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Two ProShares Treasury ETFs List on NYSE Arca
January 21, 2010-- NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the ProShares Ultra 7-10 Year Treasury (Ticker: UST) and theProShares Ultra 20+ Year Treasury (Ticker: UBT). The ETFs are sponsored by ProShares.
ProShares Ultra 7-10 Year Treasury
The Fund seeks daily investment results, before fees and expenses and interest income earned on cash and financial instruments, that correspond to twice (200%) the daily performance of the Barclays Capital 7-10 Year U.S. Treasury Bond Index (the “Index”). The Index includes all publicly issued, U.S. Treasury securities that have a remaining maturity of between 7 and 10 years, are non-convertible, are denominated in U.S. dollars, are rated (at least Baa3 by Moody’s Investors Service or BBB- by S&P), are fixed rate, and have more than $250 million par outstanding. The Index is weighted by the relative market value of all securities meeting the Index criteria. Excluded from the Index are certain special issues, such as flower bonds, targeted investor notes (TINs), U.S. Treasury inflation-protected securities (TIPs), state and local government bonds (SLGs), and coupon issues that have been stripped from assets already included. The Index is published under the Bloomberg ticker symbol “LT09TRUU.”
ProShares Ultra 20+ Year Treasury
The Fund seeks daily investment results, before fees and expenses and interest income earned on cash and financial instruments, that correspond to twice (200%) the daily performance of the Barclays Capital 20+ Year U.S. Treasury Bond Index (the “Index”). The Index includes all publicly issued, U.S. Treasury securities that have a remaining maturity greater than 20 years, are non-convertible, are denominated in U.S. dollars, are rated investment grade (at least Baa3 by Moody’s Investors Service or BBB- by S&P), are fixed rate, and have more than $250 million par outstanding. The Index is weighted by the relative market value of all securities meeting the Index criteria. Excluded from the Index are certain special issues, such as flower bonds, targeted investor notes (TINs), U.S. Treasury inflation protected securities (TIPs), state and local government series bonds (SLGs), and coupon issues that have been stripped from assets already included. The Index is published under the Bloomberg ticker symbol “LT11TRUU.”
These funds seek a 200% return, respectively, of their indices for a single day. Due to the compounding of daily returns, returns over periods other than one day will likely differ in amount and possibly direction from the target returns for the same period. Investors should monitor their holdings consistent with their strategies, as frequently as daily. The funds’ prospectuses describing correlation, leverage and other risks are available at www.proshares.com.
Source: NYSE Euronext
War on banks unsettles hedge funds
January 21, 2010--JPMorgan may be forced to pull just under $1bn it has invested in funds run by its flagship hedge fund, the $21bn Highbridge Capital, if new proposals from the US government to regulate banks’ use of proprietary capital go through.
JPMorgan took a majority stake in Highbridge in 2007 and full ownership in 2009, but was also one of the single largest investors in the firm’s underlying funds last year.
The bank invested $225m in Highbridge in the first quarter of 2009, reversing a damaging slew of redemptions from other clients that had hit the fund and many of its peers after the collapse of Lehman Brothers in September 2008.
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Source: JP Morgan
Obama to set limits on bank trading
January 21, 2010--President Barack Obama is set to toughen his approach to Wall Street regulation on Thursday, announcing limits on the size of proprietary trading operations in the second broadside against banks this month.
Mr Obama will make his remarks after a meeting with Paul Volcker, the White House adviser and former Federal Reserve chairman, whose more far-reaching vision of curbing banks’ riskier activities has been sidelined until now in favour of reforms drafted in the Treasury.
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Source: FT.com
Agencies issue final rule for regulatory capital standards related to financial accounting standards nos. 166 and 167
January 21, 2010--The federal banking and thrift regulatory agencies today announced the final risk-based capital rule related to the Financial Accounting Standards Board's adoption of Statements of Financial Accounting Standards Nos. 166 and 167. These new accounting standards make substantive changes to how banking organizations account for many items, including securitized assets, that had been previously excluded from these organizations' balance sheets.
Banking organizations affected by the new accounting standards generally will be subject to higher risk-based regulatory capital requirements. The rule better aligns risk-based capital requirements with the actual risks of certain exposures. It also provides an optional phase-in for four quarters of the impact on risk-weighted assets and tier 2 capital resulting from a banking organization's implementation of the new accounting standards.
The final rule, issued by the Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision, will take effect 60 days after publication in the Federal Register, which is expected shortly. Banking organizations may choose to comply with the final rule as of the beginning of their first annual reporting period after November 15, 2009.
Source: Board of Governors of the Federal Reserve System
Select Sector SPDRs Underscores Status as Leading Sector ETF Family with Banner 2009
January 21, 2010--Against a backdrop of economic dislocation and rollercoaster financial markets, Select Sector SPDRs, a family of exchange-traded funds (ETFs) that divide the S&P 500 into nine individual sector funds, saw its collective assets under management climb by almost 34%, or $8.1 billion, to close 2009 with a record $31.3 billion in assets under management.
Launched in 1998, Select Sector SPDRs is the oldest brand name in sector exchange-traded funds. In addition, equal sector investing, in which a portfolio is divided equally market sectors, beat the returns of the S&P 500 for the 10th year in a row.
“By all measures, 2009 was one of the most uncertain and volatile market environments in recent history,” said Dan Dolan*, Director of Wealth Management Strategies for the Select Sector SPDR Trust, and architect of Select Sector SPDRs. “What’s evident, however, is that despite the tough investment climate last year, investors with properly allocated investment portfolios who used sector ETFs as substitutes for equities in a way that reduced single stock exposure were able to feel more optimistic about the long-term viability of their holdings.”
Leading the Sector SPDRs asset gainers for 2009 was Technology, which soared 155.15% to end the year with $4.7 billion, followed by Consumer Discretionary (+120.52%, to close the year at $1.48 billion), and Utilities (+86.38%, to finish at $3.64 billion). Materials, Healthcare, Energy, and Industrials all ended 2009 with significant double-digit growth. The only sector to end the year in a negative position was Financials, which saw its assets dip by some $960.8 million to close the last year of the decade down 12.32%.
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Source: Select Sector SPDRs
Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index
January 21, 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 21, 2010:
The shares of BioExx Specialty Proteins Ltd. (TSXVN:BXI) will be removed from the index. The company will graduate to trade on the TSX under the same ticker symbol.
Allana Resources Inc. (TSXVN:AAA) will trade under the new name Allana Potash Corp. There is no change in the ticker symbol and no consolidation of capital. The new CUSIP number will be 016735 10 2.
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
Frank Statement on the President’s Financial Reform Proposals
January 21, 2010--Today, House Financial Services Committee Chairman Barney Frank (D-MA) released the following statement:
“I welcome the President’s strong support for additional provisions in the financial reform legislation to address the too big to fail problem. The President’s initiatives build on provisions that originated in the House Financial Services Committee and were included in the Wall Street Reform and Consumer Protection Act, which passed the House on December 11.
By adopting the amendment offered by Rep. Paul Kanjorski, we included provisions in this bill to give the regulators the power to do everything the President has proposed. Those measures were very controversial and were unanimously opposed by Committee Republicans. Now, with the President’s strong support, I believe we should be able to overcome this resistance and take the next step. While our bill gave the President’s appointees the power to do everything that his proposal would do, the advantage of doing them legislatively is that a future administration would not be able to ignore or undo them. I also want to note that the powers that we gave them would be at the discretion of the regulators and go beyond those that the President would mandate. This works well because if the regulators think that circumstances require that more should be done then they will have the power to do so. Paul Volcker has long advocated these measures, and I am delighted that the President agrees with him.”
The President’s proposals today are similar to amendments and provisions in H.R. 4173, the Wall Street Reform and Consumer Protection Act, which the House passed on December 11.
Breaking Up Large Financial Institutions:
This provision, which is an amendment originally authored by Rep. Paul Kanjorski (D-PA), would empower federal regulators to rein in and dismantle financial firms that are so large, inter-connected or risky that their collapse would put at risk the entire American economic system, even if those firms currently appear to be well capitalized and healthy. Therefore, American taxpayers should no longer be on the hook for bailouts, as financial companies would not be able to become “too big to fail.” The Kanjorski amendment expands on a segment of the Financial Stability Improvement Act, by enabling federal action to address financial companies that are deemed "too big to fail" before resolution authority is needed. The amendment transfers such mitigatory action from the Federal Reserve to the Financial Services Oversight Council and establishes objective standards for the Council to effectively evaluate companies to determine whether they are systemically risky. Additionally, the amendment provides clear checks and balances by requiring the Council to consult with the President before taking extraordinary mitigatory actions. A financial company also has the right to appeal any actions.
Proprietary Trading:
To further manage risk in the financial system, Congressmen Brad Miller (D-NC) and Ed Perlmutter (D-CO) authored an amendment that was included in H.R. 4173 to give the Federal Reserve the authority to prohibit systemically designated companies from engaging in proprietary trading. Proprietary trading is defined as trading securities, commodities, derivatives and other financial instruments with the company’s own money for its own account. Rules will be written jointly by the primary regulators of banks and bank holding companies. The Fed will have authority to exempt activities depending on the nature of such trading and the degree of threat it poses to the company or the financial system.
Source: House Financial Services Committee
Frank Releases Memo on CFPA
January 21, 2010-Today, House Financial Services Committee Chairman Barney Frank (D-MA) released the following memo to members of the House Financial Services Committee:
MEMORANDUM
TO: Members, Committee on Financial Services
FROM: Chairman Barney Frank
RE: Inaccuracies about CFPA Exemptions
Some inaccuracies have appeared in the press about institutions exempted from the reach of the Consumer Financial Protection Agency in the House-passed financial reform bill. For instance, yesterday’s New York Times reported that it “exempted smaller community banks, credit unions, retail merchants …”. Not true. All of those institutions will be subject to all rules issued by the agency with respect to the extension of credit. They also will be subject to agency enforcement. The exemption for smaller financial institutions is only with respect to examination which will continue to be the responsibility of the institutions’ prudential regulators. However, the CFPA will have back-up inspection authority and may independently take enforcement action. And even this exemption is limited to institutions with less than 2% of bank assets.
Importantly, the new agency will also have authority with respect to the now lightly or unregulated institutions such as pay day lenders and check cashers firms which are especially important to lower income families. It also will have authority over independent mortgage brokers and lenders that led the industry in issuing subprime and abusive option ARM mortgages.
Consumer protection has long been a weak link in our system of financial regulation and the meltdown of the subprime mortgage market is only the most dramatic example of the consequences of our failure in this area. The President’s position on closing this gap is of great importance.
Leading consumer protection advocates unanimously support the President. Harvard professor Elizabeth Warren said when the House bill passed, “the banks lost today.” That same day, Travis Plunkett from the Consumer Federation of America said that “The CFPA will allow consumers to shop or take out a loan knowing that there is an agency looking out for their best interests.”
Source: House Financial Services Committee
ALPS Advisors, Inc. Lists Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF on NYSE Arca
January 20, 2010--NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, began trading the Jefferies | TR/J CRB Wildcatters Exploration & Production Equity ETF (Ticker: WCAT). The ETF is sponsored by ALPS Advisors, Inc.
The fund seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters/Jefferies CRB Wildcatters Energy E&P Equity Index, which is a modified capitalization-weighted, float-adjusted, rules-based index designed to track the overall performance of a universe of listed U.S. and Canadian small- and mid-capitalization companies engaged in the exploration and production of oil and natural gas. ALPS Advisors, Inc. is the investment adviser for the new ETF, and Arrow Investment Advisors, LLC is the investment sub-adviser.
Source: NYSE Euronext
DB Index Research -- Weekly ETF Reports -- US
January 20, 2010--Highlights
ETF Volume
US ETF turnover rose by 4.5% to US$44.7bn in the previous week. Turnover in the S&P 500 SPDR ("Spider") was US$14.0bn. The PowerShares QQQ Nasdaq 100 had turnover of US$3.6bn followed by iShares Russell 2000 with turnover of US$3.1bn.
n the previous week, average daily turnover in the Large Cap, US Sector, Leveraged and Global Regional products was US$18.9bn (5.8%), US$7.6bn (5.1%), US$4.6bn (4.1%) and US$3.6bn (-0.2%) respectively.
Among the Emerging country ETFs, iShares MSCI Brazil ETF turnover was US$948m followed by iShares FTSE/Xinhua China ETF with turnover of US$791m. In non-US developed market flows, iShares MSCI Japan had turnover of US$253m. In non-domestic regional flows, emerging market turnover was US$2.6bn and developed markets regional flows EAFE had turnover of US$0.9bn.
Assets under Management (AUM)
Total assets under management for equity based ETFs declined by 1.9% in the previous week, AUM were US$609.9bn.
To request a copy of the report
Source: Aram Flores and Shan Lan -DB Index Research