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Knight Capital to Fully Resume NYSE and NYSE MKT Designated Market Maker Responsibilities on Monday, Aug. 13, 2012
August 8, 2012--Knight Capital Group Inc., has regained some of the market share it lost after a huge trading loss last week nearly ran it out of business and will resume full market-making responsibilities as of next week.
Knight, which secured a $400 million bailout from an investor consortium in exchange for a 73 percent stake, may have turned down a more lucrative rescue bid that might have had less of an effect on shareholders from hedge fund Citadel LLC, a source familiar with negotiations said on Tuesday.
The bailout has restored some confidence in the firm days after a software glitch caused a trading loss of $440 million - most of Knight's capital - and caused customers to desert. Trading volumes are now steadily recovering SEC to Host Market Technology Roundtable
Nearly all trading in the equity and options markets depends on the reliable performance of highly automated systems used by investors, broker-dealers, and exchanges and other trading systems.
"Libor, Naked and Exposed-New York Times OP-ED" AdvisorShares Set to Launch the QAM Equity Hedge ETF (NYSE: QEH) QEH employs an actively managed long/short strategy that seeks to exceed the risk-adjusted performance of approximately 50% the long/short equity hedge fund universe as defined by the constituents of the HFRI Equity Hedge (Total) Index, aiming to provide investors with better risk adjusted returns versus the S&P 500 Index over time while reducing the time required and expertise needed to select individual hedge funds. Combined with its exposure to the HFRI Equity Hedge (Total) Index, CAM utilizes its own proprietary research with Markov Processes International's ("MPI") Dynamic Style Analysis ("DSA") hedge fund analysis software, and extensive experience and knowledge of the hedge fund investment community for its portfolio management of QEH. DB - Equity Research-US ETF Market Monthly Review : ETP AUM added $30bn helped by equity inflows of $16bn
Muddling through the way back to risk-on
Within long-only ETPs, total flows were +$15.7bn in July vs. +$11.6bn in June. Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of +$14.8bn, +$0.9bn, and -$1.6bn, respectively. July and June ETP flow trends, although flickering, have been pointing towards a comeback to risk. Moreover, flows have been consistent with the market which has downplayed the negativism portrayed towards the end of Q2. Nevertheless, July ETP flows exhibited a more evident bias towards risk as compare to June. The main shift was marked by a clearer allocation to riskier asset classes along with a significant departure from typical ‘safe haven’ investment segments. Although markets are still navigating choppy seas, ETP flow trends suggest that investors are becoming less negative about the outlookin Europe and in the US. However as the oscillation of equity flows suggests (Figure 3), the situation remains fluid and could revert easily on the back of any negative development. Stronger and steadier inflows to equity would be required before we could confirm a full shift back to risk on.
Some of the relevant flow trends of the month were: (1) US equity (+$11.4bn), (2) Sovereign debt (-$4.1bn), and (3) Corporate debt (+$2.7bn).
New Launch Calendar: ETFs going after alpha and income
ETP floor activity recorded lowest level since May 2007
US ETP trading made up 26.0% of all US cash equity trading in July, down from both its August 2011 peak of 37.5% and its 3-year monthly average of 29.4%.
The largest drop was on Equity ETP turnover, which fell by $205bn or 17.9% to $0.9 trillion, followed by Commodity and Fixed Income ETP turnover which shrank by $18.2bn (totaling $50bn) and $15.2bn (totaling $67bn) during last month, respectively. Morgan Stanley-US ETF Weekly Update ETFs posted net inflows of $4.9 bln last week, rebounding from the prior week’s net outflows of $3.0 bln
13-week flows were mostly positive among asset classes; combined $33.8 bln net inflows
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) generated net inflows of $913 mln last week, the most of any ETF
Conversely, the ProShares Ultra Russell2000 (UWM) lost ~75% of its market cap last week with net cash outflows of $352 mln US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 7/13/12
Aggregate ETF USD short interest declined $2.8 bln over the past two weeks ended 7/13/12
For the third consecutive period, SPDR S&P 500 ETF (SPY) short interest declined; SPY’s 205.7 mln shares short is its lowest level since 12/31/09
The average shares short/shares outstanding for ETFs is currently 4.6%
US-Listed ETFs: Most Successful Recent Launches by Assets $8.0 billion in total market cap of ETFs less than 1-year old
Over the past year, many of the successful launches have an income/dividend orientation
Top 10 most successful launches account for 71% of market cap of ETFs launched over the past year (skewed by BOND) S&P 500 climbs above 1,400 Standard Chartered Says It's The Victim In $250 Billion Hidden Transactions Case Russell, Scottrade retreat from US ETF market Knight Is Said to Have Spurned $500 Million Citadel Loan read more BofA Merrill Lynch Increases Benefit Plan Assets to $20B The growth the business has seen so far comes as it has boosted its number of plans to about 3,700, up 200 from the same time last year, including 401(k), defined benefit, equity and non-qualified deferred compensation.
After Knight, Unfair Knocks
August 8, 2012--The Securities and Exchange Commission today announced that it will host a technology roundtable next month to discuss ways to promote stability in markets that rely on highly automated systems.
The roundtable entitled “Technology and Trading: Promoting Stability in Today’s Markets” will take place on September 14 and convene experts on designing, operating, and controlling the systems that form the core of our market’s infrastructure.
Opinion by Chairman Gary Gensler
August 7, 2012--AMERICANS who save for the future, use credit cards or borrow money for tuition, cars and homes deserve assurance that the interest rates on their savings and loans are set in a reliable and honest way.
That’s why the revelation that the British bank Barclays attempted to manipulate the London interbank offered rate, or Libor — one of the benchmark rates used to determine the cost of borrowing around the world — is so disturbing. But the Barclays case isn’t only about misconduct by large financial institutions. It also raises questions about the reliability and accuracy of these key interest rates, which are largely determined by the private sector, without significant government oversight.
New Actively Managed ETF Seeks to Outperform Long/Short Equity Hedge Fund Universe
August 7, 2012--AdvisorShares, a leading sponsor of actively managed Exchange Traded Funds (ETFs), announced today that the QAM Equity Hedge ETF (NYSE: QEH) will open for trading tomorrow, Wednesday, August 8, 2012.
QEH is sub-advised by Commerce Asset Management ("CAM"), a Memphis, Tenn.-based investment advisor and subsidiary of Commerce Holdings, LLC who advise on approximately $700 million in assets.
August 7, 2012--US ETP assets rose by 2.6% MoM in July reaching a 14% growth YTD
ETP assets in the US rose by $29.9bn to $1.19 trillion last month, boosting AUM growth to a decent 14% growth on a YTD basis.
Global ETP industry assets rose to $1.62 trillion, or 13.0% up YTD.
US ETP flows experienced inflows of $16.3bn during July (+$88.5bn, 8.5% of last year’s AUM).
There were 9 new ETPs and 1 new ETN listed during the previous month. All of the products were listed in the NYSE Arca. The new products cover multiple asset classes such as equity, fixed income, and currency (See figure 20 for more details). Most of the new additions to the ETF offering give access to incomedriven investments, actively managed strategies, or enhanced beta indices
Total monthly turnover dropped by 18.5% to $1.07 trillion vs. $1.31 trillion in the previous month.
August 7, 2012--US ETF Weekly Update
Weekly Flows: $4.9 Billion Net Inflows
ETF Assets Stand at $1.2 Trillion, up 14% YTD
No ETF Launches Last Week
Direxion Announced the Planned Liquidation of 9 ETFs
US-Listed ETFs: Estimated Flows by Market Segment
Last week’s net inflows were primarily driven by US Large-Cap and Fixed Income ETFs ($2.4 bln and $2.0 bln, respectively)
ETF assets stand at $1.2 tln, up 14% YTD; ETFs have posted net inflows 23 out of 31 weeks YTD ($86.5 bln in net inflows)
Fixed Income ETFs have generated net inflows 50 out of the past 51 weeks ($12.1 bln net inflows over the last 13 weeks)
Emerging Market Equity ETFs have had net outflows of $1.1 bln over the past 13 weeks with 62 ETFs exhibiting net cash outflows, 39 exhibiting no net flows, and just 29 exhibiting net cash inflows
We estimate that SPY has posted net inflows 11 out of 31 weeks YTD ($1.3 bln in aggregate net inflows)
The iShares Dow Jones US Real Estate Index Fund (IYR) had net cash outflows of $431 million last week, nearly erasing its net
cash inflows for the year (YTD net inflows now $45 mln)
The ProShares Ultra 7-10 Year Treasury (UST) had net cash inflows of $481 mln last week accounting for 96% of its market cap;
iShares MSCI EM Index Fund (EEM) had the largest increase in USD short interest at $577 mln
Retail ETFs have consistently been some of the most heavily shorted ETFs
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%)
Source: Bloomberg, Morgan Stanley Smith Barney Research.
Data estimated as of 8/3/12 based on daily change in share counts and daily NAVs.
Newly launched Active ETFs generated the largest 13-week net inflows at $1.7 bln (PIMCO Total Return ETF-BOND had the largest flows at $1.6 bln; next highest was the First Trust North American Energy Infrastructure Fund-EMLP at $33.5 mln)
119 new ETF listings and 17 closures YTD
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
The iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV) had net cash inflows of $88 mln last week, which is almost two times more than its second largest weekly of net inflows of $45 mln (from 2/27/12 – 3/2/12)
August 7, 2012--Wall Street's benchmark S&P 500 climbed above 1,400 for the first time since early May as US stocks looked set for a third consecutive session of gains with luxury retailers leading the way.
Shares in Fossil surged 31.5 per cent to $91.77 in New York after the retailer of high-end watches, wallets and other accessories reported second-quarter results that were better than expected.
August 7, 2012--"In recent weeks, issues have surfaced around governance and behaviour in banking. At Standard Chartered, we believe it is not just about what we do, but how we do it. Our culture and values continue to be a source of strength and a competitive advantage. Strong corporate governance and an obsession with the basics of banking remain key areas of focus for our board."
So read a statement issued by John Pease, chairman of Standard Chartered bank, last week, reports the Guardian. One would assume that the bank has to sing a different tune as of yesterday, when the New York State Department of Financial Services accused the bank of hiding $250 billion worth of transactions with Iran.
August 7, 2012--Two recent entrants to the US exchange traded funds market are pulling back, reflecting the intense competitive pressure from the industry's biggest players.
Russell Investments has put its direct US ETF business under review and is "scaling back" its US ETF team. Meanwhile, Scottrade’s FocusShares unit has announced it is liquidating its ETF family at the end of the month.
August 7, 2012--Knight Capital Group Inc. (KCG) rejected a last-minute, $500 million rescue-loan offer from Citadel LLC on Aug. 5 as it worked on a competing plan from a group of investors, said two people with knowledge of the matter.
The loan terms would have given Citadel a minority stake in Jersey City, New Jersey-based Knight’s stock and an interest in the market maker’s HotSpot foreign-exchange subsidiary, said the people, who spoke on condition of anonymity because the talks were private. Citadel, the $12.5 billion hedge fund run by billionaire Ken Griffin, competes with Knight’s market-making and electronic-trading business.
August 7, 2012-- Bank of America Merrill Lynch has grown its new financial benefit plan assets to a record $20 billion this year as it leverages stronger ties between its bank and brokerage forces.
The $20 billion total the firm reached through new and existing company customers as of the end of June surpasses the $19 billion total new assets for that business in 2011 and $17 billion in 2010.
August 7, 2012--ETF liquidity, electronic trading and rogue algorithms all came under renewed scrutiny in the wake of the Knight Capital debacle. But the pundits got it wrong: The ETF market is liquid and sound.
The recent event at Knight Capital, which was in reality nothing more than a technology glitch, once again gave various media outlets and talking heads an excuse to theorize about issues of liquidity in ETFs and the effects of electronic trading in our market place.
