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North American index investors highlight concerns with cap-weighting size biases but do not wish to replace cap-weighted indices
July 3, 2012--In its first EDHEC-Risk North American Index Survey, a survey of 139 investment professionals (institutional investors, asset managers, private wealth managers, investment banks and brokerage firms), EDHEC-Risk Institute has analysed the current uses of and opinions on stock, bond and volatility indices in the North American region.
Key findings of the survey
Size biases associated with cap-weighted indices are perceived as a very important issue by North American investors – nearly 100% of respondents see it as important to very important, in contrast to only 71% of European investors.
Cap-weighted indices – despite the fact that their shortcomings are widely acknowledged by respondents – are likely to remain the reference for equity portfolios for some time to come. Only a minority of respondents (23%) see alternative indices as a means of replacing cap-weighted indices. The majority see such indices as complements to cap-weighted indices or as replacement options for active managers (58.6% and 27.6%, respectively).
Investors have quite different objectives when it comes to different asset classes. Investors tend to resort to government bond indices as hedging tools for risk exposure (57% for government bond indices versus only 33.7% for corporate bond indices), while corporate bond indices are seen more as tools for achieving higher returns (33.7% for corporate bond indices and 25% for government bond indices). Indices that reflect risk factors are perceived to be of relatively little importance within equity portfolios, while indices categorised by interest rate risk and credit risk are seen as crucial within fixed-income portfolios.
view the EDHEC-Risk North American Index Survey 2011
Morgan Stanley-US ETF Weekly Update
July 2, 2012--Weekly Flows: $23 Million Net Outflows
ETFs Have Generated $71.5 Billion Net Inflows YTD
ETF Assets Stand at $1.2 Trillion, up 11% YTD
Two ETF Launches Last Week
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted modest net outflows of $23 mln last week, 2nd consecutive week of net outflows
Last week’s outflows were primarily driven by US Cap Focused Equity ETFs (combined $1.1 bln in net outflows)
ETF assets stand at $1.2 tln, up 11% YTD; ETFs have posted net inflows 19 out of 26 weeks YTD
ETFs have taken in $71.5 bln in net inflows, +26% YOY through the first six months of 2012
Vanguard has taken in the most new money YTD ($29.4 bln in net inflows)
13-week flows were mixed among asset classes; combined $19.9 bln net inflows
Fixed Income ETFs have consistently generated weekly net inflows (46 straight weeks of net inflows totaling $57.7 bln)
Emerging Market Equity ETFs exhibited net outflows of $3.3 bln the past 13 weeks, the most of any ETF category
US-Listed ETFs: Estimated Largest Flows by Individual ETF
Energy Select Sector SPDR (XLE) generated net inflows of $351 mln last week, the most of any ETF
PowerShares QQQ (QQQ) exhibited net outflows of $703 mln last week, the largest net outflow of any ETF; similarly, QQQ’s 13-
week flows were weak at $2.1 bln net outflows
Over the past 13 weeks, the iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD) posted net inflows of $2.6 bln, the most of any ETF as investors have flocked to the relatively attractive yield and safety of investment grade corporate bonds
US-Listed ETFs: Short Interest
Data Updated: Based on data as of 6/15/12
iShares Russell 2000 Index Fund (IWM) posted the largest increase in USD short interest
Aggregate ETF USD short interest declined $9.5 bln over the past two weeks ended 6/15/12
SPDR S&P 500 ETF (SPY) short interest declined $6.6 bln last period; SPY’s 244.8 mln shares short is its lowest level since 1/14/11
The average shares short/shares outstanding for ETFs is currently 5%
Market Vectors Retail ETF (RTH) shares short as a % of shares outstanding increased to 607% from 263% from the prior period;
despite the change, we would not draw many conclusions from the large jump given RTH’s small market cap ($20 mln)
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only nine 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 6/29/12 based on daily change in share counts and daily NAVs.
$7.1 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 $1.4 bln (specifically the PIMCO Total Return ETF-BOND)
110 new ETF listings and 17 closures YTD
Over the past year, many of the successful launches have an income/dividend orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
BlackRock has launched 51 ETFs over the past year, the most of any ETF sponsor
Top 10 most successful launches account for 65% of market cap of ETFs launched over the past year (up from 53% at the beginning of the year)
ISE Files for Second Exchange License
New options exchange to offer market structure and pricing flexibility Exchange will run on ISE's existing Optimise™ technology platform Member firms will be able to use existing connectivity to ISE to access the second exchange Anticipated launch by the end of 2012
July 2, 2012- The International Securities Exchange (ISE) announced that it has filed a Form 1 application for a second exchange license with the Securities and Exchange Commission.
ISE plans to launch its second options exchange platform by the end of 2012, pending SEC approval.
“Having a second exchange license will enhance ISE’s flexibility to meet the evolving needs of our members in a highly competitive environment,” said Gary Katz, President and Chief Executive Officer of ISE. “Our Optimise technology platform was designed to support multiple markets and will enable our member firms to leverage their existing connectivity for our new exchange as well as to benefit from Optimise’s superior technology and functionality.”
ISE Reports Business Activity for June 2012
July 2, 2012--ISE was the second largest equity options exchange in June with market share of 18.1%, excluding dividend trades.
Dividend trades made up 3.8% of industry volume in June 2012.
The International Securities Exchange (ISE) today reported average daily volume of 2.5 million contracts
in June 2012. This represents a decrease of 10.2% compared to June 2011.
Total options volume for the month was 52.2 million contracts. ISE was the second largest U.S. equity options exchange in June with market share of 18.1%*.
Business highlights for the month of June include:
On June 29, 2012, ISE filed a Form 1 application for a second exchange license with the Securities and Exchange Commission. ISE plans to launch its second options exchange platform by the end of 2012, pending SEC approval.
CBOE Holdings Reports June 2012 Trading Volume
June Average Daily Volume Up 2% from Year Ago, Down 7% from May 2012
July 2, 2012--CBOE Holdings, Inc. (NASDAQ: CBOE) today reported that June 2012 trading volume for options on the Chicago Board Options Exchange (CBOE) and C2 Options Exchange (C2), combined,totaled 96.7 million contracts.
June average daily volume (ADV) was 4.6 million contracts, a two percent increase from June 2011 ADV of 4.5 million contracts and a seven-percent decline from May 2012 ADV of 5.0 million contracts.
CBOE Futures Exchange (CFE) and the exchange's flagship product, futures on the CBOE Volatility Index (the VIX Index), posted back-to-back monthly records in June 2012 and surpassed the two-million contract benchmark for the second straight month.
CBOE Trading Volume and Market Share
CBOE trading volume — CBOE's June 2012 ADV was 4.41 million contracts, up two percent from 4.31 million contracts ADV in June 2011 and down seven percent from May 2012 ADV of 4.74 million contracts.
CBOE index options -June 2012 index option ADV was 1.25 million contracts, down four percent from 1.30 million contracts ADV in June 2011 and down seven percent from May 2012 ADV of 1.34 million contracts.
CFTC Approves Phased Compliance Proposal for Certain Swap Regulations
June 29, 2012--The Commodity Futures Trading Commission (Commission) today voted to propose a phased compliance program regarding certain swaps to non-U.S. swap dealers, non-U.S. major swap participants, U.S. swap dealers, U.S. major swap participants, and foreign branches of U.S. swap dealers and U.S. major swap participants.
In order to ensure an orderly transition to the Dodd-Frank Act the Commission released for public comment a phased compliance regarding certain entity-level requirements (Entity-Level Requirements) and transaction-level requirements (Transaction-Level Requirements) subject in each case to specified conditions. The vote was conducted via a seriatim vote of the commission and was passed by a vote of 5 to 0. The Comment period is open for 30 days after the publication in the Federal Register.
Background
The proposed phased compliance would become effective on the compliance date for registration of swap dealers and major swap participants and expire: (i) for non-U.S. swap dealers, non-U.S. major swap participants, foreign branches of U.S. swap dealers, and foreign branches of U.S. major swap participants, 12 months following the publication of the proposal; and (ii) for U.S. swap dealers and U.S. major swap participants, January 1, 2013.
view the Federal Register: Exemptive Order Regarding Compliance with Certain Swap Regulations
CFTC Approves Proposed Interpretive Guidance on Cross-Border Application of the Swaps Provisions of the Dodd-Frank Act
June 29, 2012--The Commodity Futures Trading Commission (Commission) today approved for public comment proposed interpretive guidance regarding the cross-border application of the swaps provisions of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank Act") and the Commission's regulations.
The proposed guidance interprets Section 2(i) of the Commodity Exchange Act (CEA), which states that the swaps provisions of the CEA shall not apply to activities outside the United States unless those activities have a direct and significant connection with activities in, or effect on, commerce of the United States. The vote was conducted via seriatim, which was approved by all five commissioners. The guidance will be open for public comment for 45days after publication in the Federal Register.
Under the proposed guidance, the Commission:
Proposes an interpretation of the term “U.S. person”.
Proposes guidance to determine: (1) whether a non-U.S. person’s swap dealing activities are sufficient to require registration as a “swap dealer”; (2) whether a non-U.S. person’s swap positions are sufficient to require registration as a “major swap participant”; and (3) the treatment for registration purposes of foreign branches, agencies, affiliates, and subsidiaries of U.S. swap dealers and of U.S. branches of non-U.S. swap dealers.
Precidian files with the SEC
June 29, 2012--Precidian has filed a third and amended application for exemptive relief with the SEC.
view filing
Direxion files with the SEC
June 29, 2012--Direxion has filed a post-effective amendment, registration statement with the SEC.
read more
IMF Working paper-The Impact of Longevity Improvements on U.S. Corporate Defined Benefit Pension Plans
June 29, 2012--Summary: This paper provides the first empirical assessment of the impact of life expectancy assumptions on the liabilities of private U.S. defined benefit (DB) pension plans.
Using detailed actuarial and financial information provided by the U.S. Department of Labor, we construct a longevity variable for each pension plan and then measure the impact of varying life expectancy assumptions across plans and over time on pension plan liabilities. The results indicate that each additional year of life expectancy increases pension liabilities by about 3 to 4 percent. This effect is not only statistically highly significant but also economically: each year of additional life expectancy would increase private U.S. DB pension plan liabilities by as much as $84 billion.
ALPS Launches High-Dividend Equity ETF: Teaching an Old Dog a New Trick
June 29, 2012--ALPS-- A DST Company announced today the launch of the ALPS Sector Dividend Dogs ETF
(Exchanged-Traded Fund) (NYSE Arca: SDOG) an ETF that applies the ‘Dogs of the Dow Theory' (an investment strategy
which proposes that an investor annually select for investment the ten Dow Jones Industrial Average stocks whose dividend is
the highest fraction of their price) on a sector-by-sector basis using the S&P 500 as its starting universe of eligible securities.
“ALPS is thrilled to add a high-yield large-cap equity income ETF to our suite of portfolio solutions” said Tom Carter, Executive Vice President of ALPS Holdings. “We believe SDOG offers investors a product with attractive differentiating factors from other large-cap dividend ETFS including higher yield and sector diversification.”
United States Commodity Funds files with the SEC
June 29, 2012--United States Commodity Funds has filed a form S-1 regitration statement with the SEC for the US Golden Currency Fund ("USGCF").
view filing
Guggenheim Investments files with the SEC
June 29, 2012--Guggenheim Investments
has filed a Form S-1 registration statement with the SEC for the CurrencyShares(R) Swedish Krona Trust.
view filing
Well-paid FINRA Lobbyist Departs as Losses Mount
June 29, 2012--FINRA announced the departure of another key executive Friday. Howard Schloss, who is head of corporate communications and government relations for the broker/dealer regulator and has been a key figure in lobbying efforts to grant FINRA oversight of investment advisers, will leave in September after 12 years with the organization.
The announcement came on the same day that the regulator released its annual report showing a loss of $84 million and coincides with an SEC review of FINRA’s executive compensation practices and other matters prompted by a Government Accountability Report released in May. Schloss earned over $1 million in 2010 and took a pay cut in 2011 to $732,000, according to FINRA’s annual report.
SEC Adopts New Procedures for Reviewing Clearing Submissions Under Dodd-Frank Act
June 28, 2012--The Securities and Exchange Commission has adopted rules that establish procedures for its review of certain clearing agency actions. The rules were required by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which called for a new regulatory framework for trading in over-the-counter derivatives, including swap agreements.
The rules detail how clearing agencies will provide information to the SEC about security-based swaps that the clearing agencies plan to accept for clearing. The information is intended to aid the SEC in determining whether such security-based swaps are required to be cleared.
