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Morgan Stanley-US ETF Weekly Update
September 17, 2012--US ETF Weekly Update
Weekly Flows: $14.9 Billion Net Inflows
ETF Assets Stand at $1.3 Trillion, up 23% YTD
One ETF Launch Last Week
Guggenheim Mega Cap ETF Changes Name
US-Listed ETFs: Estimated Flows by Market Segment
Last week, ETFs posted their largest net inflows ($14.9 bln) since Oct-11, the seventh consecutive week of
net inflows; however, only 25% of ETFs exhibited net inflows while 64% of ETFs had no net flows
Net inflows were primarily driven by equity-focused ETFs with US Large-Cap ETFs leading the pack ($5.6 bln)
ETF assets stand at $1.3 tln (up 23% YTD) and have posted net inflows 29 out of 37 weeks YTD ($112.5 bln in net inflows)
13-week flows were mostly positive among asset classes; combined $39.6 bln net inflows
US Sector & Industry, International – Developed, and International – Emerging have led equity-focused ETF net inflows;
Conversely, Currency ETFs were the only market segment to post net outflows over the past 13 weeks (aggregate $225 mln)
Fixed Income ETFs have generated net inflows of $7.5 bln the past 13 weeks and have posted net inflows 55 out of the past 57
weeks
US-Listed ETFs: Estimated Largest Flows by Individual ETF
Vanguard MSCI Emerging Markets ETF (VWO) generated the second highest net inflows last week ($1.3 bln)
Interestingly, VWO has exhibited net inflows of $11.1 bln YTD versus just $1.1 bln for iShares MSCI Emerging Markets Index Fund(EEM); both ETFs track the same underlying index
Last week’s top 10 ETFs to post the largest net inflows were biased toward markets that should benefit from the Federal Reserve’s announcement to extend asset purchases (i.e., equities & high yield bonds – increasing investor risk appetite; gold – rising inflation)
US-Listed ETFs: Short Interest
Data Updated: Based on data as of 8/31/12
iShares Dow Jones US Real Estate Index Fund (IYR) had the largest increase in USD short interest at $312 mln
SPDR Gold Trust (GLD) exhibited the largest decrease in short interest ($575 mln); GLDs shares short have declined materially over the last two periods (15.0 mln shares from 21.8 mln shares) and currently sits below its 1-year average of 16.9 mln shares
Aggregate ETF USD short interest declined by $5.6 bln over the past two weeks ended 8/31/12
The average shares short/shares outstanding for ETFs is currently 4.5%
Smaller ETFs by market cap may skew the results (4 of the top 10 with the highest % of shares short have market caps <$25 mln); for example, the % of shares short for Market Vectors Retail ETF (RTH), a $21 mln fund, declined 287% since our last update
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 9/14/12 based on daily change in share counts and daily NAVs.
$9.7 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs generated the largest 13-week net inflows at $1.3 bln (PIMCO Total Return ETF-BOND had the largest flows at $1.2 bln; next highest was the First Trust North American Energy Infrastructure Fund – EMLP at $60.8 mln)
126 new ETF listings and 44 closures YTD (additional 25 liquidations have been announced)
Over the past year, many of the successful launches have an income / defensive orientation
ETFs focusing on fixed income (inclusive of active ETFs) account for ~54% of the market cap of ETFs launched over the past year, while equity ETFs focusing on risk-adjusted returns and equity income ETFs make up ~16% and ~8%, respectively
Five different ETF sponsors and two asset classes represented in top 10 most successful launches
Top 10 most successful launches account for 69% of market cap of ETFs launched over the past year
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Source: Morgan Stanley
iPath Short ETNs SFSA, ROSA Hit Early Termination Trigger
September 14, 2012--Two Barclays iPath ETN products triggered their early automatic termination and redemption features on September 7, 2012.
The defining moments occurred when the intraday indicative note values of iPath Short Extended S&P 500 TR Index ETN (SFSA) and iPath Short Extended Russell 1000 TR Index ETN (ROSA) dropped to levels of $10 or less.
Redemption values of $9.9312 for SFSA and $9.8168 for ROSA were determined by the closing indicative values on the trigger day. Today (9/13/12) was their last day of trading, and cash payments equal to the redemption values will be made on September 14, 2012.
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Source: Seeking Alpha
SEC Charges New York Stock Exchange for Improper Distribution of Market Data
NYSE Agrees to Settle Charges by Paying First-Ever SEC Financial Penalty Against An Exchange
September 14, 2012--The Securities and Exchange Commission today brought first-of-its-kind charges against the New York Stock Exchange for compliance failures that gave certain customers an improper head start on trading information.
SEC Regulation NMS (National Market System) prohibits the practice of improperly sending market data to proprietary customers before sending that data to be included in what are known as consolidated feeds, which broadly distribute trade and quote data to the public. This ensures the public has fair access to current market information about the best displayed prices for stocks and trades that have occurred.
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Source: SEC.gov
SEC Called On Once More To Answer For Favoring Big Firms
September 14, 2012--Everyone has the feeling that the Securities and Exchange Commission is taking it easy on big firms. But until now, there hasn’t been an empirical study that backs up that claim.
Now, there is.
Berkeley Law professor Stavros Gadinis recently released the results of a study he conducted analyzing SEC enforcement actions against broker-dealers, covering over 400 cases in 1998 and from 2005-2007. He found that bigger firms were treated with a lighter hand than smaller ones.
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Source: CompliencEX
CFTC.gov Commitments of Traders Reports Update
September 14, 2012--The current reports for the week of September 11, 2012 are now available.
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Source: CFTC.gov
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices-A Deletion From The S&P/TSX Venture Composite Index
September 14, 2012--S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:
On September 13, 2012, Continental Nickel Limited (TSXVN:CNI) received final court approval for their Plan of Arrangement whereby the company will be acquired by IMX Resources Limited (ASX:IXR).
Continental Nickel will be removed from the S&P/TSX Venture Composite Index after the close of trading on Friday, September 14, 2012.
Source: Standard & Poor's
Hedge funds plow into commodities just before QE3: CFTC
September 14, 2012--Hedge funds and other big speculators pumped more than $6 billion into U.S. commodity markets this week, the most in three weeks, just before the Federal Reserve announced a third round of stimulus for the U.S. economy, trade data showed on Friday.
With gold, oil, metals and crop prices already at or near multimonth highs, the speculators raised to above $117 billion their net long positions across 22 commodity markets tracked by the U.S. Commodity Futures Trading Commission.
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Source: Reuters
SEC's Shillman says new rules could include more market participants
Current review standards are voluntary, could be made enforceable
September 13, 2012--With high-profile technical glitches costing U.S. exchanges and trading firms hundreds of millions of dollars in recent months, U.S. regulators are taking a deeper look at creating enforceable technology review standards for exchanges and market participants.
"If there is a technology glitch things can get real bad real fast, so market participants need to reassess their controls over technology," David Shillman, associate director for the U.S. Securities and Exchange Commission's Division of Trading and Markets said on Thursday.
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Source: Reuters
Federal Reserve issues FOMC statement
September 13, 2012--Information received since the Federal Open Market Committee met in August suggests that economic activity has continued to expand at a moderate pace in recent months.
Growth in employment has been slow, and the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment appears to have slowed. The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently. Longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective.
Hedge Fund Association Asks SEC for Clear Rules on Verifying Investor Accreditation
Industry Trade Organization Asks for Provision in JOBS Act Rules to Limit Fund Managers' Liability Should They Take Reasonable, Pre-Defined Steps to Confirm Whether Investors Are Accredited
September 13, 2012--The Hedge Fund Association, (the HFA), an international not-for-profit organization representing investors, hedge funds and service providers, today asked the Securities and Exchange Commission (SEC) in a comment letter to specifically tell private fund managers what they will need to do to safely verify whether investors are accredited,
should they want to advertise after the rules in the Jump Start Our Business Start-ups Act (JOBS Act) are finalized. The HFA also praised the entire proposed rule to lift the hedge fund advertising ban as a significant step to modernize securities laws that maintains the investor protections available under the current system. At the same time, they encouraged the regulator to coordinate with the Commodity Futures Trading Commission (CFTC) to harmonize any new rules with the Commodity Exchange Act (CEA).
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Source: The Hedge Fund Association
