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Final rule establishing requirements for determining when a company is "predominantly engaged in financial activities"
April 3, 2013--The Federal Reserve Board on Wednesday announced approval of a final rule that establishes the requirements for determining when a company is "predominantly engaged in financial activities."
The requirements will be used by the Financial Stability Oversight Council (FSOC) when it considers the potential designation of a nonbank financial company for consolidated supervision by the Federal Reserve.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, a nonbank financial company can be designated by the FSOC for supervision by the Federal Reserve only if it is "predominantly engaged in financial activities." A company is considered to be predominantly engaged in financial activities if 85 percent or more of the company's revenues or assets are related to activities that are defined as financial in nature under the Bank Holding Company Act. Additionally, the FSOC may issue recommendations for primary financial regulatory agencies to apply new or heightened standards to a financial activity or practice conducted by companies that are predominantly engaged in financial activities.
The final rule largely adopts the approach in the proposed rule, with a few exceptions. For example, the final rule states that engaging in physically settled derivatives transactions generally will not be considered a financial activity, a change from the proposal.
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Source: FBR
Morgan Stanley ETF Fund Flows-Preliminary 1Q 2013 ETF Net Cash Flows
April 3, 2013--We estimate that net cash inflows into US-listed ETFs were
$54.5 billion during the first quarter of 2013. This report contains our estimates and analysis of 1Q 2013 ETF flows for the US market. Once official data are released, we will publish our more comprehensive flow analysis.
The $54.5 billion during 1Q 2013 is the highest ETF cash flows
recorded in the first quarter. Additionally, this is the third
consecutive quarter of net cash inflows of more than $50 billion.
US-listed ETF assets are now over $1.4 trillion, which is roughly 8%
higher than from the end of 2012.
The largest net cash inflows went into ETFs tracking International Developed Markets and US Sector & Industry equity indices. These segments had net cash inflows of $13.9 billion and $11.2 billion in 1Q 2013, respectively. Commodity ETFs was the only segment to post net outflows ($6.7 billion) this past quarter, most of which is attributable to $6.6 billion in net outflows from the largest gold ETF, the SPDR Gold Trust (GLD).
Vanguard’s net cash inflows of $20.1 billion in 1Q 2013 were the largest of any provider. BlackRock, State Street and Vanguard account for nearly 80% of ETF assets.
There were 19 ETFs launched and 26 liquidated in the US during 1Q 2013. Of the 19 ETFs issued, 10 provide passive exposure to US equity markets while five are actively managed ETFs. There are 37 issuers with 1,232 ETFs.
Roughly $6 billion in total ETF market cap is from ETFs issued over the past year. The most successful recent launches (by total assets) have focused on low cost, broad equity exposure and seven out of the 10 most successful launches have an income orientation.
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Source: Morgan Stanley
ISE Reports Business Activity for March 2013
April 2, 2013--ISE was the second largest equity options exchange in March with a market share of 17.5%,
excluding dividend trades.
Dividend trades made up 4.7% of industry volume in March 2013.
The International Securities Exchange (ISE) today reported an average daily volume of 2.4 million contracts in March 2013.
This represents a decrease of 11.7% compared to March 2012. Total options volume for the month was 47.3 million contracts. ISE was the second largest U.S. equity options exchange in March with a market share of 17.5%*.
Business highlights for the month of March include:
On March 1, ISE appointed Rob Cornish Chief Technology Officer of ISE.
On March 5, ISE announced that the U.S. Securities and Exchange Commission (SEC) published for comment a Form 1 application for ISE’s second options exchange.
On March 14, ISE issued a statement on the patent infringement case against the Chicago Board Options Exchange (CBOE).
On March 18, ISE signed a licensing agreement with KSM, the largest Israeli ETF Issuer. The KSM ETF will track the ISE Water Index.
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Source: International Securities Exchange (ISE)
Record ETF Inflows Help Fuel Stock Rally
April 2, 2013--More and more people are warming back up to stocks.
The latest data point confirming that trend comes from BlackRock, which reported Tuesday morning that the first quarter witnessed record inflows to exchange traded funds, with U.S. stock funds attracting a majority of that cash.
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Source: Wall Street Journal
Dow, S&P push to new record highs
April 2, 2013--US stocks pushed to new record highs Tuesday, bolstered by solid US manufacturing orders and strong results from US automakers.
The Dow Jones Industrial Average closed at an all-time record high of 14,662.01, up 89.16 (0.61 percent).
The broad-based S&P 500 also reached a new record, gaining 8.08 (0.52 percent) at 1,570.25.
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Source: AFP.
Morgan Stanley-US ETF Weekly Update
April 1, 2013--Weekly Flows: $1.6 Billion Net Inflows
ETF Assets Stand at $1.5 Trillion, up 8% YTD
No ETF Launches
Two Vanguard International ETFs Change Benchmarks and Names
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $1.6 bln last week, the fifth consecutive week of net inflows
Over the past five weeks, ETFs have generated net inflows of $19.0 bln
Last week’s net inflows were led by US Custom ETFs ($570 mln), primarily broad equity low volatility ETFs; conversely, US
Sector & Industry ETFs exhibited net outflows of $470 mln, the most of any category we measured
ETF assets stand at $1.5 tln, up 8% YTD; $53.9 bln net inflows YTD, slightly above last year’s record pace
13-week flows were mostly positive among asset classes; combined $54.8 bln in net inflows
International – Developed Equity ETFs have posted material net inflows over the last 13 weeks ($14.2 bln), 32% more net inflows
than the next highest category
Commodity ETFs have posted net outflows of $6.7 bln over the last 13 weeks; in particular, the SPDR Gold Trust (GLD) has
exhibited net outflows of $6.6 bln over this period (GLD accounts for 61% of Commodity market cap)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Core S&P 500 ETF (IVV) generated net inflows of $533 mln last week, the most of any ETF
Over the past 13 weeks IVV has posted net inflows of $2.5 bln, lagging only the WisdomTree Japan Hedged Equity Fund (DXJ) and
the iShares Russell 2000 Index Fund (IWM) for the most net inflows
Interestingly, both the ProShares UltraShort 20+ Year Treasury (TBT) and the iShares Barclays 20+ Year Treasury Bond Fund
(TLT) generated net inflows; TBT is bearish and TLT is bullish the performance of long-dated Treasuries
Conversely, the iShares Barclays TIPS Bond Fund (TIP) exhibited $507 mln in net outflows last week, the most of any ETF; TIP has
posted net outflows seven out of the past eight weeks totaling $1.5 bln
US-Listed ETFs: Short Interest Data Updated: Based on data as of 3/15/13
iShares MSCI Emerging Markets Index Fund (EEM) had the largest increases in USD short interest at $731 mln
EEM’s shares short have increased for three consecutive periods and are at their highest level since 10/14/11
EEM is up more than 11% on a total return basis since 10/14/11
Aggregate ETF USD short interest increased by $1.9 bln over the period ended 3/15/13 and has now increased $13.3 bln over the
last four periods
The average shares short/shares outstanding for ETFs is currently 4.4%
The SPDR Retail ETF (XRT) regained the top spot as shares short as a % of shares outstanding currently is 234%
Retail, currency, and financial ETFs seem to consistently make the list as the most heavily shorted ETFs
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only four 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 Smith Barney Research. Data estimated as of 3/28/13 based on daily change in share counts and daily NAVs.
$6.0 bln in total market cap of ETFs less than 1-year old
Newly launched Fixed Income ETFs accounted for 31% of the market cap of ETFs launched over the past year, the most of any
category, including $801 mln in net inflows over the last 13 weeks
19 new ETF listings and 26 closures YTD; at this point last year, 76 ETFs had come to market and 16 ETFs had closed
The top 10 most successful launches make up 58% of the market cap of ETFs launched over the past year
Five different ETF sponsors and two asset classes represented in top 10 most successful launches
Seven out of the 10 most successful launches over the past year have an income orientation
Notably, the iShares Core MSCI Emerging Markets ETF (IEMG) has generated net inflows of $691 mln over the last 13 weeks
(tracks 99% of MSCI EM market cap); over the same time period, the larger, more actively traded iShares MSCI Emerging
Markets Index Fund (EEM) has posted net outflows of $1.9 bln (tracks 85% of MSCI EM market cap)
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Source: Morgan Stanley
CFTC's Division of Swap Dealer and Intermediary Oversight Issues Time-Limited No-Action Letter for Commodity Pool Operators of Securitization Vehicles
April 2, 2013--The Commodity Futures Trading Commission's (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) issued a time-limited letter stating that DSIO will not recommend that the Commission take enforcement action against the commodity pool operators of securitization vehicles that are required to register by March 31, 2013,
for failure to comply with certain enumerated sections in Part 4 of the Commission’s regulations, prior to June 30, 2013 – provided that the commodity pool operators of securitization vehicles comply with the guidance set forth in the letter with respect to those sections.
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Source: CFTC.gov
CFTC's Division of Swap Dealer and Intermediary Oversight Issues No-Action Relief for Certain Persons from Registration as an Introducing Broker or Commodity Trading Advisor
March 29, 2013--The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission announced today in a letter that it is taking a no-action position which provides relief from the requirement to register as an introducing broker or a commodity trading advisor for certain affiliates of a swap counterparty and the affiliates' employees,
where the affiliates and their employees engage in certain activity on behalf of the swap counterparty and the swap counterparty has commenced application for registration as a swap dealer or has exceeded the de minimis amount of swap dealing activity under Commission Regulation 1.3(ggg)(4)(i).
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Source: CFTC.gov
Morgan Stanley-US ETF Weekly Update
March 25, 2013--US ETF Weekly Update
Weekly Flows: $3.5 Billion Net Inflows
Fourth Consecutive Week of Net Inflows
ETF Assets Stand at $1.4 Trillion, up 8% YTD
Three ETF Launches
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $3.5 bln last week, the fourth consecutive week of net inflows
- Last week’s net inflows were led by US Small- & Micro-Cap ETFs ($2.0 bln); conversely, International – Emerging Equity ETFs
exhibited net outflows of $2.4 bln, the most of any category we measured
ETF assets stand at $1.4 tln, up 8% YTD; $52.3 bln net inflows YTD
13-week flows were mostly positive among asset classes; combined $59.5 bln in net inflows
International – Developed Equity ETFs have posted material net inflows over the last 13 weeks ($15.5 bln); the category’s ETF
market share has risen as assets are up 26% over the past 52 weeks
Commodity ETFs have posted net outflows of $6.8 bln over the last 13 weeks; in particular, one ETF, the SPDR Gold Trust
(GLD), has exhibited net outflows of $6.6 bln over this period (GLD accounts for 61% of Commodity market cap)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares Russell 2000 Index Fund (IWM) generated net inflows of $1.9 bln last week, the most of any ETF
Eight of the 10 ETFs to post the largest net inflows last week were US equity-based
Notably, the four largest ETFs by market cap (SPY, GLD, VWO, EEM), exhibited a combined $5.2 bln in net outflows last week
Over the last 13 weeks the WisdomTree Japan Hedged Equity Fund (DXJ) posted net inflows of $4.0 bln, the most of any ETF; DXJ
focuses on Japanese exporters and hedges its yen risk
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 2/28/13
SPDR S&P 500 ETF (SPY) had the largest increases in USD short interest at $4.1 bln
SPY’s shares short have increased for four consecutive periods and are at their highest level since 5/31/12
Aggregate ETF USD short interest increased by $4.4 bln over the period ended 2/28/13 and has now increased $11.4 bln the last
three periods; despite the increase in short interest, financial markets have remained resilient
The average shares short/shares outstanding for ETFs is currently 4.3%
Interestingly, the top 10 ETFs most heavily shorted as a % of shares outstanding does not change much; certain areas of the market
such as retail, currency, and real estate seem to consistently make the list
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 Smith Barney Research. Data estimated as of 3/22/13 based on daily change in share counts and daily NAVs.
$5.7 bln in total market cap of ETFs less than 1-year old
Newly launched Fixed Income ETFs accounted for 31% of the market cap of ETFs launched over the past year, the most of any
category, including $760 mln in net inflows over the last 13 weeks
Issuance is off to a slow start in 2013; 19 new ETF listings and 26 closures YTD
The top 10 most successful launches make up 58% of the market cap of ETFs launched over the past year
Five different ETF sponsors and two asset classes represented in top 10 most successful launches
Seven out of the 10 most successful launches over the past year have an income orientation
The First Trust North American Energy Infrastructure Fund (EMLP) has steadily grown in size since its 6/2012 inception;
EMLP is unique in that it is actively managed and does not solely own MLPs to achieve broad energy infrastructure exposure
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Source: Morgan Stanley
Market Vectors Launches Treasury-Hedged High Yield Bond ETF (THHY)
New fixed income fund is positioned for rising interest rates
March 22, 2013--Market Vectors ETF Trust announced today that it has launched the Market Vectors Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY), an exchange-traded fund (ETF).
is designed to combine the income potential of high-yield corporate bonds with the interest rate hedging capability offered by shorting Treasury notes
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Source: Market Vectors
