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Joint Statement of Tim Geithner, Secretary of the Treasury,Peter Orszag,
Director of the Office of Management and Budget, on Budget Results for Fiscal Year 2009
October 15, 2009--U.S. Treasury Secretary Tim Geithner and White House Office of Management and Budget (OMB) Director Peter R. Orszag today released details of the final Fiscal Year 2009 budget results. In making the announcement, Geithner and Orszag pointed to the severe economic and financial crisis the country faced this year and the Administration's commitment to lay a new foundation for economic growth and fiscal sustainability.
"This year's deficit is lower than we had projected earlier this year, in part because we are managing to repair the financial system at a lower cost to taxpayers. But future deficits are too high, and the President is committed to working with Congress to bring them down to a sustainable level as the economy recovers," Secretary Geithner explained.
"It was critical that we acted to bring the economy back from the brink earlier this year. As we move from rescue to recovery, the President recognizes that we need to put the nation back on a fiscally sustainable path. As part of the FY 2011 budget policy process, we are considering proposals to put our country back on firm fiscal footing," Director Orszag stated.
A summary of the FY2009 data, released as part of the September 2009 Monthly Treasury Statement of Receipts and Outlays of the United States Government, shows that the federal deficit dropped by $162 billion from a projected $1,580 billion in the August Mid-Session Review (MSR) to the final figure of $1,417 billion.
Receipts for the fiscal year totaled $2,105 billion, while outlays totaled $3,522 billion.
The decline in the deficit from the August MSR estimate reflected outlays that were $132 billion lower than expected in August, in large measure because of lower-than-anticipated outlays by the government's Troubled Assets Relief Program (TARP). The decline was also the result of receipts that were $31 billion higher than estimated in the MSR.
The FY2009 deficit was largely the product of the spending and tax policies inherited from the previous Administration, exacerbated by a severe recession and financial crisis that were underway as the current Administration took office. The new Administration's chief economic stabilization and recovery efforts implemented through TARP and the American Recovery and Reinvestment Act (Recovery Act) accounted for 24 percent of the deficit total.
Federal borrowing from the public net of financial assets increased by $1,417 billion during FY2009, to $6,711 billion or 47.2 percent of GDP. [1]
Summary of Fiscal Year 2009 Final Data
read more
Source: U.S. Department of the Treasury.
Treasury International Capital Data for August
October 16, 2009--The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for August 2009. The next release, which will report on data for September 2009, is scheduled for November 17, 2009.
Net foreign purchases of long-term securities were $28.6 billion.
Net foreign purchases of long-term U.S. securities were $32.9 billion. Of this, net purchases by private foreign investors were $21.3 billion, and net purchases by foreign official institutions were $11.6 billion.
U.S. residents purchased a net $4.3 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $13.0 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities decreased $18.5 billion. Foreign holdings of Treasury bills decreased $2.5 billion.
Banks' own net dollar-denominated liabilities to foreign residents increased $15.7 billion.
Monthly net TIC flows were $10.2 billion. Of this, net foreign private flows were $14.9 billion, and net foreign official flows were negative $4.7 billion.
Complete data are available on the Treasury website at www.treas.gov/tic
Source: U.S. Department of the Treasury.
Wisom Tree files with the SEC
October 15, 2009--Wisdom Tree has filed a prospetus with the SEC. The prospectus refers to the following funds:
WisdomTree
Fixed Income Funds
WisdomTree U.S. Short-Term Government Income Fund
WisdomTree Currency Income Funds
WisdomTree U.S. Short-Term Government Income Fund (formerly the WisdomTree U.S. Current Income Fund) -Ticker:USY
WisdomTree Dreyfus Brazilian Real Fund-Ticker:BZF
WisdomTree Dreyfus Chinese Yuan Fund-Tocker:CYB
view filing
Source: SEC. gov
AlphaShares Launches New China All Cap Index Covering Broad Market of Chinese Stocks
New China All Cap Index includes Chinese companies listed in Hong Kong and New York including the technology and consumer sectors
October 15, 2009--The first China All Cap Index designed to track Chinese companies of all capitalization sizes has been introduced by AlphaShares, LLC, it was announced today.
The AlphaShares China All Cap Index (Bloomberg: ACNAC) measures the performance of large, mid and small capitalization Chinese companies currently trading on the Hong Kong or New York stock exchanges and available to international investors. The index uses a modified market capitalization weighting methodology that limits individual companies to five percent of the index and sector exposure to 35 percent of the index. It does not currently include China A-Shares or China B-Shares.
“The major China indexes and the ETFs based on them are materially flawed,” said Dr. Burton G. Malkiel, Co-founder and Chief Investment Officer of AlphaShares. “The largest does not include important Chinese technology companies such as Baidu, BYD or Tencent. It has 45% exposure to financials - dominated by extremely large state owned banks. It has nearly 20% in state owned oil companies, and perhaps worse, it has no exposure to the Consumer sectors. Investors should be seeking exposure to China but they should look more closely at what they are buying when they use an (index-based) ETF. We believe the AlphaShares China All Cap Index is now the best index available for investors seeking exposure to the increasingly important China equities market.”
The AlphaShares China All Cap Index has been licensed to Claymore Advisors, LLC (“Claymore”) and it is anticipated to be the basis for the Claymore/AlphaShares China All-Cap ETF (NYSE Arca: YAO) that is scheduled to launch later this month. AlphaShares has licensed two other China indexes to Claymore. The AlphaShares China Real Estate Index (Bloomberg: ACNRE) serves as the basis for the Claymore/AlphaShares China Real Estate ETF (NYSE Arca: TAO) which provides exposure to Chinese real estate companies and the AlphaShares China Small Cap Index (Bloomberg: ACNSC) serves as the basis for the Claymore/AlphaShares China Small Cap Index ETF (NYSE Arca: HAO) which provides exposure to Chinese small cap stocks.
Source: AlphaShares
Guggenheim Partners Announces the Acquisition of Investment Adviser to Claymore-Advised Funds
October 15, 2009-Guggenheim Partners, LLC ("Guggenheim Partners"), a global diversified financial
services firm, and Claymore Group Inc. ("Claymore"), a leading provider of
innovative investment products, including exchange-traded funds ("ETFs"),
closed-end funds ("CEFs" and, together with the ETFs, the "Funds") and unit
investment trusts, announce the completion of a previously-announced merger.
As
a result of the transaction, Claymore and its associated entities, including
Claymore Securities, Inc., Claymore Advisors, LLC and Claymore Investments, Inc.
in Canada, are now indirect wholly-owned subsidiaries of Guggenheim Partners.
:read more
Source: Reuters
Financial Services Committee Approves Legislation to Regulate Derivatives
Committee completes work on a key element of President Obama’s plan to bring accountability and responsibility to Wall Street
October 15, 2009-- Washington, DC - The House Financial Services Committee today approved legislation that would, for the first time ever, require the comprehensive regulation of the over-the-counter (OTC) derivatives marketplace. Today’s bill, which was approved by a vote of 43-26, represents a key part of a broader effort by Congress and President Obama to modernize America’s financial regulatory system in response to last year’s financial crisis.
Under the bill, all standardized swap transactions between dealers and large market participants, referred to as “major swap participants,” would have to be cleared and must be traded on an exchange or electronic platform. A major swap participant is defined as anyone that maintains a substantial net position in swaps, exclusive of hedging for commercial risk, or whose positions creates such significant exposure to others that it requires monitoring. OTC derivatives include swaps, which are contracts that call for an exchange of cash between two counterparties based on an underlying rate, index, credit event or the performance of an asset.
The legislation then sets out parallel regulatory frameworks for the regulation of swap markets, dealers, and major swap participants. Rulemaking authority is held jointly by the Commodity Futures Trading Commission (CFTC), which has jurisdiction over swaps, and the Securities and Exchange Commission (SEC), which has jurisdiction over security-based swaps. The Treasury Department is given the authority to issue final rules if the CFTC and SEC cannot decide on a joint approach within 180 days. Subsequent interpretations of rules must be agreed to jointly by the Commissions.
Description of the Over-the-Counter Derivatives Markets Act of 2009
Clearing
The legislation provides a mechanism to determine which swap transactions are sufficiently standardized that they must be submitted to a clearinghouse. For transactions that are clearable, clearing is a requirement when both counterparties are either dealers or major swap participants. Clearing organizations must seek approval from the appropriate regulator—either the CFTC or the SEC—before a swap or class of swaps can be accepted for clearing.
Transactions in standardized swaps that involve end-users are not required to be cleared. Such customized transactions must, however, be reported to a trade repository.
Mandatory Trading on Exchange or Swap Execution Facility
A standardized and cleared swap transaction where both counterparties are either dealers or major swap participants must either be executed on a board of trade, a national securities exchange or a “swap execution facility”—as defined in the legislation. If none of these venues makes a clearable swap available for trading, the trading requirement would not apply. Counterparties would, however, have to comply with transaction reporting requirements established by the appropriate regulator. The legislation also directs the regulators to eliminate unnecessary obstacles to trading on a board of trade or a national securities exchange.
Registration and Regulation of Swap Dealers and Major Swap Participants
Swap dealers and major swap participants must register with the appropriate Commission and dual registration is required in applicable cases. Capital requirements for swap dealers' and major swap participants' positions in cleared swaps must be set at greater than zero. Capital for non-cleared transaction must be set higher than for cleared transactions. The prudential regulators will set capital for banks, while the Commissions will set capital for non-banks at a level that is “as strict or stricter” than that set by the prudential regulators.
The regulators are directed to set margin levels for counterparties in transactions that are not cleared. The regulators are not required to set margin in transaction where one of the counterparties is not a dealer or major swap participant. In cases where an end user is a counterparty to a transaction, any margin requirements must permit the use of non-cash collateral.
Reporting and Public Disclosure of Swap Transactions
Reporting and recordkeeping is required for all over-the-counter derivative transactions. Clearing organizations must provide transaction information to the relevant Commission and a designated trade repository. Swap transactions that are not cleared and for which no trade repository exists, must be reported directly to the relevant Commission. The legislation also provides for public disclosure of aggregate data on swap trading volumes and positions—in a manner that does not disclose the business transactions or market position of any person. Large positions in swaps must also be reported directly to regulators.
Swap Execution Facilities
Swap execution facilities, or facility for the trading of swaps that are not Boards of Trade or National Securities Exchanges, must register with the relevant regulator as a swap execution facility (SEF). SEFs must also adhere to core regulatory principles relating to enforcement, anti-manipulation, monitoring, information collection and conflicts of interest, among others. The CFTC and SEC are required to prescribe joint rules governing the regulation of swap execution facilities. A Commission may exempt a SEF from registration if it is subject to comparable, comprehensive supervision and regulation by another regulator.”
view the OTC Derivatives Markets Act of 2009
Source: House Financial Services Committee
Statement of Chairman Gary Gensler on House Financial Services Committee Passage of OTC Derivatives Regulatory Reform Legislation
October 15, 2009-U.S. Commodity Futures Trading Commission Chairman Gary Gensler today commented on the OTC Derivatives Markets Act of 2009, passed this morning by the House of Representatives Committee on Financial Services. Chairman Gensler said:
“Today’s vote by the House Financial Services Committee represents historic progress toward comprehensive regulatory reform of the over-the-counter derivatives marketplace. The Committee’s bill is a significant step toward lowering risk and promoting transparency. Substantive challenges remain. I look forward to building on this Committee’s hard work with Chairman Frank, Chairman Peterson and others in the House and Senate to complete legislation that covers the entire marketplace without exception and to ensure that regulators have appropriate authorities to protect the public."
Source: CFTC.gov
NASDAQ OMX Announces Third Equity Trading Platform in the U.S.
Leverages NASDAQ OMX PHLX Equity License and Becomes First Exchange
to Offer Price Size Priority Model
October 14, 2009-The NASDAQ OMX Group, Inc.
(Nasdaq:NDAQ), the world's largest exchange company, today announced
that it plans to launch a third equity trading platform during the
second half of 2010, pending SEC approval. NASDAQ OMX will offer this
equity trading platform with a new price/size priority model using the
license acquired from its 2007 acquisition of the former Philadelphia
Stock Exchange, known today as NASDAQ OMX PHLX.
ASDAQ OMX's new equity price/size priority market structure is
currently not offered on The NASDAQ Stock Market, NASDAQ OMX BX, or any
other U.S. equity trading platform. The new model gives customers the
ability to choose how to execute orders by either selecting a
price/size priority model on NASDAQ OMX PHLX or a price/time priority
model available on the exchange's other two U.S. equity trading
platforms. NASDAQ OMX's new equity platform will also run on the INET
technology to leverage the speed and efficiency benefits offered
throughout NASDAQ OMX globally.
"NASDAQ OMX is pleased to continue its tradition of offering customers additional choices that will help supplement their various trading strategies. Based on feedback from key customers we decided to announce the launch of this trading platform that offers a new competitive equity market structure model," commented Eric Noll, Executive Vice President, NASDAQ OMX Group. "Furthermore, we are happy to extend one of the many assets of our acquisition of The Philadelphia Stock Exchange, yet again, to provide the benefits to our equity trading customers," added Mr. Noll.
Currently, The NASDAQ Stock Market and NASDAQ OMX BX offer customers a
price time priority model with different pricing and functionality.
NASDAQ OMX will reactivate its NASDAQ OMX PHLX equity license. NASDAQ
OMX PHLX today operates a leading equity options trading business.
Today, NASDAQ OMX also offers two diverse market structures for equity
options trading in the U.S. with The NASDAQ Options Market and NASDAQ
OMX PHLX, the third largest U.S. options market.
Source: NASDAQ OMX
CME Group Announces The Launch Of New Options Contracts On Futures Strips For Natural Gas, Crude Oil, Electricity And Coal
October 14, 2009--CME Group, the world's largest and most diverse derivatives marketplace, today announced the launch of trading and clearing services for seven new options contracts on underlying futures strips for natural gas, crude oil, electricity and coal.
Trading will be available on the New York trading floor and clearing services will be available through CME ClearPort®, a set of flexible clearing services open to over-the-counter (OTC) market participants to substantially mitigate counterparty risk and provide neutral settlement prices across asset classes, scheduled to begin on November 1 for trade date November 2. These contracts are listed with and subject to the rules and regulations of NYMEX.
The European style options contracts and commodity codes will be:
Natural gas option on calendar futures strip (6J)
Natural gas option on summer futures strip (4D)
Natural gas option on winter futures strip (6I)
Crude oil option on calendar futures strip (6F)
Crude oil option on quarterly futures strip (6E)
PJM electricity option on calendar futures strip (6O)
Central Appalachian coal option on calendar futures strip (6M)
The energy industry widely uses options on futures strips (also known as swaptions) that represent the right, but not the obligation, to exercise into a consecutive monthly strip of futures. Such options are economically efficient because producers and consumers of a given commodity can lock in the right to buy or sell futures on a given multi-period time horizon with a single premium for a single expiration date. This is in contrast to a strip of options that usually have the same exercise price but would have multiple expiration dates and different premiums for each month. The options on futures strips are generally less expensive than buying individual options for each month for the same strike price, but the options strips allow greater flexibility in whether or not to exercise over the course of the entire time period.
The first listed month for the calendar and quarterly futures strips will be January 2010; for the summer futures strip will be April 2010; and for the winter futures strip will be November 2010. Options on calendar futures for PJM, crude oil and natural gas will be listed for five consecutive years; options on calendar futures strips for coal will be listed for four consecutive years; crude oil options on quarterly futures strip will be listed for the nearest four consecutive quarters; and natural gas will have one summer and one winter strip.
The minimum price fluctuations will be $0.0001 per MMBtu for natural gas; $0.01 per barrel for crude oil; $0.01 per megawatt hour for PJM; and $0.01 per ton for coal. The contract sizes are: 30,000 MMBtus for natural gas calendar strips; 17,500 MMBtus for natural gas summer strips; 12,500 MMBtus for natural gas winter strips; 12,000 barrels for crude oil calendar strips; 3,000 barrels for crude oil quarterly strips; approximately 10,200 MMBtus for PJM calendar strips; and 18,600 tons for coal calendar strips.
For more information please visit www.cmegroup.com/clearport.
Source: CME Group
DB Index Research -- Weekly ETF Reports -- US
October 14, 2009--Highlights
ETF Volume
US ETF turnover remained at about the same level at US$59.1bn in the previous week. Turnover in the S&P 500 SPDR ("Spider") was US$19.2bn. The PowerShares QQQ Nasdaq 100 had turnover of US$4.3bn followed by the iShares Russell 2000 with turnover of US$2.8bn.
There were no new ETFs launched in the last week.
In the previous week, average daily turnover in the Large Cap, US Sector Leveraged and global regional products was US$25.1bn (4.6%), US$9.1bn (6.4%), US$8.4bn (0.7%) and US$4.2bn (7.4%) respectively.
Among the Emerging country ETFs, iShares MSCI Brazil ETF turnover was US$1,107m followed by iShares FTSE/Xinhua China ETF with turnover of US$782m. In non-US developed market flows, iShares MSCI Japan had turnover of US$334m. In non-domestic regional flows, emerging market turnover was US$2.9bn and developed markets regional flows EAFE had turnover of US$1.1bn.
Assets under Management (AUM) Total assets under management for equity based ETFs rose by 3.4% in the previous week, AUM were US$555.4bn.
To request a copy of the report click here
Source: Aram Flores and Shan Lan -DB Index Research