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Global Equity Index & ETF Research -- US ETP Market Weekly Review
August 10, 2010--New Listings and Delistings
There were three funds listed over the previous week in NYSE Arca. Charles Schwab IM entered the Fixed Income space by introducing three new products offering inflation protected, short term, and intermediate-term US Treasuries exposure. As they have done with their previously listed ETFs, the new listings offer the lowest TER among their peers and $0 online trading commissions for Schwab accounts.
Net Cashflows
Total ETP inflows in the US added up to $5.8 bn during the previous week. Equity and Fixed Income ETPs had inflows of $6.0 bn and $80 mm, respectively. Commodity and Currency ETPs, on the other hand, experienced outflows of $309 mm and $24 mm, respectively.
Within Equity ETPs, Large Cap ETPs received the largest inflows ($3.4 bn) followed by Emerging Market Regional ETPs, while Small Cap ETPs saw the largest outflows ($1.1 bn).
The Fixed Income ETPs inflows were led by Corporates ETPs ($486 mm), while Sovereign ETPs experienced the largest outflows ($568 mm), almost offsetting all the other categories.
Commodity ETPs experienced outflows again, driven mainly by Crude Oil ETPs ($255 mm), it is worth to point out that Gold ETPs recorded mild positive flows ($26 mm) after a series of weeks experiencing outflows.
Turnover Avg. Daily Turnover decreased by 8.6% and totaled $62 bn at the end of the week.
Assets Under Management (AUM)
US ETPs AUM rose by 2.3% totaling $845 bn at the end of the week. Equity ETPs account for 73% of the assets with $620 bn, followed by Fixed Income funds with $141 bn and 17% of market share.
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Source: Deutsche Bank Global Equity Index & ETF Research
United States Commodity Funds LLC Launches the United States Commodity Index Fund (USCI)
August 10, 2010-- United States Commodity Funds LLC, a sponsor of exchange traded commodity funds, listed for trading on the New York Stock Exchange Arca a new exchange traded commodity index fund, United States Commodity Index Fund, under the ticker "USCI".
The United States Commodity Index Fund (USCI) is an exchange traded product ("ETP") that seeks to reflect the performance of a diverse group of commodities. USCI issued units may be purchased and sold on the NYSE Arca. The investment objective of USCI is for the daily changes in percentage terms of its units' net asset value ("NAV") to reflect the daily changes in percentage terms of the SummerHaven Dynamic Commodity Index, less USCI's expenses.
United States Commodity Index Fund's target is a diversified basket of the most important physical commodities in the global economy. These commodity holdings are among the most actively traded futures contracts and represent the primary U.S. and non-U.S. benchmarks for each commodity. The portfolio consists of positions in listed commodity futures contracts and other commodity-related futures, forwards and swap contracts. These investments will be collateralized by cash, cash equivalents and U.S. government obligations with remaining maturities of two years or less.
Source: United States Commodity Funds LLC
Barclays Launches Eight New iPath(R) Exchange Traded Notes Linked to US Treasury Futures Indices
New iPath(R) ETNs allow investors to express views on the shape of the US Treasury yield curve
August 10, 2010--Barclays Bank PLC announced that today is the first day of trading for eight new iPath Exchange traded Notes (ETNs) on the NYSE-Arca stock exchange. These are the first iPath(R) ETNs that provide exposure to fixed income strategies.
The following are the new ETNs and their exchange ticker symbols:
iPath(R) US Treasury Steepener ETN (STPP)
iPath(R) US Treasury Flattener ETN (FLAT)
iPath(R) US Treasury 2-year Bull ETN (DTUL)
iPath(R) US Treasury 2-year Bear ETN (DTUS)
iPath(R) US Treasury 10-year Bull ETN (DTYL)
iPath(R) US Treasury 10-year Bear ETN (DTYS)
iPath(R) US Treasury Long Bond Bull ETN (DLBL)
iPath(R) US Treasury Long Bond Bear ETN (DLBS)
"The new ETNs allow investors to take a view on whether the yield curve will steepen or flatten or if specific yields might increase or decrease," said Philippe El-Asmar, Managing Director, Head of Investor Solutions at Barclays Capital. "This launch underscores our commitment to expanding the iPath ETN platform in the US and providing investors with innovative investment solutions across all asset classes. The ETN market in the US has grown tremendously since it launched in 2006 with over $10 billion assets currently under management in ETNs."
These eight new iPath(R) ETNs are senior, unsecured, unsubordinated debt securities of Barclays Bank PLC.
iPath(R) ETNs are designed to provide investors with convenient access to the returns of market benchmarks, less investor fees. Subject to the requirements described in the applicable prospectus, the securities can be sold in the secondary market during trading hours at market prices, and may typically be redeemed in at least 50,000 units on a daily basis directly to the Issuer(1).
The prospectuses can be found on EDGAR, the SEC website at: www.sec.gov, as well as on the product website at www.iPathETN.com.
Barclays Bank PLC is the issuer of iPath ETNs and Barclays Capital Inc. is the issuer's agent. BlackRock's broker dealer affiliate, BlackRock Fund Distribution Company, engages in the promotion of iPath ETNs to intermediaries.
Source: Barclays
Commodity ETF Tracking Yale Professors' Index of Raw-Material Mix Debuts
August 10, 2010--The United States Commodity Index Fund, an exchange-traded fund tied to an index designed in part by two Yale University professors whose research earlier this decade helped spur a commodities rush, begins trading today.
The index was created by SummerHaven Index Management LLC, based in Stamford, Connecticut, with the help of K. Geert Rouwenhorst, whose 2004 paper with colleague Gary Gorton, titled “Facts and Fantasies About Commodity Futures,” argued that an investment in a broad commodity index would have brought positive returns from 1959 to 2004. Both are professors of finance at the Yale School of Management.
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Source: Bloomberg
United States Commodity Funds Launches the first 3rd Generation Commodity ETP
August 10, 2010--The United States Commodity Funds is pleased to announce the launch of the United States Commodity Index Fund (NYSE: USCI), the first 3rd Generation Commodity ETP. USCI seeks to provide clients with diversified commodity exposure while addressing some of the major obstacles of investing in commodity futures.
USCI is based on the SummerHaven Dynamic Commodity Index (SDCI), a rules based commodity index that seeks to identify long-term sources of return in commodity futures based on fundamental signals about the underlying physical commodity markets.
USCI differs from other Commodity ETFs in the following ways:
Commodity Selection - Unlike 1st and 2nd generation commodity indices which are always fully invested in the same commodities, the SDCI is comprised of 14 Futures Contracts that will be selected on a monthly basis from a list of 27 possible Futures Contracts.
Commodity Weighting - Each of the 14 commodities in the SDCI are equally weighted, providing meaningful exposure to each commodity that we believe has the best chance to outperform in the short-run.
Curve Selection - Rather than obtaining all of our commodity exposure at the front month, the SDCI is rules-based and rebalanced monthly. The composition of the SDCI in any given month will be determined by quantitative formulas relating to the prices of the futures contracts as they relate to both price momentum and inventory levels.
Visit http://www.unitedstatescommodityindexfund.com/ for more info
Source: USCI
Agencies Issue Advance Notice of Proposed Rulemaking Regarding Alternatives to the Use of Credit Ratings
August 10, 2010--The federal banking agencies (agencies) today have agreed to publish an advance notice of proposed rulemaking (advance notice) regarding alternatives to the use of credit ratings in their risk-based capital rules (capital rules) for banking organizations. The advance notice is issued in response to section 939A of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Act), enacted on July 21, 2010, which requires the agencies to review regulations that (1) require an assessment of the credit-worthiness of a security or money market instrument and (2) contain references to or requirements regarding credit ratings. In addition, the agencies are required to remove such references and requirements and substitute in their place uniform standards of credit-worthiness, where feasible.
Through this advance notice, the agencies are seeking to gather information as they begin to develop alternatives to the use of credit ratings in their capital rules. This advance notice describes the areas in these capital rules where the agencies rely on credit ratings, as well as the Basel Committee on Banking Supervision's recent amendments to the Basel Accord. The advance notice solicits comment on alternative standards of creditworthiness that could be used in lieu of credit ratings. It requests comment on a set of criteria the agencies believe are important in evaluating creditworthiness standards, including risk sensitivity, transparency, consistency, and simplicity. It asks for comment on a range of potential approaches, including basing capital requirements on more granular supervisory risk weights or on market-based metrics, as well as on how these approaches might apply to different exposure categories. It also seeks comment on the feasibility of and burden associated with alternative methods of measuring creditworthiness for banking organizations of varying size and complexity.
full text-Advance Notice of Proposed Rulemaking Regarding Alternatives to the Use of
Credit Ratings in the Risk-Based Capital Guidelines of the Federal Banking Agencies
Source: Federalreserve.gov
FOCM Statement
August 10, 2010--Information received since the Federal Open Market Committee met in June indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Bank lending has continued to contract. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be more modest in the near term than had been anticipated.
Measures of underlying inflation have trended lower in recent quarters and, with substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities.1 The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.
The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.
Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and limits the Committee's ability to adjust policy when needed. In addition, given economic and financial conditions, Mr. Hoenig did not believe that keeping constant the size of the Federal Reserve's holdings of longer-term securities at their current level was required to support a return to the Committee's policy objectives.
1. The Open Market Desk will issue a technical note shortly after the statement providing operational details on how it will carry out these transactions.
2010 Monetary Policy Releases
Source: Federal Open Market Committee (FOCM)
State Street Global Advisors-ETF SNAPSHOT: JULY 2010
August 10, 2010--As of July 31, 2010, 917 ETFs — with assets totaling approximately $822BN — were managed by 33 ETF managers. ETF industry assets rose $50BN for the month — up 6.5%.
Year-to-date, ETF assets have increased $46BN, or 6.0%.
STATE STREET HIGHLIGHTS, JULY 2010
br>SPDR® Barclays Capital High Yield Bond ETF [JNK] surpassed $5BN in assets in July, fueled by inflows of more than $628MM in July and $1.6BN year-to-date.1 JNK trades 2,313,977 shares per day (20 Day Avg.) and has an average daily volume of more than $91MM dollars — making it the most liquid high yield bond ETF. JNK has had the highest inflows of any high yield bond ETF YTD.
ASSET CLASSES OVERALL
The S&P 500® Index bounced back in July, returning 7.1%, while the MSCI EAFE Index and MSCI Emerging Markets Index rose 9.5% and 8.4%, respectively. US Bonds advanced with the Barclays U.S. Treasury Index gaining 0.7% and the Barclays U.S. Aggregate Index climbing 1.1%. For Commodities, the S&P® GSCI Index returned 5.6% in July.
The International and Size categories had the largest increases in AUM.
The Commodity category saw the largest decline in assets, dropping $3.7BN, or 4.7%.
SIZE/STYLE
Large Cap had the largest increase in assets, up $6.7BN followed by Small Cap with $3.3BN.
AllCap - Value was the only category with a decline in assets for the month, down $2MM.
SECTOR
All Sector categories saw increases in assets in July with the exception of Materials, down $436MM, or 3.6%.
Energy and REITs led asset increases, gaining $1.2BN and $1.3BN, respectively.
For more information, including research and statistics, please visit www.spdrs.com.
Source: State Street Global Advisor
Plunge in May Highlighted Concerns With ETF Trading
August 10, 2010--The May 6 stock market plunge in the U.S. exposed hazards in the use of exchange-traded funds during periods of volatility, ETF sponsors such as State Street Global Advisors’ James Ross said at a panel today in New York.
Investors using the funds should avoid the market when it is gyrating if they can, said Ross, a senior managing director at the unit of Boston-based State Street Corp. ETFs made up 70 percent of securities with trades on May 6 that were canceled due to excessive declines, a study by federal regulators found.
Ross said losses may have been worsened for ETF and stock investors by the use of market orders, or requests to buy or sell a security at any available price. About $862 billion was erased from U.S. equity values in less than 20 minutes on May 6 as dozens of ETFs and companies such as Accenture Plc fell as much as 99 percent.
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Source: Business Week
Treasury Assistant Secretary for Financial Institutions Michael S. Barr-Implementing the Dodd-Frank Act to End Too Big To Fail
Remarks at the Chicago Club on Next Steps on Financial Reform
August 10, 2010--Last month, President Obama signed into law a comprehensive set of reforms to our financial system that will lay a firm foundation for growth and prosperity in the years ahead.
Last week in Charlotte, I focused on getting the balance right on consumer protection while fostering innovation and growth. Today I want to focus on the task of ending "too- big-to-fail."
The Dodd-Frank reforms will help to make sure that risks taken by banks do not threaten the health of the economy as a whole. These reforms require the largest financial firms to build up their capital and liquidity buffers, constrain their relative size, and place restrictions on their riskiest financial activities. These reforms bring transparency to the shadow banking system and fully regulate our derivatives markets. And these reforms create a mechanism for the government to shut down failing financial firms without putting taxpayers at risk. The import of the Act is clear: in the future, no financial firm will be "too big to fail."
For much of the last century, the American financial system was the envy of the world--surpassing other major developed economies in innovation and productivity growth. It provided investors and consumers with the strongest protections. Its regulatory checks and balances helped create a remarkably long period of relative economic stability. And the financial system was consistently better at directing investment towards the companies and industries where the returns would be the highest.
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Source: U.S. Department of th Treasury
