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U.S. Department of the Treasury Economic Statistics - Quarterly Data Update
October 29, 2010--The U.S. Department of the Treasury Economic Statistics - Quarterly Data has been updated is now available.
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ETFs role in rising equity correlations
October 29, 2010--Growing use of exchange traded funds has contributed to an increase in correlations between individual equities, posing particular problems for long-short equity hedge funds, according to Hennessee Group, the consultant.
Hennessee said the growing popularity of ETFs and their rising share of overall trading volumes was contributing to the stock market being driven more by sentiment about broad economic issues rather than company fundamentals.
“The ‘risk on-risk off’ trade, driven largely by macro sentiment, continues to dominate the financial markets,” said Charles Gradante, co-founder of Hennessee. “Until we see fundamentals return to the forefront of investing, we believe hedge funds will have difficult executing their investment strategy, particularly on the short side.”
NASDAQ OMX Reports Solid Third Quarter 2010 Results
EPS of $0.50 Represents 19% Increase Over Prior Year Non-GAAP Results
Net Revenues Grow 7% to $372 Million
October 29, 2010--The NASDAQ OMX Group, Inc. ("NASDAQ OMX(R)") (Nasdaq:NDAQ) reported solid results for the third quarter of 2010. Net income attributable to NASDAQ OMX for the third quarter of 2010 was $101 million, or $0.50 per diluted share, compared with $96 million, or $0.46 per diluted share, in the second quarter of 2010, and $60 million, or $0.28 per diluted share, in the third quarter of 2009. Included in the third quarter of 2010 results are $4 million of expenses associated with workforce reductions, merger and strategic initiatives, and other items, offset by $4 million of benefits associated with the tax impact of these items and certain other tax adjustments.
Financial Highlights:
Net exchange revenues grew 7% over prior year results to $372 million
Non-GAAP operating income improved to $169 million, up 11% from third quarter of 2009 results, while operating margins increased to 45%
Non-GAAP EPS increased to $0.50, up from $0.42 in the prior year quarter
GAAP EPS of $0.50 represents a 79% increase over third quarter of 2009 results
Completed $300 million of the $400 million authorized share repurchase program thus far, representing 15.1 million shares. Board has authorized an additional $150 million for the program, bringing the total authorized amount to $550 million.
CFTC.gov Commitments of Traders Reports Update
October 29, 2010--The CFTC.gov Commitments of Traders Reports has been updated for the week of October 26, 2010and are now available.
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Exchange-Traded Funds:Quarterly Report:$925 Billion in 955 ETFs- Morgan Stanley
October 28, 2010--Assets under management in US ETFs are currently $925 billion. ETFs generated net cash
inflows of $72 billion through the end of the third quarter 2010. New issuance remains strong at 155 ETFs this year, and is on pace for the most new
listings since 2007. Year to date, fixed income, emerging market equity, and gold ETFs have generated the strongest net inflows.
This is our comprehensive quarterly report on USlisted ETFs. It includes a summary of investment applications, excerpts from our strategy reports, our
outlook for related markets, index data, and individual profiles for the 290 ETFs in our coverage universe,
which represent approximately 95% of US ETF assets.
ETFs provide access to many favored market segments. Morgan Stanley & Co.’s global strategists
remain constructive on risky assets through year-end as global rebalancing supports US growth. The firm
continues to be positive on emerging markets and high yield bonds and sees further upside in Europe. Several of Morgan Stanley’s favored sectors and
industries
including telecom, energy, and banks
can be accessed with ETFs.
Tighter US ban on bank trading urged
October 28, 2010--A group of senators led by Carl Levin, the Democrat from Michigan, is pushing a new financial oversight council to adopt a strict ban on proprietary trading at banks.
The financial reform legislation passed by Congress in the summer included a version of the Volcker rule, named after former Federal Reserve chairman Paul Volcker, which bans banks from trading for their own account.
But to the chagrin of Mr Levin and others who wanted an outright ban, it does contain some latitude for banks to invest in hedge funds and private equity firms.
Dow Jones Indexes Launches U.S. Venture Capital Index
October 28, 2010-- Dow Jones Indexes, a leading global index provider and CME Group Company, today announced the launch of the Dow Jones U.S. Venture Capital Index, designed to measure changes in the market value of venture capital-financed companies in the United States. The new index has been licensed to Chicago Alternative Investment Partners, LLC to serve as a basis for financial products.
“This index tracks an asset class that has not been readily available before to the general public,” said Michael A. Petronella, president, Dow Jones Indexes. “By publishing this index, we intend to shed light on this dynamic market and offer investors access to information in this important segment of U.S. economic growth,” noted Petronella.
The methodology for the Dow Jones U.S. Venture Capital Index was developed by Dow Jones Indexes together with Sand Hill Econometrics.
The values are based on a combination of values reported to Dow Jones VentureSource and value estimates based on Sand Hill’s previously developed econometric methods for estimating company values when a recent market value is not readily available. Dow Jones VentureSource database is owned by Dow Jones & Company, Inc.
The selection universe for the Dow Jones U.S. Venture Capital Index is based on companies in the Dow Jones VentureSource database, the world’s most comprehensive venture capital database which tracks more than 14,000 private investment firms and more than 48,000 venture-backed companies in all industries and stages of development, worldwide. The index is based on data from Dow Jones VentureSource, about companies headquartered in the United States that have received equity funding from institutional venture capital funds. Excluded from the index are companies that receive funding solely from “angels,” affluent private investors, or leveraged buyout funds.
Van Eck Launches Market Vectors(R) Rare Earth/Strategic Metals ETF (REMX)
First U.S.-listed ETF to focus on rare earth/strategic metals, essential elements for many of today's advanced technologies
October 28, 2010--Van Eck Global has launched Market Vectors Rare Earth/Strategic Metals ETF (NYSE Arca: REMX), the first U.S.-listed exchange traded fund (ETF) which seeks to give investors pure play exposure to the equities of companies primarily engaged in the producing, refining,
and recycling rare earth/strategic metals, it was announced today.
Rare earth/strategic metals are industrial metals that are typically mined as by-products in operations focused on precious metals and base metals. Compared to base metals, they have more specialized uses and are often more difficult to extract. Currently, approximately 49 elements in the periodic table are considered rare earth/strategic metals. They include such elements as cerium, manganese, titanium and tungsten. Strategic metals are used in a variety of technologies including jet engines, hybrid cars, steel alloys, wind turbines, flat screen televisions and cellular phones. Rare earth metals, a subset of strategic metals, are a collection of 17chemical elements that are essential in many of today’s most advanced technologies, with particular applications in electronics.
REMX seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Rare Earth/Strategic Metals Index (ticker MVREMXTR), a rulesbased, modified-capitalization weighted, float adjusted index intended to give investors a means of tracking the overall performance of publicly traded companies primarily engaged in the producing, refining, and recycling of rare earth/strategic metals. To be included in the index, a company must have the capacity to generate more than 50 percent of its revenue from rare earth/strategic metals-focused efforts.
AdvisorShares Set to Launch the Peritus High Yield ETF (NYSE: HYLD)
HYLD Is the First Actively Managed High Yield Bond ETF
October 28, 2010-- AdvisorShares Investments, LLC, an innovator of actively managed Exchange Traded Funds (ETFs), today announced an expected launch date of no later than December 3rd, 2010 for the first ever actively managed high yield bond ETF, the Peritus High Yield ETF (NYSE: HYLD). HYLD is managed by Peritus I Asset Management ("Peritus"), a Santa Barbara, California-based investment manager.
Peritus is a unique value focused, active credit manager capitalizing on opportunities in the corporate bond market. They place limited value on the rating agencies and their methodologies, believing the agencies lag the market perception of risk and often ignore critical components of a company's credit profile. Instead, Peritus views credit as either "AAA" or "D," either the credit is expected to pay its coupon and principal obligations or it isn't. By avoiding arbitrary restrictions on aspects such as ratings and subordination and not being forced to take the one-of-everything approach as in the index products, Peritus is able to focus exclusively on the credits where they see the best risk reward. In addition, HYLD may utilize U.S. Treasuries in an effort to hedge against adverse market declines in periods of excessive exuberance as evidenced by compressed spreads and questionable underwriting standards. Short term treasuries (less than 5 year maturities) benefit from the "flight to quality" trade when there is a market disruption. While there is an opportunity cost in adding Treasuries to the portfolio (the yield is less), the possible Treasury "overlay" is expected to help potentially reduce risk and maximize the income stream regardless of the environment.
Noah Hamman, CEO and Founder of AdvisorShares said, "Peritus has an established track record managing high yield bonds. More importantly they have extensive high yield bond trading experience and the relationships to find the best opportunities. We believe that the high yield asset class is one which is best served through active management. We are very excited to be the first Firm to offer an actively managed high yield bond ETF to investors."
Tim Gramatovich, Chief Investment Officer of Peritus said, "We are very excited to launch HYLD with AdvisorShares as investors have begun to realize the benefits of yield in their portfolios. Delivering this via an ETF brings both transparency and liquidity to a much misunderstood asset class. Given the massive size of the marketplace, we believe that we have the tools to manage this portfolio through any and all environments and as such view HYLD as an active credit fund with all season tires. Our goal is to deliver a monthly income stream while also positioning the portfolio to generate capital gains by acquiring securities at a discount to par value."
ELX Futures Exceeds 100,000 Contracts of Open Interest and Sets New Volume Record in Eurodollar Futures
October 28, 2010--ELX Futures, L.P. (ELX) announced today that it has reached a new milestone in open interest (OI) and set a new volume record in its Eurodollar Futures contract, which was launched in June 2010.
On Wednesday, October 27th, OI for Eurodollar Futures reached 104,313 contracts, with OI more than doubling every month since launch. Eurodollar Futures also set a new volume record, reaching 20,227 contracts on Tuesday, October 26th. Month over month, market share in Eurodollar contracts increased over 100% since September.
Neal Wolkoff, Chief Executive Officer of ELX Futures, said, “The Eurodollars Futures contract has been a very successful product for ELX, achieving new records every month. The exponential growth in open interest and the increase in volume show the great interest by market participants for an alternative Eurodollar Futures contract, which provides cross margining opportunities and adds to ELX’s suite of U.S. Treasury futures products.”
CME Group Inc. Reports Solid Third-Quarter 2010 Financial Results
October 28, 2010--CME Group Inc. (Nasdaq: CME) today reported that third-quarter total revenues increased 13 percent to $733 million and operating income increased 10 percent to $443 million from the year-ago period. Third-quarter net income was $244 million, up 21 percent from third quarter last year, and diluted earnings per share were $3.66, up 20 percent.
"For the third consecutive quarter, we've shown solid year-over-year volume gains," said CME Group Executive Chairman Terry Duffy. "Additionally, we've seen strong performances in several areas, including 41 percent growth in Treasury contracts versus the same time period last year, and combined 32 percent growth across our FX, agricultural commodities and metals products, with strong participation during non-U.S. trading hours. This performance highlights the value of CME Group's wide array of products to a diverse, global user base, which in turn creates optimal strategic positioning for us going forward."
House Money
Speech of Commissioner Bart Chilton to the National Supply Summit, Las Vegas, NV
October 28, 2010--Everyone knows that casinos operate with a “house edge”—the mathematically determined odds that ensure the house maintains an advantage over the players. Sometimes, however, there’s a player on a winning streak who keeps piling the bets back on the table—“playing with the house’s money.” That’s a sweet win for the player, if it happens, but a sore loss for the house—which is why the odds are that it’s relatively rare.
Despite what some people say, the U.S. futures markets aren’t gambling marts—they are intended to be used for risk management and price discovery. Yes, speculators play an important part in these markets—they provide necessary liquidity. But when they begin to “play with the house’s money”—that is, when they are more than just liquidity providers, when they are a new, large, potent force in the markets, making money from the markets without providing inputs that go to the core functions of the markets—then that raises some serious red flags.
That’s what we saw in 2008. When supplies of crude were at record highs, and demand was at a record low, prices skyrocketed. I asked myself, what’s going on? Part of the answer was the increase in “Massive Passives,” new speculators that were playing with the house’s money, getting in the markets and staying there, rolling from one delivery month to the next, insensitive to price. And they had an effect on prices. To what degree we can’t say, but—in hindsight—we can surely say they had an effect.
Global X files with the SEC
October 28, 2010--Global X has filed a post effective amendment, registration statement with the SEC for 2 ETFs
Global X Russell Emerging Markets Growth ETF
Global X Russell Emerging Markets Value ETF
Pimco files with the SEC
October 28, 2010--Pimco has filed a post effective amendment, registration statement with the SEC for 6 actively-managed ETFs.
3 short duration
PIMCO Enhanced Short Maturity Strategy Fund (MINT NYSE Arca)
PIMCO Government Limited Maturity Strategy Fund (GOVY)
PIMCO Prime Limited Maturity Strategy Fund (PPRM)
2 Tax-exempt municipal
PIMCO Short-Term Municipal Bond Strategy Fund (SMMU NYSE Arca)
PIMCO Intermediate Municipal Bond Strategy Fund (MUNI NYSE Arca)
1 Taxable Municipal
PIMCO Build America Bond Strategy Fund (BABZ NYSE Arca)
Upgrades Top Downgrades; Issuance Soars in U.S. Corporate Bond Market in 3Q'10
October 28, 2010--The par value of U.S. corporate bonds affected by upgrades again topped downgrades in the third quarter of 2010 and by a wider margin that in the second quarter. Downgrades of $21.1 billion affected 0.6% of market volume while upgrades of $51.7 billion moved 1.5% of outstanding bonds.
The third-quarter downgrade tally was the lowest level of the year and in line with similar activity in the precrisis years of 2006-2007. While downgrades had a muted impact on both the investment-grade and speculative-grade portions of the market, the vast majority of the quarter's upgrades were concentrated at the speculative-grade level - a trend repeated in each quarter of 2010. Through September, the par value of U.S. corporate bonds affected by downgrades at $95.8 billion, trails upgrades of $123.4 billion.
