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CFTC Issues Interim Final Rules Regarding Business Conduct and Documentation Requirements for Swap Dealers and Major Swap Participants
December 18, 2012--The Commodity Futures Trading Commission (CFTC) today approved interim final rules for swap dealers and major swap participants who would otherwise be required to comply with certain business conduct and documentation requirements found in provisions of subpart F, subpart H, and subpart I to part 23 of the Commission's Regulations.
The Commission voted [5-0] via seriatim to approve the interim final rules, which will become effective immediately upon publication in the Federal Register.
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Source: CFTC.gov
CFTC's Division of Swap Dealer and Intermediary Oversight Issues No-Action Letter on the Obligation of Swap Dealers and Major Swap Participants to Provide the Pre-Trade Mid-Market Mark for Certain Credit Default Swaps and Interest Rate Swaps
December 18, 2012--The Commodity Futures Trading Commission's (CFTC) Division of Swap Dealer and Intermediary Oversight (DSIO) today issued a no-action letter that provides swap dealers and major swap participants with relief from the requirement to disclose the pre-trade mid-market mark to counterparties in certain credit default swaps and
interest rate swaps that are identified in the no-action letter (Covered Derivative Transactions).
The disclosure requirements prescribed in Regulation 23.431 state, among other things, that a swap dealer or major swap participant must disclose to certain counterparties the pre-trade mid-market mark of a swap.
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Source: CFTC.gov
John Ramsay Named Acting Director of SEC's Division of Trading and Markets
December 17, 2012-- Securities and Exchange Commission Chairman Elisse B. Walter today named John Ramsay as Acting Director of the Division of Trading and Markets. He will replace Robert Cook, who announced that he plans to step down after a short transition period.
Since September 2010, Mr. Ramsay has served as a Deputy Director for the Division and is responsible for broker-dealer financial responsibility, risk oversight, and clearance and settlement functions. He has played a key role in the advancement of rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“John has a wealth of experience to draw upon and a firm grasp of the intricacies of issues,” said Chairman Walter. “He is well-positioned to oversee the Division as we continue to further bolster the markets and ensure they operate fairly and efficiently.”
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Source: SEC.gov
CFTC's Division of Market Oversight Issues Time-Limited, No-Action Relief for Swap Dealers and Major Swap Participants From Compliance With Reporting Obligations
December 17, 2012--The Commodity Futures Trading Commission's (Commission) Division of Market Oversight (Division) today issued a no-action letter providing time-limited relief to Swap Dealers ("SDs") and Major Swap Participants ("MSPs") from the obligation to report valuation data for cleared swaps
as required by § 45.4(b)(2)(ii) of the Commission’s regulations.
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Source: CFTC.gov
CFTC's Division of Market Oversight Issues Time-Limited No-Action Relief from Parts 43 and 45 Reporting for Prime Brokerage Transactions, and Reporting of Unique Swap Identifiers in Related Trades under Part 45 by Prime Brokers
December 17, 2012--The Commodity Futures Trading Commission's (CFTC) Division of Market Oversight today issued a letter providing swap dealers with time-limited no-action relief from parts 43 and 45 reporting for prime brokerage transactions, and reporting of Unique Swap Identifiers in related trades under part 45 by prime brokers.
To avail themselves of the relief, reporting parties must first meet specific criteria set forth in the no-action letter, and they must also comply with certain conditions attached to the relief.
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Source: CFTC.gov
CFTC Approves Final Rule on Adaptation of Regulations to Incorporate Swaps- Records of Transactions
December 17, 2012--The U.S. Commodity Futures Trading Commission (CFTC) today approved a final rule to enhance the Commission's enforcement program for the futures market. The rule amends CFTC regulations 1.35(a) and 1.31 to conform them to recordkeeping requirements for swap dealers and major swap participants under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
As proposed, the rule would have included oral communications that lead to the execution of a transaction in a commodity interest or a cash commodity. The Commission received many comments on the proposal regarding the effect of this requirement on members of the agricultural community. The Commission is adopting the proposal, with modifications, to preserve its purpose without adversely affecting the agricultural community.
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Source: CFTC.gov
Federal Reserve Board Issues Supervision And Regulation Letter Summarizing Changes Made To Its Program For Consolidated Supervision Of Large Financial Institutions
December 17, 2012--The Federal Reserve Board on Monday issued a Supervision and Regulation letter summarizing changes made in recent years to its program for consolidated supervision of large financial institutions.
The updated approach incorporates a stronger focus on the stability of the financial system and broader economy as a whole, while making improvements to the Federal Reserve's program to promote resiliency of individual firms.
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Source: FRB (Federal Reserve Board)
DB-Synthetic Equity & Index Strategy-North America-US ETF Weekly Review-US ETPs received $11bn inflows mostly due to Large Cap funds
December 17, 2012--Market and Net Cash Flows Review
Markets were mixed during last week. The US (S&P 500) fell by 0.32%; While, outside the US, the MSCI EAFE (in USD) and the MSCI EM (USD) rose by 1.17% and 1.84%, respectively. Moving on to other asset classes, the 10Y US Treasury Yield rose by 8 bps last week; while the DB Liquid Commodity Index ended the week flat.
In the meantime, the Agriculture sector (DB Diversified Agriculture Index) pulled back by 1.13% and the WTI Crude Oil rose 0.93%, while Gold and Silver prices retreated by 0.47% and 2.40%, respectively. Last but not least, Volatility (VIX) rose by 6.92% during the same period.
The total US ETP flows from all products registered $11.06bn (+0.8% of AUM) of inflows during last week vs. $1.08bn (+0.1%) of inflows the previous week, setting the YTD weekly flows average at +$3.3bn (+$166.33bn, +15.9% YTD in total cash flows).
Equity, Fixed Income, and Commodity ETPs experienced flows of +$11.25bn (1.23%), -$0.28bn (-0.11%), +$0.11bn (0.1%) last week vs. -$0.39bn (-0.04%), +$1.14bn (0.44%), +$0.4bn (0.33%) in the previous week, respectively.
Among US sectors, Industrials (+$0.37bn, +6.4%) received the only significant inflows, while Information Technology (-$0.64bn, -4.0%) and Materials (-$0.19bn, -2.2%) experienced the largest outflows.
Within Equity ETPs, Large Cap products had the largest inflows (+$7.0bn, +3.3%); while US Sector products had the largest outflows of $0.5bn (-0.4%). Within Fixed Income ETPs, Sub-Sovereign products had the largest inflows (+$0.2bn, +0.6%); meanwhile Sovereign (-$0.7bn, -1.1%) ETPs experienced the largest outflows.
Top 3 ETPs & ETNs by inflows: SPY (+$5.4bn), EEM (+$2.1bn), IVV (+$1.2bn) Top 3 ETPs & ETNs by outflows: XLK (-$0.6bn), XLF (-$0.3bn), TIP (-$0.3bn)
New Launch Calendar: global merger arbitrage
There was 1 new ETF listed on the BATS exchange during the previous week. The new fund offers exposure to a global merger arbitrage strategy.
Turnover Review: Floor activity increased by 3.8%
Total weekly turnover increased by 3.8% to $261.7bn vs. $252.2bn from the previous week. Equity and Fixed Income ETPs turnover increased by $8.8bn (+3.9%) and $1.5bn (+9.9%), respectively; while Commodity ETPs turnover decreased by 6.5% (-$0.8bn).
Assets under Management (AUM) Review:
US ETPs reach $1.32 trillion
US ETP assets keep reaching new highs, reaching $1.316 trillion during last week. As of last Friday, US ETPs have accumulated an asset growth of 25.8% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved +$15.0bn, -$0.7bn, -$0.4bn during last week, respectively.
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Source: Deutsche Bank -Synthetic Equity & Index Strategy -North America
Morgan Stanley-ETF Weekly Update
December 17, 2012--Weekly Flows: $10.5 Billion Net Inflows
ETF Assets Stand at $1.3 Trillion, up 26% YTD
One ETF Launch Last Week
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US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $10.5 bln last week, the 4th consecutive week of net inflows
Net inflows were led by US Large-Cap and Emerging Market Equity ETFs, which posted combined net inflows of $9.7 bln
ETF assets stand at $1.3 tln (up 26% YTD) and have posted net inflows 39 out of 50 weeks in 2012 ($164.4 bln YTD)
ETF flows are on pace for their highest amount since 2008 when net inflows totaled nearly $175 bln
13-week flows were mostly positive among asset classes; combined $52.0 bln net inflows
Despite posting net outflows last week, Fixed Income ETFs have posted net inflows 66 out of the past 70 weeks; including $11.6 bln over the past 13 weeks
International Equity ETFs have exhibited net inflows of $20.8 bln over the past 13 weeks
Source: Bloomberg, Morgan Stanley Smith Barney Research. Data estimated as of 12/14/12 based on daily change in share counts and daily NAVs.
US-Listed ETFs: Estimated Largest Flows by Individual ETF
The SPDR S&P 500 ETF (SPY) posted net inflows of $5.0 bln last week, the most of any ETF
The iShares MSCI Emerging Markets Index Fund (EEM) had another impressive week, posting net inflows of $2.1 bln; EEM has not posted a weekly net outflow since the week of 8/27/12 (net inflows of $7.6 bln over that period)
Improving Chinese macro data have led to net inflows in China, specifically the iShares FTSE China 25 Index Fund (FXI) has come
alive the past 13 weeks, generating net inflows of $2.3 bln
Despite modest net inflows last week, the PowerShares QQQ (QQQ) has exhibited net outflows of $3.1 bln over the last 13 weeks, the most of any ETF
US-Listed ETFs: Short Interest Data Updated: Based on data as of 11/30/12
iShares Russell 2000 Index Fund (IWM) had the largest increase in USD short interest at $625 mln
IWM’s shares short climbed for the 4th period in a row, however remain 13% below their 52-week average
Aggregate ETF USD short interest decreased by $154 mln over the past two weeks ended 11/30/12
The average shares short/shares outstanding for ETFs is currently 4.4%
Smaller ETFs by market cap may skew results (three of the top 10 with the highest % of shares short have market caps <$25 mln)
The CurrencyShares Euro Trust (FXE) is the most heavily shorted ETF at 232%; based on recent FXE performance, shorting the euro has not been a good trade
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only six 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 12/14/12 based on daily change in share counts and daily NAVs.
$8.3 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs account for 52% of the market cap of ETFs launched over the past year; PIMCO Total Return ETF (BOND) is the largest actively managed ETF with a market cap of $3.9 bln
147 new ETF listings and 79 closures YTD (IndexIQ announced an additional closure to take place on 12/18)
The top 10 most successful launches make up 71% 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
Interestingly, the iShares MSCI Global Select Metals & Mining Producers Fund (PICK) is the most successful equity launch over the past year; PICK owns global companies involved in the production and extraction of metals, aluminum, steel, and precious
metals and minerals, ex-gold and silver
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Source: Morgan Stanley
Treasury International Capital Data for October
December 17, 2012--The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for October 2012.
The next release, which will report on data for November 2012, is scheduled for January 16, 2013.
The sum total in October of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC outflow of $56.7 billion. Of this, net foreign private outflows were $56.4 billion, and net foreign official outflows were $0.3 billion.
Foreign residents increased their holdings of long-term U.S. securities in October – net purchases were $28.4 billion. Net purchases by private foreign investors were $22.3 billion, and net purchases by foreign official institutions were $6.2 billion.
At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $27.1 billion
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Source: US Department of the Treasury
