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Morgan Stanley-ETF Weekly Update
September 4, 2012--Weekly Flows: $2.0 Billion Net Inflows
ETF Assets Stand at $1.2 Trillion, up 17% YTD
One ETF Launch Last Week
ProShares Announces Reverse Split on VIX ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $2.0 bln last week, the fifth consecutive week of net inflows
Fixed Income ETFs generated net inflows of $1.2 bln last week, the most of any category (Fixed Income ETFs have posted net
inflows 54 of the past 55 weeks)
ETF assets stand at $1.2 tln (up 17% YTD) and have posted net inflows 27 out of 35 weeks YTD ($92.5 bln in net inflows)
13-week flows were mostly positive among asset classes; combined $35.6 bln net inflows
All but two categories exhibited net inflows over the past 13 weeks (US Mid-Cap and Currency ETFs had net outflows of merely $486 mln combined)
Over the last 13 weeks, 41% of ETFs had net inflows/35% had net outflows/24% had no net flows
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Barclays TIPS Bond Fund (TIP) generated net inflows of $314 mln last week, the most of any ETF
The iShares Russell 2000 Index Fund (IWM) exhibited net outflows of $416 mln last week, the most of any ETF; IWM has posted net outflows of $271 mln YTD and outflows coincide with small-cap underperformance relative to large-caps
Fixed Income ETFs have benefitted as investors have continued to search for yield; in particular, the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) and the iShares iBoxx $ High Yield Corporate Bond Fund (HYG) have posted a combined $3.8
bln in net inflows over the last 13 weeks
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 8/15/12
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $1.6 bln
SPY’s short interest increased for the first time since 5/31/12, however its 213 mln shares short is well below its 52-week average of 335 mln shares short
Aggregate ETF USD short interest increased $104 mln over the past two weeks ended 8/15/12
The average shares short/shares outstanding for ETFs is currently 5.2%
Out of the 10 ETFs with the highest % of shares short, five of them have market caps less than $20 mln, and in our view skewing the impact of the exhibit
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Smith Barney Research.
Data estimated as of 8/31/12 based on daily change in share counts and daily NAVs.
$9.1 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched Active ETFs generated most net inflows at $1.3 bln (specifically the PIMCO Total Return ETF-BOND)
125 new ETF listings and 35 closures YTD (additional 34 liquidations have been announced)
Notably, nine out of the 37 ETF sponsors have liquidated/slated to liquidate ETFs this year; one issuer (FocusShares) shuttered its entire line-up
Over the past year, many of the successful launches have an income/defensive orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
Top 10 most successful launches account for 69% of market cap of ETFs launched over the past year
iShares files with the SEC
September 4, 2012--iShares has filed a Form N-1A registration statement with the SEC for the iShares Ultrashort Duration Bond Fund.
August VIX Futures Trading Volume Rises 5% From August 2011
Year-To-Date VIX Futures Average Daily Volume 58% Ahead of Same Period One Year Ago
September 4, 2012--The CBOE Futures Exchange, LLC (CFE(R)) today announced that trading volume in futures on the CBOE Volatility Index(R) (the VIX(R) Index) during August 2012 totaled nearly two million contracts, five percent ahead of August 2011 and nearly even with July 2012.
August 2012 average daily volume (ADV) in VIX futures was 83,016 contracts, an increase of five percent from 79,402 contracts ADV in August 2011. August 2012 average daily volume decreased by nine percent when compared to ADV of 91,140 contracts in July 2012.
ISE Reports Business Activity for August 2012
September 4, 2012--ISE was the second largest equity options exchange in August with market share of 17.9%,excluding dividend trades.
Dividend trades made up 5.1% of industry volume in August 2012.
The International Securities Exchange (ISE) today reported average daily volume of 2.1 million contracts in August 2012. This represents a decrease of 48.2% compared to August 2011, which was a month of exceptionally high volatility. Total options volume for the month was 49.1 million contracts. ISE was the second largest U.S. equity options exchange in August with market share of 17.9%*.
Business highlights for the month of August include:
On August 14, 2012, ISE completed the roll out of Implied Order functionality for all products in its complex order book. Implied Orders significantly enhance ISE’s industry-leading complex order book by enabling greater interaction of multi-legged orders with the regular order book.
Russell flop sparks fear of ETF malaise
September 3, 2012--In early 2010, Russell Investments, the fund manager and compiler of market indices, hired two stars of the exchange-traded fund industry who had pioneered the cheap index tracking products at the iShares franchise.
Following the likes of BlackRock and State Street, Russell was betting that investors would seek nimble strategies to trade in and out of markets after the financial crisis. Barely two years later, Russell has announced the closure of its passive funds business.
ISE Weekly Listings August 31, 2012
August 31, 2012--The International Securities Exchange listed new options classes during the week beginning August 27, 2012 as described below.
Effective Monday, August 27, 2012, the ISE listed options on the following product(s) along with their related symbol(s):
Bin 10 - Morgan Stanley & Co. LLC
Equity
MEMC Electronic Materials Inc. (Symbol: WFR, Trading Symbol(s): WFR) will trade on a January expiration cycle with exercise and position limits of 250000.
CFTC.gov Commitments of Traders Reports Update ALPS and RiverFront Lower Fees and Add a New Income Fund SEC Issues Risk Alert on "Pay-To-Play" Prohibitions Under MSRB Rules
Compliance with the rule’s ban on doing business with a municipal issuer within two years of a political contribution to officials of the issuer by any of the firm’s municipal finance professionals
Possible recordkeeping violations
Preliminary Annual Report on U.S. Holdings of Foreign Securities .S. Department of the Treasury TIC Annual and Benchmark Surveys Update Fee Rate Advisory #7 for Fiscal Year 2013 Federal Reserve Chairman Ben S. Bernanke At The Federal Reserve Bank Of Kansas City Economic Symposium
Today I will review the evolution of U.S. monetary policy since late 2007. My focus will be the Federal Reserve's experience with nontraditional policy tools, notably those based on the management of the Federal Reserve's balance sheet and on its public communications. I'll discuss what we have learned about the efficacy and drawbacks of these less familiar forms of monetary policy, and I'll talk about the implications for the Federal Reserve's ongoing efforts to promote a return to maximum employment in a context of price stability.
Hedge Funds Cleared to Advertise Under SEC Proposal Pimco, the quiet giant among commodity investors: Kemp
With more than $21 billion invested in Pimco's main Commodity Real Return Strategy Fund at the end of June, and another $4.7 billion in the newer Commodity Plus Fund, the California-based investment manager's holdings are far larger than public pension funds with more famous commodity programs like California Public Employees' Retirement System (CalPERS), or PGGM and ABP in the Netherlands
August 31, 2012--The current reports for the week of August 28, 2012 are now available.
RiverFront Conservative Income Builder Fund the Newest Addition to the ALPS Investment Lineup
August 31, 2012--A DST Company announced a 0.15% fee reduction for three of the RiverFront Global Allocation Series
mutual funds effective as of August 31, 2012.
As part of a new expense limitation agreement between ALPS, RiverFront, the RiverFront Moderate Growth and Income Fund, RiverFront Global
Allocation Fund and RiverFront Dynamic Equity Income Fund, investors will benefit from reduced expenses. The new agreement caps expenses at 0.90%, not inclusive of distribution or service fees, acquired fund fees, taxes, brokerage commissions, and ordinary expenses. Previously, expenses had
been capped at 1.05%.
August 31, 2012--The Securities and Exchange Commission today issued an alert to strengthen compliance with a Municipal Securities Rulemaking Board rule that limits political contributions by municipal securities professionals to campaigns of public officials of issuers with whom they are doing or seek to do business.
The Risk Alert issued by the agency’s Office of Compliance Inspections and Examinations notes that SEC examiners have observed practices that raise concerns about firms’ compliance with their obligations under MSRB Rule G-37, which clamped down on so-called “pay to play” practices. These concerns include:
August 31, 2012--Preliminary data from an annual survey of U.S. portfolio holdings of foreign securities at year-end 2011 were released today.Final survey results, which will include additional detail as well as revisions to the data, will be reported on October 31, 2012.
The survey was undertaken jointly by the U.S. Department of the Treasury, the Federal Reserve Bank of New York, and the Board of Governors of the Federal Reserve System.
A complementary survey measuring foreign holdings of U.S. securities also is conducted annually. Data from the most recent such survey, which reports on securities held on June 30, 2012, are currently being processed. Preliminary results are expected to be reported on February 28, 2013.
Overall Preliminary Results
The survey measured the value of U.S. holdings of foreign securities at year-end 2011 of approximately $6.8 trillion, with $4.5 trillion held in foreign equities, $2.0 trillion held in foreign long-term debt securities (original term-to-maturity in excess of one year), and $0.4 trillion held in foreign short-term debt securities.
August 31, 2012--The preliminary data from the annual survey on U.S. Portfolio Holdings of Foreign Securities at End-year 2011 is available.
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August 31, 2012--The Securities and Exchange Commission today announced that in fiscal year 2013 the fees that public companies and other issuers pay to register their securities with the Commission will be set at $136.40 per million dollars.
The Commission determined this new rate in accordance with procedures required under the securities laws. Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment.
Jackson Hole, Wyoming, August 31, 2012-- Monetary Policy Since The Onset Of The Crisis
When we convened in Jackson Hole in August 2007, the Federal Open Market Committee's (FOMC) target for the federal funds rate was 5-1/4 percent.
Sixteen months later, with the financial crisis in full swing, the FOMC had lowered the target for the federal funds rate to nearly zero, thereby entering the unfamiliar territory of having to conduct monetary policy with the policy interest rate at its effective lower bound. The unusual severity of the recession and ongoing strains in financial markets made the challenges facing monetary policymakers all the greater.
August 30, 2012--Hedge funds may go from soliciting individual investors behind closed doors to conducting wide advertising campaigns without restrictions under a rule proposed today by the U.S. Securities and Exchange Commission.
SEC commissioners voted 4-1 to invite public comment on a proposal for how to end decades of limits on the pursuit of investors by private funds and startups. The proposal is driven by a law that repealed a ban on pitching such investments to all but a select few investors, such as those accustomed to pumping cash into hedge funds.
August 30, 2012--Pimco is well-known as the world's largest bond fund. But how many people realize it is also the largest investor in commodities, with a portfolio dwarfing the more high-profile pension funds?
And according to one of the most widely used databases, Pimco's flagship fund has been the most successful general commodity fund over the last decade.
