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SIFMA’s Small Firms Chair Testifies On Need for a Federal Fiduciary Standard
September 23, 2009--The Chair of the Securities Industry and Financial Markets Association’s (SIFMA) Small Firms Committee, E. John Moloney, who is president and CEO of Moloney Securities Company today testified before the House Committee on Small Business concerning the impact of financial regulatory restructuring on small businesses and community lenders.
Moloney noted SIFMA and his own firms support financial reform, especially minimizing systemic risk, so that no firm is too big or interconnected to fail, or could pose a risk to the larger financial system. And, he noted another area where smaller firms such as his are supporting major reform that would impact nearly every American investor - the creation of a new, federal fiduciary standard.
“SIFMA has long advocated the modernization and harmonization of the disparate regulatory regimes for brokers, dealers, investment advisers and other financial intermediaries. When broker-dealers and investment advisers engage in the identical service of providing personalized investment advice about securities to individual investors, they should be held to the same standard of care,” said Moloney in prepared testimony. “The hallmark of a new federal standard should be putting investors’ interests first.”
As of August 2009, FINRA, the Financial Industry Regulatory Authority, reported that there are 4,797 registered broker-dealers. Of these, it is estimated that some 4,600 are smaller broker-dealers defined by FINRA as having 150 registered persons, or fewer. Moloney Securities is a general securities broker-dealer with 110 registered brokers and 20 support staff, with three Offices of Supervisory Jurisdiction (OSJ) located in St. Louis, Kansas City and Denver, plus nineteen additional registered branches located in fourteen states. The firm was not a TARP recipient.
For his full testimony please visit: http://www.sifma.org/legislative/testimony/pdf/John-Moloney-testimony-092309.pdf.
Standard & Poor's Announces Changes In The S&P/TSX Venture Composite Index
September 23, 2009--Standard & Poor's will make the following changes in the S&P/TSX Venture Composite Index after the close of trading on Wednesday, September 23, 2009:
The shares of Challenger Energy Corp. (TSXV:CHQ) will be removed from the index. The shares of the company have been acquired by Canadian Superior Energy Inc. (TSX:SNG) pursuant to an Arrangement Agreement. Shareholders of the company will receive 0.51 shares of SNG for each common share held.
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.
NYSE Euronext’s U.S. Options Penny Pilot Expansion Filing Adopted by the SEC
Adds 300 More Issues for a Total of 363 Options Issues Trading in Pennies-
Represents Approximately 85% of the Volume in U.S. Options
September 23, 2009--NYSE Euronext (NYX) today announced that its
proposal for the expansion of the Securities and Exchange Commission’s
(SEC) Penny Pilot program, filed by NYSE Arca options, has been approved
for market-wide implementation by the SEC. The approval will extend the
proposed pilot through December 31, 2010, including four quarterly
additions to the pilot consisting of 75 issues each.
Representing over 85% of the overall volume in U.S. options, this
expansion of the penny pilot offers many benefits to the investing
public, including increased transparency, improved price discovery and
reduced spreads," said Paul Finnegan, Senior Director, NYSE Euronext
U.S. Options. "By adding 300 new issues in a systematic fashion over a
defined period of time, the endorsement of NYSE Euronext's proposal to
allow for an appropriate expansion benefits the investing public while
safeguarding the integrity of industry quoting activity. We are very
pleased with the SEC’s decision and we look forward to offering our
customers the highest levels of market quality and execution choice as
this program is carefully rolled out."
Highlights of NYSE Euronext’s plan include:
· The addition of the next 300 most active issues into the program for a total of 363 issues
· The phase in of 75 issues on a quarterly basis: 10/09, 1/10, 4/10, 7/10
· Provides structure to replace delisted pilot issues on a semi-annual basis
· Excludes high priced underlying issues (>$200)
For more information on NYSE Euronext’s U.S. Options exchanges, please
visit: http://www.nyse.com/options
Secretary Geithner before the House Financial Services Committee
September 23, 2009--Chairman Frank, Ranking Member Bachus, members of the House Financial Services Committee, I am pleased to be back before you today as our Administration and this Congress work toward comprehensive reform of our financial regulatory system.
The Chairman has set an ambitious schedule of hearings that will lead to your markup of legislation and facilitate enactment this year. We have now provided more than 600 pages of legislative language, and I am aware and appreciative of the long hours you have spent working through the critical details of reform. My staff has been in constant contact with members of this committee and with your staff, and will continue to be as we work through key issues.
As you prepare to put this legislation together and we prepare to help, it might be useful to remind ourselves why we have a financial system in the first place and why we have reached this moment of decision.
Stripped of its complexities, the purpose of a financial system is to let those who want to save--whether for vacation, retirement or a rainy day--save. It is to let those who want to borrow--whether to buy a house or build a business--borrow. And it is to use our banks and other financial institutions to bring savers' funds and borrowers' needs together and carefully manage the risks involved in transfers between them.
The job of a financial system, in other words, is to efficiently allocate savings and risk.
Last fall, our financial system failed to do its job, and came precariously close to failing altogether.
The Options Industry Council Announces New Study Finds Collar Strategies Outperform Buy And Hold
September 23, 2009--The results of a new study examining the use of options in a collar strategy (both active and passive implementations) on the PowerShares QQQ™ exchange-traded fund (ETF) show it provides superior returns to the traditional buy and hold strategy while reducing risk by almost 65%.
The Options Industry Council (OIC) is pleased to note the study reaffirms the risk management potential of equity options, finding that during the entire 10-year study period, including the sub-periods around the tech bubble and credit crisis, collars significantly outperformed the QQQ, providing much needed capital protection.
“Loosening Your Collar: Alternative Implementations of QQQ Collars,” by Edward Szado and Thomas Schneeweis, looked at data from March 1999 to May 2009. It concluded that over the entire 122 month period the passive collar returned almost 150%, while the QQQ lost one-third of its value. The active collar outperformed both strategies and returned more than 200%.
Additionally, the study simulated a collar on a small-cap mutual fund. The return of the active mutual fund collar was four times the return of the fund, while the standard deviation was about one-third lower. The study was conducted by the Isenberg School of Management’s Center for International Securities and Derivatives Markets (CISDM) at the University of Massachusetts.
This is the third in a series of studies OIC has helped to support, studies which demonstrate the effectiveness of implementing options strategies on specific products over specific time periods covering a variety of market conditions. By supporting these studies in cooperation with CISDM, OIC remains dedicated to its mission of providing education and research to institutional investors. The study is available to all investors at www.optionseducation.org/institutional/research/pdfs/qqq_collar_study.pdf.
About OIC
OIC is an industry cooperative funded by the Boston Options Exchange, Chicago Board Options Exchange, International Securities Exchange, NASDAQ OMX PHLX, NASDAQ Options Market, NYSE Amex Options, NYSE Arca Options, and The Options Clearing Corporation. OIC was formed in 1992 to educate investors and their financial advisors about the benefits and risks of exchange-traded equity options. OIC's resources include:
The Options Industry Services Help Desk at 1-888-OPTIONS, educational Web sites at
www.OptionsEducation.org, www.OptionsEducation.org/advisor
and www.OICoptions.com, evening seminars throughout the continental United States and Canada, instructional DVDs and educational literature and software.
Deloitte Says ETFs Need to Grow Assets to Challenge Mutual Funds
September 22, 2009-With half of all Exchange Traded Funds (ETF) falling short of the $50 million minimum net assets required to maximize profitability, attracting capital will be key to remaining competitive and potentially challenging mutual funds' dominant market share, according to Deloitte's "Exchange-Traded Funds: Challenging the Dominance of Mutual Funds?" paper, released today.
"For retail investors hurt by market volatility over the last year, an ETF may be more appealing longer term than actively managed assets like mutual funds. When this perceived safety net is coupled with the tax efficiencies that are attractive to retail investors, it appears the stars may be aligning to end mutual funds' 69-year dominance," said Cary Stier, Deloitte's U.S. Asset Management Services leader. "But in order to execute on this opportunity, ETFs will have to expand investor friendly attributes beyond transparency and low costs to compete for a share of the asset influx."
According to Deloitte, several factors could enable ETFs to attract additional capital and become more profitable:
- Link to less exotic indices. Some of the best performing ETFs are linked to less exotic indices, such as commodities and equities. The data shows exotic funds, on average, have not performed as well as regular ETFs. This is not to say exotic funds haven't performed well, but exotic ETFs are difficult for regular investors to understand. In other words, the simpler, the better. Also, simpler betas are cheaper than their more exotic counterparts.
- Focus on indices with long-term appeal. There are a number of ETFs that are launched to benefit from a current market situation. Inverse financial sector ETFs, for example, profit from the ailing financial sector. However, most investors recognize that these ETFs have a limited shelf life. Being linked to an index with a long-term appeal is usually more attractive to investors, particularly retail investors.
- Increase appeal to 401(k) investors. The barrier for 401(k) funds investing in ETFs is its higher costs compared to index mutual funds. Given that 401(k) assets will probably reach $7.5 to $8.5 trillion in 2015, ETF sponsors need to make themselves 401(k) friendly to tap into this huge pool of assets that primarily invests in mutual funds.
- Become more retail-investor-friendly. When small investors buy ETFs, they incur commission costs, as well as the bid-ask spread. These costs usually make the difference between small investors putting their money in index mutual funds or ETFs. While commissions and bid-ask spread may not have a large impact on big investors, it is significant for investors who put in small but consistent sums of money. In essence, ETFs will have to maintain their 'good' characteristics but mimic index mutual funds.
- Keep it institution-friendly. The rise of ETFs is mainly attributable to institutional investors, such as hedge funds and pension funds. These funds were drawn to ETFs because of their low cost, risk diversification and efficient beta. Another reason for large investors to be drawn to certain ETFs is their strong liquidity.
- Ensure low tracking error. The tracking error is the difference between the net asset value of an ETF and its benchmark. Typically, the simpler the benchmark, the lower the tracking error. A lower tracking error is also one of the primary determinants of choosing an ETF.
To learn more about Deloitte's Exchange-Traded Funds: Challenging the Dominance of Mutual Funds, please visit http://www.deloitte.com/assets/Dcom-UnitedStates/Local%20Assets/Documents/us_fsi_IM_ExchangeTradedFunds_061009(1).pdf.
CME Group Announces The Launch Of Long-Term U.S. Treasury Bond Futures - 'Ultra' Treasury Bond In Response To Customer Demand - Increased Treasury Issuance
September 22, 2009--CME Group, the world's largest and most diverse derivatives marketplace, today announced the launch of Long-Term U.S. Treasury Bond futures, or "Ultra" Treasury Bonds, beginning in early first quarter 2010. This contract will be listed with, and subject to, the rules and regulations of the CBOT.
"The Long-Term Treasury Bond futures are being launched in response to strong customer demand for a contract that mimics the duration of a 30-year Treasury bond," said Robin Ross, CME Group Managing Director of Interest Rate Products. "The Ultra Bond contract will complement our existing benchmark U.S. Treasury complex and expand the range of risk management and trading opportunities for market participants."
Deliverable securities for the new Long-Term Bond future will comprise cash Treasury bonds with at least 25 years of remaining term to maturity. By comparison, deliverable securities for the existing Treasury Bond contract are bonds with remaining terms to maturity of 15 years or more. The recent fiscal policy shift toward greater issuance of long-term bonds has enabled CME Group to launch this contract targeted at this important part of the yield curve.
In all other respects, the specifications for the Ultra Bond futures closely resemble those for the existing Treasury Bond contract. They are identical in terms of their notional value, minimum tick size, contract critical dates, and coupon. Initially, the Exchange will list three March-quarterly delivery months in the Ultra Bond futures, beginning with the March 2010 expiry. There will be no modifications to the currently listed Treasury Bond futures contract specifications.
Additional information about the Ultra Treasury Bond futures and CME Group's other interest rate products can be found at http://www.cmegroup.com/trading/interest-rates/index.html.
Julie Abbett joins IndexIQ as senior vice president
September 22, 2009-In her new role, Abbett will be responsible for helping to oversee portfolio management of
In her new role, Abbett will be responsible for helping to oversee portfolio management of IndexIQ’s growing line of alternative investment products, including the firm’s separately managed accounts business.
Schwab Hires an ETF Chief
September 22, 2009--Charles Schwab has named Dustin Lewellyn the leader for its new ETF division.
Lewellyn left his position as ETF head at Northern Trust in May 2009, three months after firm closed its ETF business.
Barclays Global Investors announces the launch of new 529 plan advisor tools
September 22, 2009--iShares, a global leader of exchange traded funds (ETFs), and Barclays Global Investors, investment manager of the iShares 529 Plan, today announced the launch of new 529 plan advisor tools -- including the 529 Plan Comparison Calculator and Ugift with advisor referral -- in recognition of September as National College Savings Month. "The significance
of September as College Savings Month is not lost on advisors or their clients," said Robert Nestor, Director of Product Management for iShares. "Families often feel overwhelmed by the cost of higher education, and arming advisors with the best tools possible, helps them to guide their clients to the most effective investment plan for their needs."
The 529 Plan Comparison Calculator was conceived by Archimedes Systems to help financial advisors conduct side-by-side comparisons of 529 college savings plans, factoring in the impact of sales charges, fees, and the potential value of in-state tax deductions. The 529 calculator -- which can be found on www.iShares529.com -- also generates a client friendly report that helps advisors explain some of the reasons for their investment recommendations to clients.
The launch of the calculator follows the introduction of the iShares 529 Plan, as the first no-load, all-ETF 529 solution specifically for fee-only advisors. The Plan's portfolios invest in iShares ETFs. The calculator and supporting tools create a pattern of resources that promote saving for college, such as Ugift� -- Give College Savings, a service that lets account owners suggest that family and friends celebrate children's milestones with the gift of college savings in lieu of traditional gifts. Ugift for the iShares 529 Plan includes an important advisor referral mechanism that allows clients to indicate that their advisor is offering valuable financial guidance around saving for college and other financial challenges.
Mary Ann Lambert, a financial advisor at Lambert Advisors in Philadelphia, echoed Mr. Nestor's sentiments. "At a time when the saving for college conversation is in full tilt, tools like the 529 Plan Comparison Calculator, Ugift, and indeed the iShares 529 Plan itself help me to present the best choices for my practice and my clients," she said. "These resources keep the dialogue going so that we can break down myths about savings plans."
Attributes associated with iShares ETFs, such as transparency, flexibility, and low expenses, were built into the iShares 529 Plan, which allows advisors to customize a solution for their client from among 20 different investment options, including Custom iShares Portfolios, iShares Year-of-Enrollment Portfolios and iShares Asset Allocation Portfolios.
For more information about the iShares 529 visit www.iShares529.com.
States may sue utilities over climate, court says
September 22, 2009-- A U.S. Appeals Court reinstated on Monday a 2004 lawsuit by eight states and the city of New York against five of the largest U.S. utilities over their carbon dioxide emissions.
Monday's ruling by the U.S. Court of Appeals for the 2nd Circuit in New York said the judge "erred in dismissing two complaints on the ground that they presented non-justiciable political questions."
Treasury, Energy SURPASS $1 Billion MILESTONE IN RECOVERY ACT AWARDS for Clean Energy Projects
Geithner, Chu Hold Roundtable Discussion with Energy Companies on Expanding Development of Clean, Domestic Sources of Energy
September 22, 2009-This morning, Treasury Secretary Tim Geithner and Energy Secretary Steven Chu hosted a group of clean energy developers and manufacturers at the White House to discuss how the American Recovery and Reinvestment Act (Recovery Act) is creating jobs and helping expand the development of clean, renewable domestic energy. At the meeting, Secretaries Geithner and Chu announced $550 million in new awards through the Recovery Act's 1603 program, bringing the total to more than $1 billion awarded to date to companies committed to investing in domestic renewable energy production.
"This Recovery Act program is an example of a true federal partnership with the private sector," said Treasury Secretary Geithner. "Not only are our Recovery dollars meeting an immediate funding need among innovative companies, they are also jumpstarting private sector investment in communities across the country – with benefits for the renewable energy industry and our economy alike."
Said Secretary Chu: "These investments are crucial to ensuring America can compete and win in the race for the clean energy jobs of the future. With American workers and American innovation, we can and must lead the world when it comes to the new Industrial Revolution in clean energy."
Created under Section 1603 of the Recovery Act, the program provides cash assistance to energy producers in place of tax credits. The payments improve project viability, enabling companies to create and retain jobs, and establish sufficient financing bases for projects that may otherwise not be possible, dramatically expanding and accelerating the development of renewable energy projects throughout the country. Under this program, the federal government provides a cash payment in lieu of a tax credit totaling 30 percent of the qualifying cost of the project; for each federal dollar spent in payments, more than two dollars are spent in private sector investments.
Today the Treasury Department will make the second round of awards, all of which will be made in half the statutorily mandated turnaround time of 60 days. The first round of awards totaling $502 million was announced on September 1, 2009. Today's announcement provides an additional $550 million. The 1603 program is having an immediate effect on the renewable energy industry by significantly increasing the availability and liquidity of project capital in three ways:
· Recycling grants into new projects. Project developers are able to begin construction of additional projects thanks to the extra capital from the grants they are receiving.
· Increasing the flow of capital. By reversing the drop in availability of equity investment available, the 1603 program brings significant private capital off the sidelines to finance more renewables projects.
· Attracting investment for domestic projects. Large project developers allocate capital across many countries, and the 1603 program is attracting billions of dollars of additional capital towards projects in the US.
NASDAQ OMX and Clean Edge Introduce the NASDAQ OMX Clean Edge(R) Smart Grid Infrastructure Index
September 22, 2009--The NASDAQ OMX Group, Inc.
(Nasdaq:NDAQ) and Clean Edge, Inc. announced today the introduction of
the NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index(SM)
(Nasdaq:QGRD), a new benchmark for the smart grid and electric
infrastructure sector. The NASDAQ OMX(R) Clean Edge(R) Smart Grid
Infrastructure Index is a modified market-capitalization index and
includes companies that are primarily involved in electric grid;
electric meters, devices and networks; energy storage and management;
and enabling software used by the smart grid and electric infrastructure sector.
"This index brings sharper focus to an industry that is transforming
our nation's energy grid, an extremely significant endeavor that will
help shape our nation's future," said NASDAQ OMX Executive Vice
President John Jacobs. "Investors, thanks to this index, can now easily
track companies that are working diligently to help fully implement an
energy grid that is more efficient, cleaner and resilient."
"Our current electric grid is dated and deteriorating," said Ron Pernick, Clean Edge Co-founder and Managing Director. "To keep up with energy demand and meet modern energy needs, the next evolution in our electric grid will include the embedding of smart meters, controls, and networks to make the grid more intelligent and the introduction of a two-way flow of electrons and energy storage to enable better integration of renewable power and energy efficiency. This build-out is already under way and offers an unprecedented opportunity to reshape the way energy is generated, stored, transmitted, and delivered."
The NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index is the latest in the line of eco-themed indexes created by NASDAQ OMX and its partners. NASDAQ OMX is leading the way in creating indexes designed to help the investment community track the next generation of companies involved in alternative energy, efficient transportation, and energy management.
The NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index is calculated in real-time across the combined exchanges and is disseminated by NASDAQ OMX in U.S. Dollars. The Index commenced calculation today with a value of 250.00.
The NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index is currently comprised of companies that are screened by Clean Edge. To view the companies in the NASDAQ OMX(R) Clean Edge(R) Smart Grid Infrastructure Index, visit our website www.nasdaqomx.com/indexes.
NASDAQ OMX is a global leader in creating and licensing strategy indexes and is home to the most widely watched indexes in the world. As a premier, full-service provider, the NASDAQ OMX Global Index Group is dedicated to designing powerful indexes that are in sync with a continually changing market environment. Utilizing its expanded coverage as a global company, NASDAQ OMX has more than 1,500 diverse equity, commodity and fixed-income indexes in the U.S., Europe, and throughout the world.
NASDAQ OMX's calculation, licensing and marketing support provide the tools to measure and replicate global markets. The NASDAQ OMX Global Index Group's range of services covers the entire business process from index design to calculation and dissemination. For more information about NASDAQ OMX indexes, visit https://indexes.nasdaqomx.com/.
Access to essential historical index data for NASDAQ OMX indexes can be
accessed from a single source, NASDAQ OMX Global Index Watch. For
additional information, please visit
https://indexes.nasdaqomx.com/indexwatch.aspx.
Testimony of Chairman Gary Gensler, Commodity Futures Trading Commission Before the House Committee On Agriculture
September 22, 2009--Good morning Chairman Peterson, Ranking Member Lucas and members of the Committee. Thank you for inviting me to testify today regarding the regulation of over-the-counter derivatives. I am pleased to testify on behalf of the Commodity Futures Trading Commission (CFTC).
One year ago, the financial system failed the American public. The financial regulatory system failed the American public. We must now do all we can to ensure that it does not happen again. While a year has passed and the system appears to have stabilized, we cannot relent in our mission to vigorously address weaknesses and gaps in our regulatory structure. As a critical component of reform, I believe that we have to bring comprehensive regulation to the over-the-counter (OTC) derivatives markets. We must lower risk, promote greater market integrity and improve market transparency.
The need for reform of our financial system parallels what we faced as a nation in the 1930s. In 1934, President Roosevelt boldly proposed to the Congress “the enactment of legislation providing for the regulation by the Federal Government of the operation of exchanges dealing in securities and commodities for the protection of investors, for the safeguarding of values, and so far as it may be possible, for the elimination of unnecessary, unwise, and destructive speculation.” The Congress responded to the then clear need for reform by enacting the Securities Act of 1933, the Securities Exchange Act of 1934 and the Commodity Exchange Act of 1936.
We need the same type of comprehensive regulatory reform today. Just as we then brought regulation to the commodities and securities markets, we now need to bring regulation to markets for risk management contracts called over-the-counter derivatives.
Comprehensive Regulatory
Framework Comprehensive regulation of the OTC derivatives markets will require two complementary regimes – one for regulation of the derivatives dealers, or the actors, and one for regulation of the derivatives markets, or the stages.
This regulatory framework must cover both standardized and customized swaps. This should include all of the different products, such as interest rate swaps, currency swaps, commodity swaps, equity swaps and credit default swaps, as well as all of the derivative products that may be developed in the future. We should eliminate exclusions and exemptions from regulation for OTC derivatives.
