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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.

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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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.

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.

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.”

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.

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

Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index

January 20, 2010--Standard & Poor's will make the following changes in the S&P/TSX Venture Composite Index after the close of trading on Wednesday, January 20, 2010:
The shares of Ventura Gold Corp. (TSXVN:VGO) will be removed from the index.

The shares of the company have been acquired by International Minerals Corp. (TSX:IMZ) pursuant to an Arrangement Agreement.

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.

ISE Expands its Suite of FX Options Products With Launch of New Currency Pair

Options on Brazilian Real Now Available
January 20, 2010 – The International Securities Exchange (ISE) today announced that it has expanded its ISE FX Options® portfolio with the launch of currency options on the Brazilian real (Symbol: BRB). Timber Hill is the Primary Market Maker for these new products, which began trading on January 19, 2010.

“We are very pleased to diversify our FX options product suite with the launch of our tenth currency pair,” said Kris Monaco, ISE’s Director of New Product Development. “Brazil is one of the most important emerging market economies in the world, and for the first time investors will be able to use their existing securities accounts to hedge their exposure to the Brazilian real by trading an exchange-listed, centrally cleared, cash-settled options product. As with all of our other FX Options products, investors will also be able to use complex order types including spreads up to four legs.

ISE now lists FX options on ten currency pairs. The USD-based, or “per US$,” currency convention is available for all ten pairs and allows investors to express their views on the strength or weakness of the U.S. dollar relative to global currencies while adopting the trading strategies they currently use for equity and index options. The “in US$” currency convention, which is the inverse of the USD-based convention, is the traditional convention used in the FX spot market and is available on four currency pairs.

As exchange-listed securities, ISE FX Options are accessible through most major brokerage accounts that are approved for trading equity and index options. These products are cash-settled and have European style exercise. For more information, please visit www.ise.com/fx.

U.S. International Reserve Position

January 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 $131,997 million as of the end of that week, compared to $131,005 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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Treasury Releases TARP Warrant Disposition Report

January 20, 2010--The US Department of the Treasury today released a TARP Warrant Disposition Report. This report provides an overview of the warrants received by Treasury under the Capital Purchase Program (CPP) of the Troubled Asset Relief Program (TARP) as of December 31, 2009 and an explanation of the warrant disposition process and the results achieved on behalf of taxpayers.

The Emergency Economic Stabilization Act of 2008 (EESA) requires that Treasury receive warrants in connection with the purchase of troubled assets.

A major part of the TARP was the CPP. It was created in October 2008 to stabilize the financial system by providing capital to viable banks of all sizes nationwide. Under this program, Treasury invested $205 billion in 707 banks.

Under the CPP, Treasury purchased shares of senior preferred stock or other securities from qualifying U.S.-controlled banks, savings associations, and other financial institutions. As part of its investment, Treasury also received warrants to purchase shares of common stock or other securities from the banks. The purpose of the warrants was to provide taxpayers with an additional potential return on the government's investment.

To date, the disposition of warrants has succeeded in significantly increasing taxpayer returns on the CPP preferred investments that have been repaid. As of December 31, 2009, Treasury has received $4 billion in gross proceeds on the disposition of warrants in 34 banks, consisting of (i) $2.9 billion from repurchases by the issuers at agreed upon fair market values and (ii) $1.1 billion from auctions.1 For those 34 institutions, Treasury received an absolute return of 3.1% from dividends and an added 5.7% return from the sale of the warrants for a total absolute return of 8.8%.2 These returns are not predictive of the eventual return on the entire CPP portfolio.

When a bank repays the CPP investment, it has the right to repurchase its warrants at an agreed upon fair market value. The warrants do not trade on any market and do not have observable market prices. Accordingly, Treasury has established a methodology for evaluating a company's determination of fair market value. If a bank chooses not to repurchase its warrants, then Treasury intends to sell the warrants to a third party.

The first CPP warrant repurchase was completed in May 2009, and Treasury began the public sale of warrants to third parties in December 2009. Treasury follows a consistent process to dispose of the CPP warrants for all banks, regardless of the size of the institution or the warrant position. This process is designed to ensure that taxpayers receive fair market value for the CPP warrants whether they are repurchased by the issuer or sold to a third party.

At the end of 2009, Treasury held warrants in 18 institutions that have fully redeemed the CPP investment, and Treasury intends to sell those positions in the near future. Treasury also holds warrants in 230 public companies that have not repaid the CPP investments. In addition, Treasury also holds warrants in public companies in connection with other TARP programs, such as the Targeted Investment Program (TIP) and the Asset Guarantee Program (AGP). For example, Treasury holds warrants in Bank of America Corporation associated with both CPP (121,792,790 shares with an exercise price of $30.79) and TIP (150,375,940 shares with an exercise price of $13.30). Treasury's disposition process is the same for warrants acquired under all TARP programs.

view the full Warrant Disposition Report

Schwab Expands Portfolio Advisory Program

New Family of Professionally Managed Diversified Investment Portfolios, Schwab Managed Portfolios™ – ETFs
January 19, 2010--Schwab today announced the immediate availability of six new managed portfolios of exchange-traded funds (ETFs) available through a low cost fee-based portfolio advisory program. The new portfolios are the latest addition to a broad range of professionally managed investment solutions available to Schwab clients seeking advice.

Schwab Managed Portfolios-ETFs are made up of diversified ETF holdings representing up to 19 core sub-asset classes and make it easy and affordable for the individual investor to get broad diversification in a single account that is professionally managed. By holding potentially as many as two dozen different ETFs, Schwab Managed Portfolios-ETFs offer diversification across all the major equity and fixed income asset classes, as well as TIPs, real estate and commodities. Portfolio managers make ongoing adjustments to take advantage of market opportunities while controlling risk. In addition, the portfolios are rebalanced as needed to maintain the investor’s target asset allocation.

The portfolios have an investment minimum of $100,000 and a program management fee of 0.75% for the first $500,000 in assets, 0.65% for the next $500,000 in assets, and 0.50% for assets over $1 million.

“Investors today are looking for more help managing the risk in their investments while striving for an appropriate level of return that helps them get the most out of their money,” said Ben Brigeman, Executive Vice President for Investor Services. “These portfolios provide highly sophisticated asset allocation and diversification – benefits that used to be available only to the few and at considerable cost – to a much wider segment of the public.”

The new Schwab Managed Portfolios - ETFs follow other recent initiatives at Schwab designed to provide greater value for clients, including the launch of Schwab ETFs, which trade commission-free online through Schwab accounts, and the reduction of operating expense ratios for Schwab Equity Index Funds.

PowerShares To Launch 10 New Small-Cap ETFs

January 19, 2010--ETF issuer PowerShares has filed plans to launch 10 new small-cap ETFs. The sectors that will be represented will include: Consumer discretionary, consumer staples, energy, financials, healthcare, industrials, information technology, materials, telecom and utilities.

The new ETFs will track various S&P SmallCap indexes, which track stocks with market caps ranging from $250 million to $1.2 billion.

BM&FBOVESPA Launches Foreign Exchange Non-Deliverable Forward Contract

January 19, 2010--The Brazilian Securities, Commodities and Futures Exchange – BM&FBOVESPA has authorized, as of January 18, the registration of dollar, euro, yen, and cross-rate non-deliverable forward contracts in its OTC market.

Initially, only foreign exchange transactions established by the Brazilian Central Bank can be registered. As of March 1, BM&FBOVESPA will also authorize the registration of transactions with exchange rates calculated by the following information sources: U.S. Dollar/Euro parity exchange rate calculated and published by the European Central Bank; U.S Dollar/Euro exchange rate fixed by WMR/Reuters; Japanese Yen/U.S. Dollar parity exchange rate calculated and published by the Central Bank of Japan; and Japanese Yen/U.S. Dollar exchange rate fixed by WMR/Reuters.

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S&P Extends International Family Of Strategy Indices To Canada With Launch Of S&P/TSX 60 130/30 Strategy Index - Licenses AlphaPro Management Inc. To Create, Launch Products Based Upon The Index

January 19, 2010--Industry leader Standard & Poor's continues to offer innovative products, launching the S&P/TSX 60 130/30 Strategy Index today in Canada. With the S&P/TSX 60 as its foundation, the new index utilizes an index strategy which gives additional weighting to top performing constituents and decreased position to the weakest performing stocks in the Index. While traditional equity indices passively monitor market performance, the S&P/TSX 60 130/30 establishes over- and underweight positions providing an advantageous weighting of index components with the prospect of outperformance.

S&P Indices also announced today that it has licensed AlphaPro Management Inc. to create and launch an ETF based upon the S&P/TSX 60 130/30.

To determine overweight and underweight positions in the Index, Standard & Poor's employs a transparent, rules-driven framework leveraging quantitative and qualitative factors, including capitalization rate, earnings quality and equity analyst recommendations, and divides the index into two baskets. Constituents of the overweight basket each have their weights increased by three percent relative to the S&P/TSX 60, while stocks in the under-weight basket each have their weights decreased by three percent relative to the S&P/TSX 60. The S&P/TSX 60 130/30 Strategy Index is rebalanced quarterly to minimize turnover and volatility.

"As Canadians and investors around the world face a new financial reality in 2010, the appetite for efficient exposure to a strategic index approach grows," says Srikant Dash, Head of Global Research and Design at S&P Indices. "The introduction of the S&P/TSX 60 130/30, S&P Indices first index of its kind for the Canadian market, provides risk-controlled, long/short exposure in a transparent, cost-efficient format."

S&P Indices currently offers the S&P 500 130/30 Strategy Index, as well as other Strategy Indices such as the S&P 500 Risk Control Indices and the S&P 500 VIX Futures Index Series.

A white paper on 130/30 Indexation, as well as the methodology document for the S&P/TSX 60 130/30 Strategy Index, can be accessed by going to: www.strategyindices.standardandpoors.com and then clicking on the index name.

For more information about S&P Indices, please visit www.standardandpoors.com/indices.

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