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Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association
May 4, 2010--Since the Committee met in early February, incoming data confirm that the economic expansion is moving onto a self-sustaining path. Although aggressive policy stimulus and a turn in the inventory cycle provided the initial spark for recovery, the sources of growth have broadened into private final demand. This shift appears to be generating gains in labor income and an improvement in financial conditions. Ongoing drags from tight credit markets and strained public finances are likely to temper the strength of the recovery for some time and slow the decline in the unemployment rate. However, the prospects for sustaining growth are good.
On the heels of a 5.6% annualized gain in the final quarter of 2009, GDP growth moderated to 3.2% last quarter.
Although a large inventory contribution faded some, growth continues to be supported from a turn in the stock-building cycle. Importantly, the recovery in final sales is finding firmer ground as equipment spending, exports and personal consumption each posted a third consecutive gain last quarter. The manufacturing sector continues to benefit from the lift in domestic and foreign demand, with output rising at a 6.6% pace last quarter. The most recent readings from business surveys – including a 60.4 ISM manufacturing survey in April – point to further rapid gains this quarter. Indicators such as the ISM non-manufacturing survey and the establishment survey of private service employment have moved higher, suggesting that growth in the service sector is now gaining momentum.
Retail sales expanded briskly in the first quarter, supporting growth in real consumption at a 3.6% annual rate. It appears that households are responding to resumption in labor income growth – compensation rose at a 3.6% annualized pace last quarter – alongside rising equity wealth, and a gradual opening up of credit availability. As a result, a sharp upward adjustment in the saving rate appears to have ended. However, last quarter's fall in the saving rate is not likely to be repeated and most forecasts anticipate rising saving this year that holds spending gains close to its recent pace, even as labor income growth is sustained.
Dow Jones adds Required Business Performance indices
"The strategy indexes licensed to Transparent Value represent a brand new approach to indexing that combines the innovative RBP methodology with aggressive, defensive and neutral views of the market," said Michael A. Petronella, president designate, Dow Jones Indexes. "Dow Jones RBP Indexes are quantitative strategy indexes built upon rules-based analytics providing a powerful tool set for measuring and evaluating component company valuation."
Emerging Markets Week in Review 4/26/2010 - 4/30/2010 Geithner Testimony before the Senate Finance Committee
The principle that the cost of putting out a financial fire should be recovered from financial institutions was adopted by Congress in the aftermath of the savings-and-loan crisis. The FDIC Improvement Act (FDICIA) required the FDIC to recoup any losses it incurred as a result of closing failed banks through assessments on banks. This same principle is incorporated into the financial reform proposals adopted by the House and now being considered by the Senate. Both bills require the financial industry to repay the government for any costs associated with the resolution of a failing financial institution. US pension funds sue Goldman over Abacus
They filed their amended complaint on April 28, according to a new Goldman 8-K filing.
WisdomTree Announces First Quarter 2010 Results On the
back of this progress, the Company has further strengthened its financial position and is
now generating positive cash-flow. We continue to balance prudent cost management
while still investing in important growth initiatives and we believe we are positioned to
see significant operating leverage in the business going forward.” CME Group Volume Averaged 11.9 Million Contracts Per Day in April 2010, Up 31 Percent CME Group equity index volume averaged 2.6 million contracts per day, down 15 percent from April 2009. CME Group foreign exchange (FX) volume averaged 842,000 contracts per day, up 87 percent compared with the same period a year ago, reflecting average daily notional value of $110 billion. On April 28, FX volume hit a new record with 1,476,662 contracts traded, reflecting notional value of $193 billion.
ISE Expands Market Data Offering with Launch Of ISE Order Feed The ISE Order Feed is the latest offering in ISE’s suite of market data products. Also available are the ISE Depth
of Market Feed, ISE TOP Quote Feed, ISE Spread Book Feed, as well as put/call product offerings and historical
market data.
For more information about the ISE Order Feed, please visit www.ise.com/orderfeed. For more information about
ISE’s suite of market data products, please visit www.ise.com/marketdata. FINRA to Perform NYSE Regulation's Market Oversight Functions The final agreement is expected to be completed in the next several weeks, with an effective date anticipated to be at or prior to the end of June. "This agreement will strengthen market regulation by consolidating surveillance and enforcement responsibilities across multiple markets into one regulator," said NYSE Euronext COO Lawrence Leibowitz. "Today, trading is dispersed among numerous venues, and no single regulator has responsibility for monitoring data and pursuing activity across markets. Aggregating our surveillance and enforcement functions with those already performed by FINRA for other markets is an important step on the road to creating a consistent and completely integrated approach to regulation." DB Index Research -- Weekly ETP Market Review - US
Turnover
Assets Under Management (AUM) To request a copy of the report CME Group Announces Request to List Twelve New Agricultural Swaps BNY Mellon ADR Index Monthly Performance Review Krueger testimony before the joint economic committee While the collapse in the job market in the wake of the financial crisis has been devastating, job growth in the earlier part of the 2000s was also poor compared to the preceding decade. In my testimony I will focus on two periods: First, I will contrast job growth in the decade of the 1990s with job growth in the 2000s prior to the most recent recession; and second, I will analyze the job losses in the recession that began in December 2007 and the recent stabilization and probable improvement of the job market. BlackRock Announces Changes to Membership of U.S. iShares Exchange Traded Funds Boards
"We are delighted to have George as Chairman and welcome Rob as a member of the Board as we look forward to their substantial contributions in guiding the iShares business in the years ahead," said Mr. Latham. "We also sincerely thank Lee for his remarkable contributions and dedication in helping advance the iShares business to its leading industry position with over $500 billion in global assets under management1 in ten short years. Lee recognized early the prospects of ETFs and was instrumental in the growth of a business that has changed, and continues to change, the way individuals invest."
"It has been a wonderful experience helping build iShares and serving our investors," said Mr. Kranefuss. "I have enjoyed working with the new leadership to help them to continue to be well-positioned advocates for iShares ETFs as a mainstream investment for many investors. I look forward to seeing new iShares successes in the next ten years and beyond." ELX Futures Sets Record Average Daily Volume In April
Neal Wolkoff, Chief Executive Officer of ELX Futures, said, “I am pleased to see ELX continuing to increase its volume and setting new monthly volume records in April. In addition to attracting new customers, ELX is busy preparing to launch its highly anticipated Eurodollar Futures contract on June 18, which will provide cross margining opportunities and add to our to suite of interest rate futures.”
May 4, 2010--Dow Jones Indexes, a leading global index provider, today announced the addition of four new indexes to its family of Dow Jones RBP Indexes. The new series of indexes include three directional strategy indexes and one fundamentally weighted U.S. market index. The three strategy indexes are the Dow Jones RBP U.S. Large-Cap Aggressive Index, the Dow Jones RBP U.S. Large-Cap Defensive Index, and the Dow Jones RBP U.S. Large-Cap Market Index. The fundamentally weighted market index, the Dow Jones U.S. Large-Cap Total Stock Market Index (RBP weighted), provides market participants with additional rules-based information to measure the valuation of publicly traded companies included in the index.
The Dow Jones RBP U.S. Large-Cap Aggressive Index, the Dow Jones RBP U.S. Large-Cap Defensive Index, and the Dow Jones RBP U.S. Large-Cap Market Index are licensed to Transparent Value LLC, a Guggenheim Partners Company, to underlie three mutual funds.
May 3, 2010--The Dow Jones Emerging Markets Composite Index declined 0.71% last week as the European Monetary Union and the IMF secured a plan worth $146 billion to aid Greece. Health Care and Financials were the best performers for the week, gaining 1.13%% and 0.98% respectively.
Telecom and Energy led the decline, down 1.41% and 1.10% respectively. All sectors but Energy remain positive for the year.
May 4, 2010--Chairman Baucus, Ranking Member Grassley, Members of the Committee, thank you for the opportunity to testify before you today regarding the Financial Crisis Responsibility Fee.
On October 3, 2008, Congress gave the Treasury Department authority to stabilize the American economy through the enactment of the Emergency Economic Stabilization Act (EESA).
Congress included in the legislation a requirement that the President put forward a plan "that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program (TARP) does not add to the deficit or national debt."
SEC charges prompt funds to take action.
May 4, 2010--Two US pension funds are sueing Goldman Sachs – with other funds threatening to follow – claiming negligence over billions of dollars of paper losses at the bank, after its share price tanked following the recently announced SEC investigation into the controversial Abacus deal.
Septa, the $640m Pennsylvania transportation fund, and the International Brotherhood of Electrical Workers Local 98 Pension Fund, said they had amended an existing lawsuit against Goldman regarding executive pay to include the new charges.
May 3, 2010-WisdomTree, an exchange-traded fund (“ETF”) sponsor and asset manager, today
reported a GAAP net loss of $3.6 million in the first quarter of 2010, as compared to
$5.0 million for the fourth quarter of 2009. Proforma operating net loss, which excludes
stock-based compensation, depreciation and amortization, and interest and investment
income, was just below $1.0 million in the first quarter, a 34.3% improvement from a
proforma operating net loss of $1.5 million in the fourth quarter.
WisdomTree CEO Jonathan Steinberg commented, “WisdomTree garnered more than
7% of the ETF industry market share in the first quarter and continued to raise assets in
emerging market equities and currencies. We continued to build awareness of emerging
market currencies as an asset class, led by the WisdomTree Dreyfus Chinese Yuan Fund
(CYB). CYB is now our second largest fund and is poised to benefit from the potential
appreciation of the Chinese yuan, a trend many investors are watching.”
Mr. Steinberg continued, “We are off to a strong start in the second quarter with an
impressive $423 million in net inflows already captured as of April 29, 2010.
Double-digit monthly volumes in interest rates, foreign exchange, commodities and alternative investments, energy and metals
Record energy average daily volume of 1.7 million contracts, up 33 percent
Record month for WTI and refined products, up 56 and 50 percent, respectively
May 4, 2010--CME Group, the world's leading and most diverse derivatives marketplace, today announced that April volume averaged 11.9 million contracts per day, up 31 percent from April 2009, and represented the highest year-over-year growth since January 2008. Total volume was 263 million contracts for April, of which 84 percent was traded electronically.
In April 2010, CME Group interest rate volume averaged 5.6 million contracts per day, up 69 percent compared with the prior April, and represented the highest year-over-year growth for the past several years. Treasury futures volume averaged 2.0 million contracts per day, up 82 percent compared with the same period in 2009, and Treasury options volume averaged 265,000 contracts per day, up 16 percent. Eurodollar futures volume averaged 2.4 million contracts per day, up 68 percent versus April 2009, while Eurodollar options volume averaged 841,000 contracts per day, up 64 percent.
May 4, 2010--The International Securities Exchange (ISE) today announced that it will expand its
market data product offering with the introduction of the ISE Order Feed. The ISE Order Feed notifies subscribers
when a new order is placed on ISE’s order book, and it shows the size of the individual orders that comprise the
Best Bid and Offer (BBO) on the exchange.
“We are very excited to launch the ISE Order Feed, which provides subscribers with a real-time snapshot of
orders that are not immediately executed at the BBO and hence are resting on ISE’s order book. Subscribers will
have access to information about the size of the individual orders that comprise ISE’s BBO, rather than only
aggregated order information,” said Jeff Soule, Head of ISE’s Market Data business. “The new data feed does not
include any quotes, and, therefore, requires less bandwidth and processing overhead than the Options Price
Reporting Authority (OPRA) feed. This feature makes the ISE Order Feed an attractive product for those
customers that are only interested in order flow information.”
May 4, 2010-- NYSE Euronext (NYSE: NYX) and the Financial Industry Regulatory Authority (FINRA) today announced that they have agreed that FINRA will assume responsibility for performing the market surveillance and enforcement functions currently conducted by NYSE Regulation. The agreement is subject to review by the Securities and Exchange Commission.
Under the agreement announced today, FINRA would assume regulatory functions for NYSE Euronext's U.S. equities and options markets – the New York Stock Exchange, NYSE Arca and NYSE Amex. FINRA currently provides regulatory services to the NASDAQ Stock Market, NASDAQ Options Market, NASDAQ OMX Philadelphia, NASDAQ OMX Boston, The BATS Exchange and The International Securities Exchange.
May 5, 2010--Highlights
New Listings and Delistings
There were 4 new listings in the last week (Figure 8). ProShares launched 4 products offering long leverage country/regional exposure on Brazil, Mexico, Europe and Pacific ex-Japan, this launch complements the short leveraged range listed last year in June, giving investors the option to go either long or short with a leverage of 2x on the countries and regions previously mentioned. All four ETFs were listed in NYSE Arca.
Net Cashflows
This week, $4.3 bn flowed into ETPs. Equity, Fixed Income and Commodity ETPs had inflows of $2.5 bn, $1.0 bn, and $611 mm, respectively. Currency ETPs, on the other hand, experienced outflows of $102 mm.
In the equity asset class, Large Cap ETPs had the highest inflows of $2.0 bn followed by Mid Cap ETPs, while US sector ETPs experienced the largest outflows of $692 mm, followed by Small Cap ETPs.
Sovereign and Corporate products contributed the most to the positive cash flows into Fixed Income ETPs.
Within Commodity ETPs, those tracking Gold saw the largest inflows followed by those tracking broad commodity benchmarks. Meanwhile, Crude Oil and Oil ETPs experienced the largest outflows.
Alternative ETPs continued to experience significant inflows during the previous week. Largely fueled by volatility ETNs, $298 mm were poured into this asset class.
ETP turnover rose significantly by 9.2% during the last week and reached $71.5 bn.
Turnover in Large Cap and US Sector ETPs had the most significant increase within Equity ETPs (Figures 30 and 33). For Fixed Income ETPs, turnover in the Sovereign space increased the most.
Commodity ETP turnover bounced back from the previous week, as Gold ETPs experienced increased trading activity.
US ETPs AUM slightly shrank by less than 1% totaling $848 bn at the end of last week. Equity ETPs had the lion’s share with $633 bn and 75% of market share, followed by Fixed Income funds with $127 bn and 15% of market share.
MAy 5, 2010--CME Group, the world’s leading and most diverse derivatives marketplace, today announced the submission of a petition to the Commodity Futures Trading Commission (CFTC) for approval to list twelve new agricultural swaps to be available on 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. These contracts will be listed with, and subject to, the rules and regulations of CME and CBOT.
“Many customers want to bring OTC transactions involving agricultural products such as grains, oil seeds and livestock to a central clearing facility in order to mitigate their counterparty credit risk,” said Tim Andriesen, CME Group Managing Director of Commodity Products and Services. “These new grain swaps will complement our grain futures and options contracts, which market participants rely on as global price benchmarks.”
May 5, 2010--BNY Mellon ADR Index Monthly Performance Review is Now Available
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May 5, 2010--Chair Maloney, Ranking Member Brady, Vice Chairman Schumer and other members of the Committee, thank you for giving me the opportunity to discuss jobs in the United States. We are meeting at a time when the U.S. labor market is beginning to show signs of what I expect will be sustained improvement after moving through the worst downturn since the 1930s by some measures, and since the early 1980s by other measures. The current unemployment rate is 9.7 percent. That is down from a recent high of 10.1 percent last October.
This is an improvement, but the rate is still unacceptably high. The economy gained an average of 54,000 jobs per month in the first quarter of 2010, a vast improvement over the 750,000 jobs lost per month in the first quarter of 2009. Yet even with the recent improvement, losses since the start of the recession amount to 8.2 million jobs.
May 3, 2010--BlackRock, Inc. (NYSE: BLK) today announced the election of George Parker, Ph.D., Dean Witter Distinguished Professor of Finance, Emeritus, at Stanford University: Graduate School of Business, to replace Lee Kranefuss as the Chairman of the Board of Trustees of iShares Trust and the Board of Directors of iShares, Inc. effective April 30th. Dr. Parker has served as Lead Independent Trustee/Director of iShares Trust and iShares, Inc. since 2006 and as a Trustee/Director on each Board since 2000. Mr. Kranefuss has served as an interested Trustee/Director and Chairman of each Board since 2003.
In addition, the Boards elected Robert Kapito, President of BlackRock, and Michael Latham, Managing Director at BlackRock and Head of U.S. iShares, to join each Board. Mr. Latham has served as President of iShares Trust and iShares, Inc. since 2007.
May 3, 2010--ELX Futures, L.P. (ELX) announced today that record average daily volume (ADV) was set in the month of April at 61K contracts, the highest in the nine full months since launch. It also set a daily volume record on April 27 with 95K contracts traded for the combined five U.S. Treasury futures products as well as trading 70K contracts for six days in April. ELX also announced in April that it will launch its Eurodollar Futures contract on Friday, June 18, 2010.
Monthly Highlights:
* Record ADV was set in April with 61K contracts, the highest ADV in the nine months since launch.
* ELX set a new daily volume record on April 27 with 95K contracts traded for the combined five U.S. Treasury futures products.
* ELX traded 70K contracts for six days in the month of April.
* Total monthly volume was also set in April with 1.3M contracts.
* Monthly average daily OI in April was the highest
* ELX set monthly volume records in the 10 Year Treasury Note with 371K contracts traded and an ADV of 18K contracts.
* A single day volume record was set in the 2 Year Treasury Note with 27K contracts traded on April 27.
* ELX finished the month of April with a 2.8% market share.
* ELX will launch its Eurodollar Futures contract on Friday, June 18, 2010.
