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Regulating the derivatives markets-European Parliment
March 8, 2010--The over-the-counter trade in derivatives must become much more transparent and better controlled, say Members of the EP Economic Affairs Committee. They argue that the risk element in derivatives should be expressed more clearly in their price, while a clear distinction should be made between the use of derivatives by companies and their use by financial institutions.
The Economic Affairs Committee discussed on Monday evening the first draft of a resolution on policy measures aimed at ensuring safer derivatives markets. MEPs placed a strong emphasis on how to deal with credit default swaps (CDS).
"Those who have benefitted from the high opacity in this area are not going to welcome us with open arms" rapporteur Werner Langen (EPP, DE) told fellow MEPs, underlining the main objective of more transparency.
Mr Langen said a balanced approach was needed, distinguishing between financial and non-financial institutions, with only the first being more tightly regulated. He believes the derivatives activities of non-financial institutions should only be regulated more if they come with high-risk attached, thus excluding most hedging derivatives. Most MEPs at last night's debate shared this opinion, although Kay Swinburne (ECR, UK) warned that this differentiation may be much more complex than initially envisaged.
Mr Langen also stresses that in future the prices of derivative products must better reflect risk and that this risk must not be borne by taxpayers. Until now, argues the draft report, the price of these products has been undervalued due to underestimated risks.
The report goes on to argue for more independence of central clearing houses from their users and also says they should not compete with each other on risk assessment. Various MEPs were not in favour of more independent clearing houses, with Peter Skinner (S&D, UK) arguing that such independence would only further concentrate risk.
view the Draft report on Derivatives markets
UBS to launch European Multilateral Trading Facility
March 9, 2010--UBS Investment Bank has announced its intention to launch, pending regulatory approval from the UK Financial Services Authority, a new Multilateral Trading Facility (MTF) for crossing orders in European stocks.
UBS MTF will be a non-displayed orderbook, featuring a Central Counterparty (CCP) model. As a 100% dark liquidity pool, there will be no pre-trade signalling risk or display of any kind. Executions completed in UBS MTF will be reported post-trade in real time to Markit BOAT. The MTF will launch offering mid-point matching based on the price of the primary market. Its CCP model will benefit clients by assisting them in mitigating counterparty risk and contributing to reduced settlement costs.
UBS MTF will be open to external members, implementing an objective membership access and order prioritization policy.
FTSE MIB Quarterly Index Review – March 2010
March 9, 2010--The FTSE Italia Joint Executive Group has approved the following changes to the FTSE MIB Index which will become effective after the close of business on Friday, 19 March 2010 (i.e. on Monday, 22 March 2010).
Inclusion
Company: Azimut Holding SpA
ISIN:IT0003261697
Exclusion:
Company:Arnoldo Mondadori Editore SpA
ISIN:IT0001469383
Four Currency Hedged ETCs of DB ETC Index plc Launched on Xetra
March 8, 2010--Four new Exchange Traded Commodities (ETCs) issued by the new issuer DB ETC Index plc have been tradable on Xetra since Monday. DB ETC Index plc, the Deutsche Bank ETC platform, is the fourth issuer in the ETC segment of Deutsche Börse.
The products offer investors a first opportunity to invest in Exchange Traded Commodities hedged against currency risk. All four db ETCs are backed by physical gold.
ETC Name: db ETC Brent Crude Oil Euro Hedged ETC Securities
Asset class: Commodities
ISIN: DE000A1AQGX1
Management fee: 0.45 percent
Benchmark: DBLCI-OY Brent Crude Oil EUR Index
ETC Name: db ETC Monthly Short Brent Crude Oil Euro Hedged ETC Securities
Asset class: Commodities
ISIN:DE000A1AQGW3
Management fee: 0.45 percent
Benchmark: DBLCI Monthly Short Brent Crude Oil EUR Index
ETC Name: db ETC Monthly Short Gold Euro Hedged ETC Securities
Asset class: Commodities
ISIN: DE000A1AQGZ6
Management fee: 0.45 percent
Benchmark: DBLCI Monthly Short Gold EUR Index
ETC Name: db ETC Industrial Metals Euro Hedged ETC Securities
Asset class: Commodities
ISIN: DE000A1AQGY9
Management fee: 0.45 percent
Benchmark: DBLCI-OY Industrial Metals EUR Index
Two of these four new Exchange Traded Commodities offer investors the opportunity to take exposure to the long or inverse performance of Brent crude oil futures contract. The db ETC Monthly Short Gold Euro Hedged ETC provides inverse exposure to gold, In addition, db ETC Industrial Metals Euro Hedged ETC offers the opportunity to take exposure to futures contracts of aluminum, copper and zinc.
The Xetra ETC segment product range currently comprises 155 products. The monthly trading volume of ETCs averages around €400 million.
More than One Billion Euros Invested in Xetra-Gold
Xetra-Gold is Germany’s ETC with highest turnover
March 8, 2010--Deutsche Börse holds gold in custody in its vaults with a total value of over one billion euros. The gold, which backs the bearer bond Xetra-Gold, currently amounts to 38.5 tons. Each unit of the security is backed by exactly one gram of physical gold. With the price of gold at €26.75 per gram (Xetra closing price), the total value of the physically deposited gold is thus over one billion euro.
Xetra-Gold has the highest turnover of the approximately 150 Exchange Traded Commodities (ETC) tradable on the Frankfurt Stock Exchange. The average monthly order book turnover on Xetra in 2009 was €127.8 million, totaling over €1.5 billion at the end of the year. This order book turnover is more than three times that of the second most successful product in the ETC segment. Launched in December 2007 Xetra-Gold’s market share of commodities trading on Xetra was over 32 percent in 2009.
With just one product, Deutsche Börse Commodities GmbH is the second largest issuer of ETCs/commodity certificates traded on stock exchanges in Germany. While Xetra-Gold was initially purchased by predominantly private investors, there is now increasing interest among institutional investors too. The product meets the provisions of the European UCITS directive.
Xetra-Gold provides investors with one of the most favorable opportunities of acquiring and trading physical gold. The bid/ask spread is only 0.1 percent. The end investor only has to pay a custodian fee, just as for any other security. No other ongoing management fees are charged for Xetra-Gold.
Eurex Admits First Chinese Broker
March 8, 2010--The international derivatives exchange Eurex announced today that it admitted the first broker headquartered in the People’s Republic of China through its Hong Kong subsidiary. GF Futures (Hong Kong) Co. Ltd. became a trading member of Eurex effective on 3 March 2010.
Dr. Cheng Xiao, the General Manager of GF Futures, said ”We are honored to be the first Chinese broker as a member of Eurex. We will have a better understanding of the European market together with our customers. Being a member of Eurex represents another major step to offer access to international business opportunities to our customers as well as a further commitment to the internationalization of GF Group.“
“We are very pleased to welcome the first Chinese broker as a member of Eurex”, said Michael Peters, member of the Eurex Executive Board. “Through their connection to Eurex, GF Futures (Hong Kong) is the first Chinese broker to give its customer base direct and reliable access to our international trading network out of Hong Kong. Over the last two years we have seen a fast growing interest from Asian clients demanding direct access to our products.”
Eurex is strongly committed to further expanding its business in the Asia-Pacific region. Representative offices in Hong Kong, Singapore and Tokyo were opened last year. Currently there are 10 members admitted out of Asia-Pacific, and several firms are in the admission process. The volume generated by the Asian members has tripled in 2009 compared with 2008.
GF Futures (Hong Kong) Co. Ltd is a subsidiary company fully owned by GF Futures Co. Ltd. Its establishment was approved by China Securities Regulatory Commission as one of the first three Futures Commission Merchants (FCMS) to launch business in the Hong Kong market.
ETF Exchange (ETFX) is Granted Distributing Fund Status for all of its 3rd Generation ETFs
March 8, 2010--The ETF Exchange has been granted distributing fund status by HM Revenue & Customs for the accounting period 15 July 2008 to 30 June 2009. The status has been granted to all 21 ETFs on the ETF Exchange. The ETF Exchange is the world’s first 3rd generation ETF platform which is supported by Bank of America Merrill Lynch, Barclays Capital, Citi, and Rabobank International who are participants on the platform.
Distribution fund status means that the tax on any gains by UK tax residents will be treated as a capital gain rather than income. This could make a huge difference for higher rate tax payers as the current rate of capital gains tax is 18% versus a 40% income tax rate which will increase to 50% from 6 April 2010 onwards.
Distributing fund status is also advantageous for UK authorised investment funds and investment trusts as they will be exempt from tax on any chargeable gain. In addition non UK investment funds who themselves seek distributor status (or are reporting funds) will not need to distribute/report any gain.
Mark Weeks, CEO of the ETFX Exchange commented: “This is another step forward in providing UK investors a tax efficient way to gain exposure to a unique range of real asset and tactical asset allocation ETFs".
Trading volumes in Europe’s first Currency ETC platform hit new high as GBP was the worst performing G-10 currency, down 5% in February
ETFS Short GBP Long USD (SGBP) rose 5.1% in February as investors’ turn their focus on weak UK fundamentals
Turnover on ETF Securities’ currency ETC platform surged 173% in February to a record high with ETFS Short EUR Long USD (SEUR) and ETFS Short GBP Long USD (SGBP) making up 60% of trading
Long USD and short G10 Currency ETCs have seen the strongest interest, capturing 81% of total AUM
Currencies have outperformed equities* over 3 years, with AUD outperforming by 46.5%
Currency ETCs provide investors with an easy way to implement both long and short currency views in a convenient exchange traded product
March 8, 2010--Turnover on ETF Securities’ Currency ETC platform surged 173% in February to a record high as investors use Europe’s first Currency ETCs to implement long and short tactical and strategic currency views. As the European sovereign debt crisis spread over the past two months, investors have focused on taking short positions in EUR and GBP vs. USD, with ETFS Short EUR Long USD (SEUR) and ETFS Short GBP Long USD (SGBP) making up 60% of trading volumes and 35% of AUM. As a result of credit concerns amongst various EU member countries and a worsening outlook for the UK economy, both the EUR and GBP have been the worst performing G-10 currencies versus USD in February and year to date.
Liquidity Calibration statement
The Financial Services Authority (FSA) published its enhanced liquidity regime in October 2009. This introduced both tougher qualitative and quantitative standards for firms.
March 8, 2010--At that stage the FSA said that it would not tighten quantitative standards before economic recovery is assured given that all firms were experiencing a market-wide stress. The FSA committed to giving a further update in the first quarter of 2010.
The FSA believes that it would be premature to increase liquidity requirements across the industry at the current time. This position will be reviewed later on in the year with a further announcement in Q4, 2010.
Meanwhile, the FSA is continuing to work with firms that are most affected by the new regime focusing on the steps they are taking to mitigate liquidity risk and on the additional impact of our progressively tightening quantitative requirements.
The FSA is also actively contributing to the international debate on liquidity.
CESR Members provide commonly agreed answers to questions on EU CRA Regulation
March 8, 2010--CESR published today a FAQ document summing up questions received and, at the same time, providing commonly agreed answers by CESR Members to the EU Regulation on Credit Rating Agencies (CRA).
view FAQ: CESR Members provide commonly agreed answers to questions on EU CRA Regulation
