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State Street Report Takes the Pulse of Buy-Side Firms Mandated to Clear OTC Derivatives
State Street's SwapExSM Files Registration with the CFTC to Become a Multi-Asset Swap Execution Facility
July 30, 2013--Buy-side firms are unprepared for new trading mechanisms, costs and increased complexity and should partner with established providers to adapt to an evolved OTC derivatives marketplace, according to research commissioned by State Street Corporation (NYSE: STT).
The new research paper, “From Readiness to Revolution: The Implementation and Impact of Derivatives Clearing Regulatory Reform,” provides insight into preparations for swap execution facilities (SEFs), central clearing, collateral management and reporting.
State Street, which operates as a futures clearing merchant (FCM) and a SEF, commissioned the research with Aite group which surveyed buy-side firms that collectively represent more than $6 trillion in assets under management. The research highlights developments across the entire trade life-cycle and includes a roadmap to readiness for Category III firms - those firms that have yet to complete the Commodity Futures Trading Commission’s (CFTC) phased implementation of derivatives clearing.
view the report-From Readiness to Revolution: The Implementation and Impact of Derivatives Clearing Regulatory Reform
Source: State Street Corporation
Home Prices Continue to Increase in May 2013, According to the S&P/Case-Shiller Home Price Indices
July 30, 2013--Data through May 2013, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed increases
of 2.5% and 2.4% for the 10- and 20-City Composites in May versus April.
Dallas and Denver reached record levels surpassing their pre-financial crisis peaks set in June 2007 and August 2006.
This is the first time any city has made a new all-time high.
The 10- and 20-City Composites annual returns rose slightly from April to May as they posted the best year-over-year gains since March 2006. All 20 cities increased from May 2012 to May 2013 and from April 2013 to May 2013.
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Source: S&P Dow Jones Indices
Most ETNs are overpriced, study claims
July 30, 2013--Research claims to show that market prices of most ETNs do not accurately reflect their risks and that the notes should trade at greater discounts
Most exchange-traded notes (ETNs) are overpriced, according to a study of 17 such notes that traded on US exchanges between 2002 and 2011.
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Source: Risk.net
Aggressive, Knowledgeable and Wealthy Investors Find Exchange Traded Funds Attractive Alternative to Mutual Funds
July 30, 2013--High Net Worth (HNW) investors and investors who are knowledgeable about their investment choices are purchasing Exchange Traded Funds at a higher rate than other investors, according to Exchange Traded Funds Investing by the HNW, a 2013 Spectrem Group Perspective.
Exchange Traded Funds are attractive to investors as a way to diversify their portfolio, and because they have lower fees and expenses. The Spectrem Group report details how investors view ETFs, why they are purchasing them, and how they are compared to more traditional investments such as mutual funds.
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Source: Spectrem Group
CFTC's Division of Market Oversight Issues Time-Limited No-Action Relief from the Prohibition of Aggregation Under (section) 43.6(h)(6) for Large Notional Off-Facility Swaps
July 30, 2013--The Commodity Futures Trading Commission's ("CFTC") Division of Market Oversight ("Division") today issued a letter providing no-action relief from the aggregation prohibition
in § 43.6(h)(6) for certain commodity trading advisors (“CTA”) and investment advisors (“IA”) with respect to large notional off-facility swaps until 11:59 p.m. Eastern time on October 1, 2013.
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Source: CFTC.gov
CBOE to add VIX trading hours in September, after delay
July 29, 2013--July 29, 2013--CBOE Holdings Inc said on Monday it will expand trading hours for futures on the CBOE Volatility Index in late September, after a technical glitch delayed the change.
CBOE, operator of the Chicago Board Options Exchange, is aiming to increase overseas trading of its lucrative VIX futures by adding 5 hours and 45 minutes to the trading day in two stages. The biggest chunk of extra time will come during European trading hours.
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Source: Reuters
ISE Gemini Set to Launch on August 5, 2013
SEC Approves ISE's Form 1 Application for ISE Gemini(TM)
July 29, 2013--
The International Securities Exchange (ISE) announced that the SEC has approved its Form 1 application for ISE GeminiTM, ISE's second options exchange that will complement its existing market.
Set to launch on August 5, 2013, ISE Gemini will ramp up over several weeks, beginning with a small number of symbols and eventually trading all of the most active options classes.
"The launch of ISE Gemini on August 5 will be the culmination of a great deal of hard work by the ISE team to deliver this important initiative,” said Boris Ilyevsky, Managing Director of ISE’s options exchanges. “We are operationally ready for the launch and in the final stages of working with our members to trade on ISE Gemini. We are excited to offer our members a new pricing structure through ISE Gemini with the same technology and market structure that are hallmarks of ISE.”
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Source: International Securities Exchange (ISE)
SEC Approves ISE's Form 1 Application for ISE GeminiTM
ISE Gemini Set to Launch on August 5, 2013
July 29, 2013--The International Securities Exchange (ISE) announced that the SEC has approved its Form 1 application for ISE GeminiTM, ISE's second options exchange that will complement its existing market.
Set to launch on August 5, 2013, ISE Gemini will ramp up over several weeks, beginning with a small number of symbols and eventually trading all of the most active options classes.
“The launch of ISE Gemini on August 5 will be the culmination of a great deal of hard work by the ISE team to deliver this important initiative,” said Boris Ilyevsky, Managing Director of ISE’s options exchanges. “We are operationally ready for the launch and in the final stages of working with our members to trade on ISE Gemini. We are excited to offer our members a new pricing structure through ISE Gemini with the same technology and market structure that are hallmarks of ISE.”
Source: International Securities Exchange (ISE)
DB-Synthetic Equity & Index Strategy-North America-US ETF Market Weekly Review-US ETPs gathered $3.6bn in new cash amid US flat market
July 29, 2013--Data in this report is as of Fri, July 26
Market and Net Cash Flows Review
Markets were flat-to-positive during last week. The US (S&P 500) ended practically flat for the week; while, outside the US, the MSCI EAFE (in USD) and the MSCI EM (USD) rose by 0.31% and 1.20%, respectively.
Moving on to other asset classes, the 10Y US Treasury Yield rose by 8 bps last week; while the DB Liquid Commodity Index was down by 1.22%. Similarly, the Agriculture sector (DB Diversified Agriculture Index) and the WTI Crude Oil pulled back by 1.50% and 3.10%, respectively, meanwhile, Gold and Silver prices rose by 2.87% and 2.54%, respectively. Last but not least, Volatility (VIX) rose by 1.44% during the same period.
The total US ETP flows from all products registered $3.6bn (+0.2% of AUM) of inflows during last week vs. $11.5bn (+0.8%) of inflows the previous week, setting the YTD weekly flows average at +$3.6bn (+$109.2bn YTD in total cash flows).
Equity, Fixed Income and Commodity ETPs experienced flows of +$2.6bn (+0.2%), +$0.9bn (+0.3%) and -$34mn (-0.0%) last week vs. +$11.3bn (+1.0%), +$0.6bn (+0.2%) and -$0.3bn (-0.5%) in the previous week, respectively.
Among US sectors, Financials (+$0.5bn, +0.9%) and Healthcare (+$0.5bn, +3.0%) received the top inflows, while Energy (-$0.4bn, -1.7%) and Materials (-$0.3bn, -3.5%) experienced the largest outflows.
Top 3 ETPs & ETNs by inflows: IWM (+$0.6bn), IEF (+$0.5bn), DIA (+$0.4bn)
Top 3 ETPs & ETNs by outflows: SPY (-$2.0bn), QQQ (-$0.8bn), USMV (-$0.5bn)
New Launch Calendar: China and Dividend Growth
There were two new ETFs listed during the previous week, one of them was listed on the NYSE Arca and the other one on the NASDAQ. KraneShares made its debut with a new Equity ETF (KFYP) that offers thematic exposure to China; meanwhile, WisdomTree launched DGRS, which offers access to growing dividend paying small-cap securities.
Turnover Review: Floor activity increased by 3.1%
Total weekly turnover increased by 3.1% to $253.6bn vs. $245.9bn from the previous week. However, last week's turnover level was 6.0% below last year's weekly average. Equity, Fixed Income and Commodity ETPs turnover increased by $5.8bn (+2.7%), $0.5bn (+2.4%) and $1.7bn (+21.8%) during the same period, respectively.
Assets under Management (AUM) Review: assets increased by $5.5bn
US ETP assets rose by $5.5bn (+0.4%) totaling $1.520 trillion at the end of the week. As of last Friday, US ETPs had accumulated an asset growth of +14.0% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved +$4.0bn, +$0.2bn and +$1.3bn during last week, respectively.
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Source: Deutsche Bank-Synthetic Equity & Index Strategy-North America
Morgan Stanley-US ETF Weekly Update
July 29, 2013--US ETF Weekly Update
Weekly Flows: $3.6 Billion Net Inflows
ETF Assets Stand at $1.5 Trillion, up 14% YTD
Two ETF Launches Last Week
Direxion Announces Share Splits on Nine ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $3.6 bln last week, the fifth consecutive week of net inflows
Over the last five weeks, ETFs have generated net inflows totaling $41.0 bln
International - Developed ETFs posted net inflows of $1.4 bln, the most of any category we measured last week
ETF assets stand at $1.5 tln, up 14% YTD; $107.2 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $47.8 bln in net inflows
US Sector & Industry ETFs have posted $11.2 bln in net inflows over the last 13 weeks, only trailing US Large-Cap ETFs; over this
period, meaningful money has flowed into Financials, specifically the Financials Select Sector SPDR (XLF) had $4.1 bln
Commodity ETFs continue to exhibit large net outflows ($8.2 bln over the last 13 weeks); Commodity ETF market share has
declined to 5% from 9% over the last year
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Russell 2000 ETF (IWM) posted net inflows of $565 mln, the most of any ETF
IWM has generated net inflows nine of the last 10 weeks for a combined $5.1 bln in net inflows
Despite recent interest rate volatility, the iShares 7-10 Year Treasury Bond ETF (IEF) posted net inflows of $510 mln last week;
over the last 13 weeks, IEF has generated $318 mln in net inflows while the yield on the 10-year Treasury is up nearly 100 basis
points
Notably, the iShares MSCI USA Minimum Volatility ETF (USMV) has exhibited net outflows nine of the last 13 weeks; similarly, its
closest competitor, the PowerShares S&P 500 Low Volatility Portfolio (SPLV) has also struggled recently, posting net outflows
eight of the last 13 weeks
US-Listed ETFs: Short Interest Data Updated: Based on data as of 7/15/13
United States Oil Fund (USO) had the largest increase in USD short interest at $299 mln
USO’s shares short are at their highest level since 10/31/11 and more than 100% above their one-year average
Shares short for the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) have declined for the second straight period amid a
renewed bid for the high yield asset class
Aggregate ETF USD short interest decreased by $3.7 bln over the period ended 7/15/13
The average shares short/shares outstanding for ETFs is currently 4.1%, down from 4.6% the prior period
Three of the 10 most heavily shorted ETFs as a % of shares outstanding are currency based; interestingly, over the last month
(6/14-7/15), all three have posted negative returns
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only five ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Wealth Management ETF Research. Data estimated as of 7/26/13 based on daily change in share counts and daily NAVs.
$8.3 bln in total market cap of ETFs less than 1-year old
International Equity ETFs account for 43% of ETFs launched over the past year; specifically, the iShares Core MSCI
Emerging Markets ETF (IEMG) and the iShares Core MSCI EAFE ETF (IEFA) have a combined market cap of $2.8 bln
76 new ETF listings and 30 closures/delistings YTD relative to 119 new listings and only 17 closures at this point last year
The top 10 most successful launches make up 68% of the market cap of ETFs launched over the past year
Six ETF sponsors and two asset classes represented in top 10 most successful launches; we note that the representation of funds
with an income orientation has declined (currently six)
Notably, the iShares MSCI USA Quality Factor ETF (QUAL) generated net inflows of $99 mln last week, the most of any
recently launched ETF; QUAL tracks an index of US large- and mid-cap stocks that are selected based on high return on equity,
stable earnings growth, and low financial leverage
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Source: Morgan Stanley
