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CFTC/SEC Staffs to Host Joint Public Roundtable to Discuss Issues Related to the Clearing of Credit Default Swaps
October 21, 2010--The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) staffs will hold a public roundtable on October 22, 2010, from 9:00 am to 12:00 pm, to discuss issues related to the clearing of credit default swaps. The roundtable will assist both agencies in the rulemaking process to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The roundtable will be held in the Lobby Level Hearing Room at the CFTC’s Headquarters, Three Lafayette Centre, 1155 21st Street, NW, Washington, DC. The discussion will be open to the public with seating on a first-come, first-served basis. Members of the public may also listen by telephone and should be prepared to provide their first name, last name and affiliation.
U.S. High Yield Default Update: Default Loss Rate Shrinks to 23 Basis Points Through Third Quarter
October 21, 2010--Summary
U.S. high yield bond defaults continued to run well below average in the third quarter of 2010, with eight issuer defaults affecting a combined $2.5 billion in bonds. Both
measures were up from the second quarter’s very low three issuer defaults on $800 million in bonds; however, the third-quarter uptick failed to move the default rate
significantly from its expected year end finish of roughly 1% ? one of the lowest levels on record, according to Fitch’s U.S. High Yield Par Default Index.
There have been both fewer and smaller defaults in 2010. The average size of bonds outstanding per defaulted issuer has fallen to $265 million this year versus $786 million per defaulted issuer in 2009. This explains why the par-based default rate has
contracted more than the issuer-based default rate, which stands at 1.6% year-to-date versus 0.5% for the par-based rate. This pattern is not without precedent. Prior Fitch research has shown that large cap high yield companies (defined as companies with
more than $500 million in bonds outstanding) show a higher propensity to default during stress periods than in benign default environments. Furthermore, when examining the
composition of the high yield market, Fitch finds that 71% of the market’s par value is concentrated in just one-quarter of the market’s issuers. A lower rate of default among these larger borrowers puts downward pressure on the overall par-based default rate.
Fitch believes that the issuer-based default rate will end the year in a range of 2% to 2.5%, versus the 1% forecast for the par-based rate.
The weighted average recovery rate on all defaults through September is 54% of par, above 2009’s 34.1% of par. The loss rate associated with bond defaults this year has therefore plummeted to just 0.23% when combining the year-to-date default rate of 0.5% with a recovery rate of 54% of par on the defaulted issues.
ELX Exceeds 80,000 Contracts Of Open Interest In Eurodollar Futures
October 21, 2010--ELX Futures, L.P. (ELX) announced today that it has reached a milestone in open interest (OI) in its Eurodollar Futures contract, which was launched in June 2010. ELX also saw a significant rebound in volume and market share in its U.S. Treasury Futures contracts with large gains in its two-year and five-year Treasury notes in October.
MTD October Highlights:
OI for Eurodollar Futures exceeded 80,000 contracts; Eurodollar OI has more than doubled every month since product launch.
Single day Eurodollar Futures volume and market share records set at 17.7K and 1.4%, respectively.
Market share in Eurodollar contracts reached almost 1%, an increase of over 100% since September.
President’s Working Group on Financial Markets Releases Money Market Funds Report
October 21, 2010--The President's Working Group on Financial Markets (PWG) today released a report detailing a number of options for reforms related to money market funds. These options address the vulnerabilities of money market funds that contributed to the financial crisis in 2008.
Following the crisis, the Treasury Department directed the PWG to develop this report to assess options for mitigating the systemic risk associated with money market funds and reducing their susceptibility to runs. The PWG agrees that, while a number of positive reforms have been implemented, more should be done to address this susceptibility.
The PWG now requests that the Financial Stability Oversight Council (FSOC), established by the Dodd-Frank Wall Street Reform and Consumer Protection Act, consider the options discussed in this report and pursue appropriate next steps. To assist the FSOC in any analysis, the Securities and Exchange Commission, as the regulator of money market funds, will solicit public comments, including the production of empirical data and other information in support of such comments. A notice and request for comment will be published in the near future.
Today's release is one part in a series of steps that the regulatory community will be taking in the coming months to implement financial reform and to help ensure that the financial system continues to become more resilient.
PowerShares files with the SEC
October 21, 2010--PowerShares has filed a post-effective amendment, registration statement with the SEC for 5 ETFs.
PowerShares S&P 500® High Beta Portfolio
PowerShares S&P 500® Low Beta Portfolio
PowerShares S&P 500® High Momentum Portfolio (NYSE Arca, Inc.
PowerShares S&P 500® High Volatility Portfolio
PowerShares S&P 500® Low Volatility Portfolio
Huntington Asset Advisors files with the SEC
October 21, 2010-Huntington Asset Advisors has filed an amended and restated application for exemptive relief with the SEC. Applicants request that the relief requested herein extend to any future series of the Trust and to any other open-end investment company or series thereof that is an actively managed exchange-traded fund (“ETF”) (“Future Funds”).
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Huntington Asset Advisors files with the SEC
October 21, 2010--Huntington Asset Advisors has filed an amended and restated Application application for exemptive relief with the SEC.
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Fannie & Freddie ‘could cost US $363bn’
October 21, 2010--Fannie Mae and Freddie Mac, the government-owned mortgage finance companies, could cost US taxpayers as much as $363bn to the end of 2013, according to their regulator, less than some of the worst-case scenarios circulated by critics of the agencies, but more than projections by the White House.
Since they were rescued by the government in 2008, Fannie Mae and Freddie Mac have drawn $148bn from the US Treasury to stay afloat as losses on bad loans underwritten during the housing boom turned bad at a record pace.
In August, the Congressional Budget Office said Fannie and Freddie would need $390bn in federal subsidies to the end of 2019. The White House’s Office of Management and Budget had in February estimated the cost to be as little as $160bn for the same period, providing the economy continued to strengthen.
Transatlantic clearing war set to get hotter
October 21, 2010--A transatlantic battle in the derivatives business is poised to heat up after LCH.Clearnet, the UK-based clearing house, said it would launch clearing of a vast untapped section of the interest rate swaps markets “in the next few weeks”.
The disclosure comes a week after rival CME Group, which owns the Chicago Mercantile Exchange, said it had started clearing interest rate swaps.
It will provide a boost to LCH.Clearnet, which has pinned much of its hopes for growth on cracking the US market for interest rate swaps clearing as it is losing customers in cash equities clearing in Europe.
BM&FBOVESPA posts record financial volume in ETF BOVA11 funds
Financial volume reaches BRL71.67 million in ETF BOVA11, totaling 1,029,790 lots in 1,457 trades at an average price of BRL69.59
October 20, 2010-- BM&FBOVESPA recorded a record financial volume on Wednesday in ETF BOVA11 Exchange Traded Funds for the Ibovespa index, at BRL71 million. The previous record was BRL65.87 million, on January 21.
There were 1,029,790 BOVA11 round lots traded on Wednesday, at an average price of BRL69.59, in 1,457 trades. Trades in PIBB11, SMALL11, MOBI11 and CSMO11 reached financial volumes of BRL1.77 million, BRL1.17 million, BRL1.75 million and BRL 67,780, respectively.
ETFs
ETFs are funds which mirror indexes and their units are traded on the Exchange just like shares. When investors buy the units of any given ETF, they become holders of all the component shares of the index which that ETF replicates without having to buy the shares of each company in the index separately. There are currently seven index funds (ETFs) trading at BM&FBOVESPA: BOVA11, SMAL11, MILA11 PIBB11, BRAX11, CSMO11 and MOBI11.They track the Bovespa, Small Cap, MidLarge Cap and IBrX-50, IBrX-100, Índice de Consumo and Índice Imobiliário, indices respectively.
BNY Mellon OnCoresm Service Integrates Middle-Office and Data Management Solutions for Investment Managers
October 20, 2010--BNY Mellon Asset Servicing, the global leader in securities servicing, has recently announced its newly named outsourcing service, BNY Mellon OnCore, which provides an integrated offering for investment managers, combining technology and operations to deliver a sophisticated suite of middle-office and data management solutions.
The OnCore service and platform combines our Asset Servicing capabilities around trade processing, data warehousing, accounting, and performance measurement to provide a comprehensive solution to our clients. Our OnCore offering spans the continuum of investment operations solutions from traditional software installation to ASP hosting models to full business process outsourcing.
For more information, contact +1-203-614-0800 or visit www.argainvest.com.
Claymore files with the SEC
October 20, 2010--Guggenheim Funds Investment Advisors, LLC (formerly, Claymore Advisors, LLC) has filed an application for exemptive relief with the SEC.
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BlackRock dismisses ETF price war concerns
October 20, 2010--BlackRock has felt little impact from the price war currently being fought by US exchange traded fund providers, according to Larry Fink, chief executive of the world’s largest asset manager.
“Fees are a consideration and may be a bigger driver, possibly in the future,” said Mr Fink. “[But] we are not seeing industry-wide pressure at all.”
Mr Fink said BlackRock’s “experiment” in lowering fees on its gold ETF had led to increased inflows but “only a fraction of what we expected”
U.S. International Reserve Position
October 20, 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 $136,532 million as of the end of that week, compared to $135,631 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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October 15, 2010 |
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A. Official reserve assets (in US millions unless otherwise specified) 1 |
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136,532 |
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(1) Foreign currency reserves (in convertible foreign currencies) |
Euro |
Yen |
Total |
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(a) Securities |
9,964 |
15,986 |
25,950 |
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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 |
14,674 |
7,852 |
22,526 |
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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 |
13,142 |
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(3) SDRs 2 |
58,720 |
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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) |
5,154 |
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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) |
5,154 |
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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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IMF's Western Hemisphere Regional Economic Outlook Shows Domestic Demand Leading Recovery in Many Latin American Countries; Risk of Overheating Must be Watched
October 19, 2010--Two years after the onslaught of the global financial crisis, some countries in the Western Hemisphere are growing at a pace that is second only to emerging Asia, according to the latest Regional Economic Outlook from the International Monetary Fund (IMF). Growth in many economies appears to be self-sustained and based on robust domestic demand, meaning their near-term prospects are positive even if recovery in advanced economies continues to be sluggish, says the IMF's Western Hemisphere: Heating up in the South, Cooler in the North, which was launched today in Bogotá in a seminar hosted by the Central Bank of Colombia.
Real GDP in the Latin America and Caribbean region is set to expand by 5.7 percent in 2010 and 4 percent in 2011. Within the region, countries are performing at different paces. Most commodity-exporting countries in South America enjoy very favorable external conditions––high international commodity prices and easy access to international finance ––and growth in some countries is projected to exceed 7 percent this year. Central American economies have kept a positive, but more moderate rate of growth (averaging about 3 percent in 2010), reflecting their greater linkages to the slower-growing U.S. economy. For most Caribbean countries, recovery is only beginning and prospects are still limited by high levels of public debt and weak tourism demand from the U.S. and other advanced economies.
"The marked heterogeneity across the region means varied challenges for economic policy formulation," Nicolas Eyzaguirre, Director of the IMF’s Western Hemisphere Department, said. "For most of South America, it is all about the risks of too much of a good thing, to avoid possible excesses of demand and finance. In Central America, governments have to continue to be prudent, to rebuild their defenses and continue pursuing reforms to boost competitiveness. Caribbean countries generally have no space for fiscal stimulus due to their high debts and still have to push ahead with fiscal consolidation plans."
Robust Domestic Demand
One of the most significant findings of the Regional Outlook is how domestic demand has been strengthening in the fastest-growing countries in South America. For such countries, the strength and momentum of domestic demand are likely to dominate their near-term growth prospects, provided advanced economies do not suffer any major setbacks. That is a different reality from the United States, where the recovery so far has been dependent on policy stimulus.
As commodity prices are expected to remain high, the commodity-exporting countries will benefit from strong export earnings. At the same time, those with stronger fundamentals and track records of sound policies will have ample access to foreign financing on easy terms. While those economies stand to benefit from low global interest rates and increased liquidity, policymakers must be alert to the risks of excesses. "Demand needs to moderate in these countries," said Mr. Eyzaguirre, "or they may risk experiencing overheating, inflation and widening current account deficits."
