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Morgan Stanley-US ETF Weekly Update
August 13, 2012--Weekly Flows: $530 Million Net Inflows
ETF Assets Stand at $1.2 Trillion, up 16% YTD
One ETF Launch Last Week
FocusShares Announces Liquidation of 15 ETFs
WisdomTree to Change Investment Objective on Hedged Equity Fd
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $530 mln last week, the second consecutive week of net inflows
Despite US Equity ETF outflows, US Sector & Industry ETFs exhibited $1.4 bln in net inflows last week
67% of ETFs exhibited no net flows last week (offsetting flows or no creation/redemption activity)
ETF assets stand at $1.2 tln (up 16% YTD) and have posted net inflows 24 out of 32 weeks YTD ($87.0 bln in net inflows)
13-week flows were mostly positive among asset classes; combined $34.0 bln net inflows
Fixed Income ETFs have generated net inflows 51 out of the past 52 weeks ($11.7 bln net inflows over the last 13 weeks)
Over the last 13 weeks, US Mid-Cap ETFs have exhibited net outflows of $648 mln, the most of any category we measured
US-Listed ETFs: Estimated Largest Flows by Individual ETF
Energy Select Sector SPDR (XLE) generated net inflows of $391 mln last week, the most of any ETF
Prior to last week, XLE had posted four straight weeks of net outflows (totaling $905 mln)
Seven out of 10 of the ETFs to post the largest net outflows last week track broad US Equity indices
Despite exhibiting net outflows of $1.4 bln last week, the SPDR S&P 500 ETF (SPY) has generated net inflows of $4.5 bln over the last 13 weeks, the most of any ETF
US-Listed ETFs: Short Interest
Data Updated: Based on data as of 7/31/12
SPDR Gold Trust (GLD) had the largest increase in USD short interest at $758 mln
Aggregate ETF USD short interest marginally increased $29 mln over the past two weeks ended 7/31/12
For the fourth consecutive period, SPDR S&P 500 ETF (SPY) short interest declined; SPY’s 201.7 mln shares short is its lowest level since 12/31/09
The average shares short/shares outstanding for ETFs is currently 4.8%
Out of the 10 ETFs with the highest % of shares short, only one has a market cap greater than $1 bln (IWM)
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 8/10/12 based on daily change in share counts and daily NAVs.
$8.4 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched Active ETFs generated most net inflows at $1.7 bln (specifically the PIMCO Total Return ETF-BOND)
120 new ETF listings and 18 closures YTD (additional 26 liquidations have been announced)
Over the past year, many of the successful launches have an income/dividend orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
The iShares MSCI All Country World Minimum Volatility Index Fund (ACWV) posted net inflows of $122 mln last week, the most of any recently launched ETF (ACWV’s largest ever weekly net inflows)
Top 10 most successful launches account for 71% of market cap of ETFs launched over the past year
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Source: Morgan Stanley
Active ETFs Come Into View
New funds are mostly designed to balance core positions. Still lots of room for competition in traditional equity space.
August 11, 2012--The long incubation of actively managed exchange-traded funds may be ending. A spate of active-equity releases has landed on U.S. exchanges recently-all of them hoping for even half the success Pimco's Total Return ETF (ticker: BOND) has seen since its launch this spring
The active ETF universe is "heterogeneous," says Morningstar ETF analyst Robert Goldsborough, though heavily skewed toward fixed income. "There are a lot of unique strategies, but not a lot of mainstream equity entries yet." It's also still just a tiny sliver of the industry: Active ETFs have just under $7 billion altogether, Goldsborough says. There's $1.2 trillion in U.S. ETFs.
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Source: Barrons
Knight Capital Group Calls In Consultants To Review Systems After August 1 System Snafu
August 10, 2012--Knight Capital Group in a 10-Q quarterly filing made on 9 August said that it had initiated an internal review into its August 1 system malfunction at the opening of trading at the NYSE on August 1, 2012.
In the filing Knight said:
"We experienced a technology issue at the open of trading at the NYSE on August 1, 2012. This issue was related to the installation that day of trading software and resulted in us sending numerous erroneous orders in NYSE-listed and NYSE Arca securities into the market. Although this software was subsequently removed from our systems and clients were not negatively affected by the erroneous orders, it resulted in us realizing a pre-tax loss of approximately $440.0 million. This event severely impacted our capital base and business operations, and we experienced reduced order flow, liquidity pressures and harm to customer and counterparty confidence. As a result, there was substantial doubt about our ability to continue as a going concern. Following the event of August 1, 2012, we have begun an internal review into such event and associated controls.
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Source: Placing Traders
BNY Mellon ADR Index Monthly Performance Review is Now Available-July 2012
August 10, 2012--The BNY Mellon ADR Index Monthly Performance Review July 2012 is now available.
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Source: BNY Mellon
CFTC.gov Commitments of Traders Reports Update
August 10, 2012--The current reports for the week of August 7, 2012 are now available.
view updates
Source: CFTC.gov
Short-Selling Bans Failed to Prevent U.S. Stock Price Declines
August 10, 2012--Bans on short-selling imposed during the financial crisis in the belief that short sales were driving United States stock prices below fundamental values did little to stabilize those prices, according to a new study by New York Fed economists. In addition, the bans had the unwanted effects of lowering market liquidity and boosting trading costs.
In "Market Declines: What Is Accomplished by Banning Short-Selling?" New York Fed economist Hamid Mehran and Notre Dame finance professors Robert Battalio and Paul Schultz investigate the link between short-selling and market downturns. The authors first evaluate evidence on the bans’ effectiveness in limiting share price declines in 2008. To provide additional evidence, the three then consider the market effects of short-selling in August 2011, when the debt-rating agency Standard and Poor’s lowered the U.S. sovereign long-term credit rating, prompting the S&P 500 to fall 6.66 percent on the next trading day. At the time, there was no short-selling ban in place in the U.S.
view the Market Declines: What Is Accomplished by Banning Short-Selling?
Source: Federal Reserve Bank of New York
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices-The Semi-Annual Review Of The S&P/TSX Venture 30 Index
August 10, 2012--S&P Canadian Index Services announces the results of the semi-annual review of the S&P/TSX Venture 30 Index effective after the close of trading on Friday, August 17, 2012.
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Source: Momdovisione
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices-A Deletion From The S&P/TSX Venture Composite Index
August 10, 2012--S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:
The Combination Transaction between U.S. Silver Corporation (TSX:USA) and RX Gold & Silver Inc. (TSXVN:RXE) has been completed.
RX Gold & Silver Inc. will be removed from the S&P/TSX Venture Composite Index after the close of trading on Friday, August 10, 2012.
Source: Standard & Poors
ETF closures show market getting tougher for firms
ETFs closing after months of going live
Some expect further closures soon
August 10, 2012--Recent exchange-traded fund closures are raising new questions as to whether the ETF market has passed its prime.
Just in the past week, Scottrade announced it is shutting down its ETF business, Russell Investments said it is considering a similar move and Direxion Shares said it was closing a number of ETFs.
Experts say a consolidation of the $1.2 trillion industry may be ahead as firms contend with tightening margins, an increasingly crowded ETF market and growing reluctance by executives to invest in marketing new products.
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Source: Reuters
Short-Selling Bans Failed to Prevent U.S. Stock Price Declines
August 10, 2012--Bans on short-selling imposed during the financial crisis in the belief that short sales were driving United States stock prices below fundamental values did little to stabilize those prices, according to a new study by New York Fed economists. In addition, the bans had the unwanted effects of lowering market liquidity and boosting trading costs.
In "Market Declines: What Is Accomplished by Banning Short-Selling?" New York Fed economist Hamid Mehran and Notre Dame finance professors Robert Battalio and Paul Schultz investigate the link between short-selling and market downturns. The authors first evaluate evidence on the bans’ effectiveness in limiting share price declines in 2008. To provide additional evidence, the three then consider the market effects of short-selling in August 2011, when the debt-rating agency Standard and Poor’s lowered the U.S. sovereign long-term credit rating, prompting the S&P 500 to fall 6.66 percent on the next trading day. At the time, there was no short-selling ban in place in the U.S.
view Market Declines: What Is Accomplished by Banning Short-Selling?
Source: Federal Reserve Bank of New York
