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Remarks of Chairman Gary Gensler, OTC Derivatives Reform, American Bar Association, Committee on Derivatives and Futures Law
January 28, 2010--Good afternoon. I thank the American Bar Association’s Committee on Derivatives and Futures Law for inviting me to speak today. This morning, I visited some friends that I made a couple years ago in Immokalee, which is about an hour east of here. Immokalee is Florida’s largest farm working community. About 95 percent of the tomatoes you eat in the United States between October and June come from Florida, with many of them grown in Immokalee.
The migrant workers who pick and package the tomatoes earn less in a year than what some in this room may bill in a day. They sleep in metal trailers with up to ten other workers, hoping that each morning they will be selected to go into the field and earn a little money. A couple of years ago, I met the people of Immokalee and was asked to help in their efforts for better wages and working conditions. It might not sound like much, but together we negotiated an additional penny per pound for tomatoes sold to Burger King. Still, they have struggled day after day to support themselves and their families.
In the last two years, even as this community has made further strides to improve living and working conditions, they have been hit by an unrelated setback: the global financial crisis. Derivatives and Wall Street might seem quite removed from people’s everyday lives, but the struggles of the people of Immokalee and so many other communities around this country are reminders that our work in Washington and our debates about reform have real effects throughout our great land. The proud, hardworking people in Immokalee do not use derivatives markets. Like so many Americans, though, their lives have been affected by the steep economic recession born out of the financial crisis. Their lives have been affected by the failure to contain the risks created by Wall Street.
Wall Street's interests do not necessarily reflect the broader interests of the American public. In maximizing their profits, banks are fulfilling their fiduciary duty to shareholders, but they do not owe a similar duty to taxpayers. Many of these banks have opposed essential components of reform.
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Source: CFTC.gov
SEC Approves Money Market Fund Reforms to Better Protect Investors
January 28, 2010--The Securities and Exchange Commission today adopted new rules designed to significantly strengthen the regulatory requirements governing money market funds and better protect investors.
The financial crisis and the weaknesses revealed by the Reserve Primary Fund's "breaking the buck" in September 2008 precipitated a full-scale review of the money market fund regulatory regime by the SEC. A money market fund "breaks the buck" when its net asset value (NAV) falls below $1.00 per share, meaning investors in that fund will lose money. The SEC's new rules are intended to increase the resilience of money market funds to economic stresses and reduce the risks of runs on the funds by tightening the maturity and credit quality standards and imposing new liquidity requirements.
"These new rules will have substantial benefits for investors and are an important first step in our efforts to strengthen the money market regime," said SEC Chairman Mary L. Schapiro. "These rules will help reduce risks associated with money market funds, so that investor assets are better protected and money market funds can better withstand market crises. The rules also will create a substantial new disclosure regime so that everyone from investors to the SEC itself can better monitor a money market fund's investments and risk characteristics."
Further Restricting Risks by Money Market Funds
Improved Liquidity: The new rules require money market funds to have a minimum percentage of their assets in highly liquid securities so that those assets can be readily converted to cash to pay redeeming shareholders. Currently, there are no minimum liquidity mandates.
Daily Requirement: For all taxable money market funds, at least 10 percent of assets must be in cash, U.S. Treasury securities, or securities that convert into cash (e.g., mature) within one day.
Weekly Requirement: For all money market funds, at least 30 percent of assets must be in cash, U.S. Treasury securities, certain other government securities with remaining maturities of 60 days or less, or securities that convert into cash within one week.
The rules would further restrict the ability of money market funds to purchase illiquid securities by:
Restricting money market funds from purchasing illiquid securities if, after the purchase, more than 5 percent of the fund's portfolio will be illiquid securities (rather than the current limit of 10 percent).
Redefining as "illiquid" any security that cannot be sold or disposed of within seven days at carrying value.
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Source: SEC.gov
SIFMA Government Survey Projects First Quarter Total Net Issuance to Rise
January 28, 2010—According to findings from the Securities Industry and Financial Markets Association’s (SIFMA) Government Securities Research and Strategist Committee and Primary Dealers Committee, total net Treasury bill, note and bond issuance is expected to be $417.0 billion in the first quarter of 2010, higher than the net $159.5 billion in the fourth quarter of 2009, but lower than the $481.3 billion issued in the first quarter last year.
The Committee is comprised of trading strategists and research analysts who specialize in the U.S. government and agency securities markets.
The jump [in the first-quarter forecast] may partly reflect a return to net issuance levels consistent with the past year,” said Robert Toomey, managing director and associate general counsel for SIFMA’s Government and Funding Division.
He added that the projected increase in net issuance also reflects continued demand for funds to cover government spending for additional stimulus efforts. “Although the recession may be over, the economic situation remains weak, and as recently as last month the government announced plans for further job creation efforts, extension of unemployment benefits, and support for the housing market,” Toomey said.
Toomey noted that the survey is intended to provide market participants with the current consensus expectations and forecasts of many of the Primary Dealers and other firms active in the U.S. government and agency securities markets.
Other Significant Issuance Findings
The median forecast for net new Treasury coupon security issuance is expected to be $460.0 billion for the first quarter 2010, 26.9 percent above the immediately prior quarter, and 46.3 percent above last year’s first quarter net issuance of $314.4 billion;
The Treasury Department is projected to finish the first quarter with a cash position of $50.0 billion, 39.0 percent below the balance of $82 billion at the end of the fourth quarter (and a significant 83 percent lower than the $295 billion cash balance at the end of the third quarter 2009); and
Net bill redemption is forecast to be $43 billion for the first quarter, compared with a net redemption of $203.0 billion in the fourth quarter and a net issuance of $166.9 billion in the first quarter of 2009.
view the SIFMA Quarterly Government Securities Issuance and Rates Forecast – First Quarter 2010
Source: SIFMA
U.S. International Reserve Position
January 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 $131,261 million as of the end of that week, compared to $131,997 million as of the end of the prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
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January 22, 2010 |
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A. Official reserve assets (in US millions unless otherwise specified) 1 |
Euro |
Yen |
Total |
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(1) Foreign currency reserves (in convertible foreign currencies) |
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131,261 |
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(a) Securities |
9,947 |
14,422 |
24,369 |
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of which: issuer headquartered in reporting country but located abroad |
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0 |
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(b) total currency and deposits with: |
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(i) other national central banks, BIS and IMF |
14,735 |
7,060 |
21,795 |
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ii) banks headquartered in the reporting country |
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0 |
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of which: located abroad |
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0 |
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(iii) banks headquartered outside the reporting country |
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0 |
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of which: located in the reporting country |
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0 |
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(2) IMF reserve position 2 |
11,336 |
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(3) SDRs 2 |
57,564 |
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(4) gold (including gold deposits and, if appropriate, gold swapped) 3 |
11,041 |
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--volume in millions of fine troy ounces |
261.499 |
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(5) other reserve assets (specify) |
5,155 |
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--financial derivatives |
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--loans to nonbank nonresidents |
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--other (foreign currency assets invested through reverse repurchase agreements) |
5,155 |
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B. Other foreign currency assets (specify) |
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--securities not included in official reserve assets |
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--deposits not included in official reserve assets |
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--loans not included in official reserve assets |
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--financial derivatives not included in official reserve assets |
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--gold not included in official reserve assets |
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--other |
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Source: US Department of the Treasury
Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index
January 28, 2010--Standard & Poor's will make the following changes in the S&P/TSX Venture Composite Index after the close of trading on Thursday, January 28, 2010:
Freewest Resources Canada Inc.. (TSXVN:FWR) will be removed from the index.
The shares of the company have been acquired by Cliff Natural Resources Inc. (NYSE:CLF).
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
Source: Standard & Poors
Exchange-Traded Funds: Strong Fourth Quarter Flows Result in 2009 ETF Net Cash Inflows of $119 Billion-Morgan Stanley
January 28, 2010--Highlights
There were 56 new ETFs listed in the US during the
last quarter of 2009. In total, 125 ETFs were launched and 48 were closed resulting in net new issuance of 74
ETFs. As of December 31, 2009, there were 32 issuers
of 836 ETFs listed in the US.
US ETF industry assets rebounded sharply in 2009 to $780 billion. US ETF assets rebounded by roughly
47% in 2009 as a result of the strong rally in global markets and strong net cash inflows. Despite the growth
of the ETF market, it still remains concentrated as three
providers and 20 ETFs account for roughly 79% and
over 50% of industry assets, respectively.
Inflows into US-listed ETFs were $54.6 billion during the fourth quarter of 2009, which accounted for almost 46% of total 2009 net flows. This is well above the average quarterly net cash inflows of $25.8 billion over the past six years. While the $119.2 billion net cash inflows into ETFs in 2009 is the lowest in three years, we note that excluding SPDR S&P 500 ETF (SPY), annual net cash inflows have actually increased in each of the last three years from $116 billion in 2007, to $136 billion in 2008, and to $139 billion in 2009.
The largest net cash inflows went into ETFs tracking fixed income and international indices, as well as into those that provide exposure to commodities. These asset classes had net cash inflows of $44, $31, and $26 billion respectively in 2009. ETFs tracking US large cap had the largest net outflows.
click here to request the report
Source: Morgan Stanley
PowerShares FTSE RAFI Fundamental Indexed ETFs Continue to Produce Superior Returns
January 28, 2010--For the one year period ended 12/31/09 seven out of eight PowerShares ETFs based on Fundamental indexes outperformed their respective cap-weighted benchmarks. Since inception, all eight ETFs provided investors outperformance compared to their respective cap-weighted benchmarks.
The Fundamental Index methodology assigns weights to stocks based on four fundamental factors; book value, cash flow, sales, and dividends. By contrast, a cap-weighted index allows the market to dictate the weight a stock receives in an index. The use of weights based on fundamental measures can provide a more accurate snapshot of a company’s relative economic footprint, thereby reducing the impact of mispricing within the index. For additional information or to arrange an exec interview to discuss Fundamental index ETFs please contact Bill Conboy at 303-415-2290, bill@bccapitalpartners.com or Dustin Weeden, dustin@bccapitalpartners.com.
Visit http://www.invescopowershares.com/rafi/ for more info.
Source: Invesco PowerShares
FQF Trust files for exemptive relief
January 28, 2010--FQF Trust has filed for exemptive relief with the SEC.
view filing
Source: SEC.gov
iShares Canada launches six new ETFs
January 27, 2010--BlackRock, Inc. (NYSE:BLK) is continuing to expand its iShares line of exchange traded funds in Canada, with the launch of six new funds that offer investors increased access to emerging markets and U.S. fixed income markets.
The funds, which are managed by BlackRock Asset Management Canada Ltd., began trading on the Toronto Stock Exchange on Wednesday.
The six new iShares Canada ETFs include:
• iShares MSCI Brazil Index Fund (TSX:XBZ)
• iShares S&P Latin America 40 Index Fund (TSX:XLA)
• iShares CNX Nifty India Index Fund (TSX:XID)
• iShares China Index Fund (TSX:XCH)
• iShares U.S. IG Corporate Bond Index Fund (CAD-Hedged) (TSX:XIG)
• iShares U.S. High Yield Bond Index Fund (CAD-Hedged) (TSX:XHY)
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Source: Investment Executive
DB Index Research -- Weekly ETF Reports -- US
January 27, 2010--Highlights
ETF Volume
US ETF turnover rose by 19.6% to US$53.5bn in the previous week. Turnover in the S&P 500 SPDR ("Spider") was US$17.4bn. The PowerShares QQQ Nasdaq 100 had turnover of US$4.4bn followed by iShares Russell 2000 with turnover of US$3.4bn.
There were eight new ETFs launched in the last week. BlackRock Fund Advisors launched five new ETFs on Nasdaq. Proshares launched two new Bond ETFs on NYSE Arca. ALPS Fund Services Inc launched one ETF on NYSE Arca.
In the previous week, average daily turnover in the Large Cap, US Sector, Leveraged and Global Regional products was US$23.5bn (24.0%), US$8.9bn (17.0%), US$5.8bn (26.2%) and US$4.0bn (11.5%) respectively.
Among the Emerging country ETFs, iShares MSCI Brazil ETF turnover was US$1,079m followed by iShares FTSE/Xinhua China ETF with turnover of US$948m. In non-US developed market flows, iShares MSCI Japan had turnover of US$270m. In non-domestic regional flows, emerging market turnover was US$2.9bn and developed markets regional flows EAFE had turnover of US$1.0bn.
Assets under Management (AUM)
Total assets under management for equity based ETFs declined by 4.6% in the previous week, AUM were US$581.5bn.
To request a copy of the report
Source: Aram Flores and Shan Lan -DB Index Research