. However, most Districts that reported on auto sales noted declines in recent weeks. Activity in residential real estate markets was sluggish in most Districts after the expiration of the April 30 deadline for the homebuyer tax credit. Commercial real estate markets, especially construction, remained weak. Banking conditions varied across the Districts, with some Districts noting soft or decreased overall loan demand; credit standards remained tight in most reporting Districts. Recent rains had mixed effects on crop conditions, while activity in the natural resources sector increased. Overall labor market conditions improved modestly across the Districts, with several reports of temporary hiring. Consumer prices of goods and services held steady in most reporting Districts. Input prices also held largely steady, with only a few reports of cost increases. Wage pressures continued to be contained on the whole.
Manufacturing and Other Business Activity View Summary of Commentary on
Current Economic Conditions
by Federal Reserve District U.S. International Reserve Position July 23, 2010 A. Official reserve assets (in US millions unless
otherwise specified) 1 128,279 (1) Foreign currency reserves (in convertible foreign
currencies) Euro Yen Total (a) Securities 9,121 14,891 24,013 of which: issuer headquartered in reporting country but
located abroad 0 (b) total currency and deposits with: (i) other national central
banks, BIS and IMF 13,485 7,298 20,783 ii) banks headquartered in the reporting country 0 of which: located abroad 0 (iii) banks headquartered outside the reporting country 0 of which: located in the reporting country 0 (2) IMF reserve position 2 11,898 (3) SDRs 2 55,807 (4) gold (including gold deposits and, if appropriate,
gold swapped) 3 11,041 --volume in millions of fine troy ounces 261.499 (5) other reserve assets (specify) 4,736 --financial derivatives --loans to nonbank nonresidents --other (foreign currency assets invested through reverse
repurchase agreements) 4,736 B. Other foreign currency assets (specify) --securities not included in official reserve assets --deposits not included in official reserve assets --loans not included in official reserve assets --financial derivatives not included in official reserve
assets --gold not included in official reserve assets --other read more Progress Software Survey Says: Over 50% of Capital Markets Firms Do Not Use Real Time Market Surveillance and Monitoring Tools
Dr. John Bates, Progress Software's chief technology officer and senior vice president of corporate development and strategy, said: "It is clear that high frequency trading is a widely accepted practice that will be at the heart of the capital markets landscape for the foreseeable future. From rogue traders to 'fat finger' errors to market panics, we've seen individuals, firms and even global economies impacted. With unprecedented trade volumes and values taking place in just fractions of a second, it is time for the capital markets culture to change with the times and embrace the tools needed to detect and avert risky trades, dangerous market movements and illicit market abuse." Other key findings include:
-- Just 36% of respondents believe that additional / stronger prohibitive
regulations are needed to effectively deal with market abuse and
anomalous market conditions.
-- 56% of believe that sponsored access, a highly-debated practice where
traders use the market participant identification of sponsoring
brokers to trade directly on electronic exchanges, should be managed
with some level of mandated pre-trade risk checks, while 31% think the
benefits outweigh the risk with sponsored access and should be freely
allowed in all forms including the highly disputed naked access. Only
13% believe that all forms of sponsored access should be banned
altogether. read more Morningstar Commodities Bulletin--2Q 2010 Here is a quick recap of how some individual sectors fared: * Energy: Oil was priced "close to perfection" (price at which supply and demand balance)--fluctuating within a relatively tight range of $70-$85. Regardless of the BP oil spill and imminent regulations on off-shore drilling, oil supply is expected to be plentiful throughout the near term. After tumbling 22% in the first five months of the year, natural gas prices shot up 15% in June amid forecasts for the hottest U.S. summer in 30 years, which would increase demand by power plants that use natural gas to generate electricity. In a recent article in the Wall Street Journal, "Hedge funds whipsawed by gas bets," the author discusses how the volatility in natural gas has caught even the savviest investors off guard, sparking a string of unexpected losses for top-name players. Funds that were short in natural gas incurred heavy losses due to the unexpected jump in prices. Research shows that energy prices are driven not only by demand/supply forces, but also factors such as geopolitical risk. It is for this reason that Morningstar uses a more conservative approach in our indexes. If the momentum turns negative in energy contracts or the signal is short, we move to a conservative cash (or flat) position.
* Agriculture: A bumper harvest in major commodities like corn and wheat kept the prices flat for the quarter. Coffee prices rose sharply--19% for the quarter--largely due to poor crops in Vietnam and Central America causing a fall in global supplies. Agriculture markets in the Northern Hemisphere could see increased volatility as farmers head into one of the hottest summers in years.
* Metals: Thanks to a strong rally in the price of gold, metals was the strongest performing sector with a gain of 7% for the quarter. Investors continue to view gold as a safe haven as concerns about government debt burdens continue to grow. Gold continued its multiyear rally adding 12% for the quarter. Among the industrial metals, copper was the worst performer, finishing the quarter 18% down. Slightly lower second-quarter growth numbers from China caused concerns about future demand from one of the world's largest metals consumers.
read more SEC Chairman Schapiro Announces Open Process for Regulatory Reform Rulemaking
The new process goes well beyond what is legally required and will provide expanded opportunity for public comment and greater transparency and accountability. The SEC also expects to hold public hearings on selected topics.
"It has not even been a week since the President signed the regulatory reform legislation into law, but at the SEC we are already working to fully implement the dozens of studies and rulemakings required of our agency," said Chairman Schapiro. "We recognize that the process of establishing regulations works best when all stakeholders are engaged and contribute their combined talents and experiences. We look forward to preliminary public comments in these areas."
The SEC is generally required by law to establish a public comment period at the time it proposes rules or rule amendments. However, because of the significant rulemaking envisioned under the new regulatory reform law, the public will have an opportunity to voice its views before rules or amendments are even proposed as well as to see what others are saying to the agency about these issues.
view Public Comment Page for SEC Initiatives Under Dodd-Frank Act SEC Publishes Public Request for Comment to Inform Study of Obligations of Broker-Dealers and Investment Advisers
As required by the Dodd-Frank Act, the SEC is requesting public input, comments, and data on issues related to the effectiveness of existing standards of care for brokers-dealers and investment advisers, and whether there are gaps, shortcomings, or overlaps in the current legal or regulatory standards.
"Broker-dealers and investment advisers provide critical financial services to millions of American investors," said SEC Chairman Mary L. Schapiro. "A system that fairly and effectively regulates these market participants is essential to protecting investors. We look forward to receiving comments from the public on these important issues."
The public comment period will remain open for 30 days, following publication of the comment request in the Federal Register. view SEC release requesting comment Submit comments
Manufacturing activity in most Districts continued to move up since the last report, although the pace of activity slowed or activity leveled off in the New York, Cleveland, Kansas City, Chicago, Atlanta, and Richmond Districts. Automobile manufacturing was a bright spot for the Cleveland, Chicago, and St. Louis Districts. Automobile parts suppliers also experienced increased demand in both the Richmond and Chicago Districts. Fuel demand at refineries in the San Francisco District improved, while gasoline demand was steady in the Dallas District. Firms in the semiconductor manufacturing industry reported relatively strong sales or demand growth in both the Boston and San Francisco Districts. Firms in aircraft and parts manufacturing saw sales pick up in both the San Francisco and Dallas Districts.
Source: Federal Reserve Board
July 27, 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 $128,279 million as of the end of that week, compared to $128,602 million as of the end of the prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
Source: US Department of the Treasury
July 27, 2010--Progress Software Corporation, a leading independent enterprise software provider that enables companies to be operationally responsive, today announced the results of its high frequency trading and market surveillance survey conducted at the recent SIFMA Financial Services Technology Expo 2010 in New York. More than 125 respondents from buy and sell-side firms provided their input on current high frequency trading (HFT) practices with 83 percent agreeing that increased transparency is needed to effectively deal with market abuse and irregular market activity, like the May 6 "flash crash." However, only 53 percent of firms surveyed currently have real-time monitoring systems in place.
According to the findings, 59 percent of financial services professionals believe that high frequency trading is beneficial to the market, with respondents citing increased liquidity and tightened spreads as the primary benefits. Only 18 percent believe that high frequency trading is dangerous or threatens market integrity. So while respondents generally do have a favorable opinion of HFT, they recognize that increased transparency is critical in preventing abuse and anomalous market conditions. In fact, 68 percent of respondents believe that the flash crash that derailed the financial markets in May 2010 could have been prevented.
Source: Progress Software Corporation
July 27, 2010--Performance Roundup
Volatility returned to the commodity markets with a vengeance in the second quarter. While most commodities saw an upswing the in the first half of the quarter, a bleak global economic outlook led to a precipitous drop in May and early June. The Morningstar Long-Only Commodity Index recorded moderate gains in April and June (3.6% and 1.2%, respectively) to no avail due to a 7.4% decrease in May. The index ended down 2.9% on the quarter, decreasing for the second straight quarter.
Across the board, April was a good month for commodities. Only copper and sugar recorded significant losses (6.2% and 8.2%). The quarter as a whole, however, proved to be a tough one with losses in all of the long indexes and stagnation in the short ones. Coffee (19%) and gold (12%) were the top performers, followed closely by natural gas (11%). Copper was the laggard of the pack, shedding 18% of its value. The surprise story is the sluggish performance of oil with Morningstar's Brent Crude down 12%, RBOB Gas down 11%, and WTI Crude down 14%.
Source: Morningstar
July 27, 2010--Securities and Exchange Commission Chairman Mary L. Schapiro today announced that the agency is making it easier for the public to provide comments as the agency sets out to make rules required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Under a new process, the public will be able to comment before the agency even proposes its regulatory reform rules and amendments. Additionally, the SEC will provide greater public disclosure of meetings with SEC staff.
Source: SEC.gov
July 27, 2010-- The Securities and Exchange Commission today published a request for public comment to inform its study of the obligations and standards of care of broker-dealers and investment advisers providing personalized investment advice about securities to retail investors.
The study is required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which President Obama signed into law on July 21, 2010.
Source: SEC.gov