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Banks to Publish Share Volumes Traded in Automated Systems
May 24, 2010-Six leading investment banks have launched a voluntary initiative to improve post-trade
transparency in the European over-the counter equity markets.
The six banks: Citi, Credit Suisse, Deutsche Bank, J.P. Morgan Cazenove, Morgan
Stanley and UBS – will now report the volumes of cash equity trades crossed in their
automated crossing systems via a service provided by Markit. Reporting will begin today,
May 24th, following live testing over the past two weeks.
At the end of each trading day Markit will collate the data from each participating bank,
conduct validation checks on the information, and publish the aggregated trading volumes
the following afternoon. This data will be freely available on www.markit.com.
The data will cover automated crosses only, including trades matched on systems such as Citi Match, CS Crossfinder, DBA, JPM?X, MSPool and UBS PIN. In line with the MiFID rules on reportable trades, it will include trading between clients of the executing broker and trading between brokers and their clients. Volumes will be published on an aggregated basis and will be broken down by country. During testing the daily percentage of trades reported in this way has ranged from 0.62% to 1.02% of total European trading.
“This initiative is designed to bring further transparency into this area of OTC trading by providing verified data where previously there has been only speculation, and by giving a clear indication of the actual levels of trading in crossing engines,” says John Serocold of the Association for Financial Markets in Europe.
“As a further step in support of making more information freely available to all market participants, it should provide useful data for the MiFID review being undertaken this year.”
Sophia Kandylaki, Director of Equities at Markit says: “Markit is pleased to facilitate this
initiative which will give participants insight into how much is traded through banks’
crossing systems on a daily basis. This information will bring greater transparency to the
European equity markets.”
Source: AFME
Russian Regulator and Deutsche Börse Sign Cooperation Agreement
May 21, 2010--The Federal Financial Markets Service (FFMS) of Russia and Deutsche Börse signed a Memorandum of Understanding. The cooperation is aimed at exchanging information regarding current legislation in the capital markets, its application and possible changes thereof.
The partners will use their cooperation as a basis for a comprehensive exchange of experience and opinions. Furthermore Deutsche Börse supports the efforts to establish Moscow as a financial centre.
“I think that this MoU will be beneficial not only for the signing parties, but in the future also for the Russian and German financial markets which in my opinion , will increase their importance in the world`s financial system”, said Vladimir Milovidov, Head of Federal Financial Markets Service of Russia.
“Deutsche Börse Group has been active in Russia for a number of years now. This memorandum formalizes the close relationship we have had ever since we opened our representative office in 2007”, said Rainer Riess, Managing Director Xetra Market Development at Deutsche Börse.
FFMS is a Russian federal executive body which regulates Russian financial markets including securities issuance and trading and supervision of exchanges, issuers, professional market participants and their self-regulatory organizations, the Russian Federation Pension Fund as well as the state management company.
Source: Deutsche Börse
NASDAQ OMX Nordic Extends Harmonized Tick Sizes To All Large Cap Shares
May 21, 2010--NASDAQ OMX Nordic, part of the NASDAQ OMX Group, Inc, today announces that it will extend the European harmonized tick sizes to cover all Nordic Large Cap shares traded on NASDAQ OMX Nordic exchanges in Stockholm, Helsinki and Copenhagen as of June 7, 2010. The decision to implement the European tick sizes for all Swedish, Finnish and Danish Large Cap shares was taken in co-operation with the Nordic Securities Dealers' Associations and the Association for Financial Markets in Europe.
The harmonized European tick size regime was first implemented at NASDAQ OMX Nordic for the constituents of the main Nordic tradable indices (OMXS30, OMXH25 and OMXC20) by NASDAQ OMX Stockholm on October 26, 2009, followed by the Helsinki and Copenhagen exchanges on January 4, 2010.
The harmonization of tick sizes (the smallest possible change in share price) aims at minimizing implicit transaction costs when trading with Nordic equities and increasing liquidity on the Nordic markets.
NASDAQ OMX Nordic implements newtick size tables in accordance with the agreement reached by the Federation of European Exchanges, the London Investment Banking Association and a number of European MTFs in July 2009. The aim of the agreement is to harmonize the tick size regimes in Europe and thus deliver multiple benefits to the markets, users and investors by simplifying the complexity and number of regimes being used.
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Source: NASDAQ OMX
Measures adopted by CESR Members on short selling-Updated
May 21, 2010--EU securities regulators are closely monitoring the functioning of the markets under the current circumstances and are considering together possible actions which might be taken to contribute to orderly functioning markets. Any such actions will be taken with a view to strengthening confidence in financial markets and protecting investors.
Particularly, CESR, in its role as a network bringing together EU securities regulators, has been co-ordinating actions by its Members regarding the short selling practices, in particular in financial companies. Some EU securities regulators have adopted measures in their respective markets either to limit, or to introduce stringent requirements or further reporting obligations by firms to supervisory authorities on short-selling.
view update
Source: CESR
Eurozone recovery threatened by crisis
May 21, 2010--The crisis over eurozone public finances threatens to derail the region’s economic recovery, with German business confidence ebbing and manufacturing growth slowing markedly.
The Munich-based Ifo institute said its German business climate index had slipped only slightly this month, dragged down by gloomier expectations about the next six months. But purchasing managers’ indices showed a clear slowdown in eurozone private sector growth, with the manufacturing output index showing its biggest decline since November 2008.
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Source: FT.com
CESR publishes its technical advice to the European Commission on the equivalence between the US regulatory and supervisory framework and the EU regulatory regime for Credit Rating Agencies
May 21, 2010--Section I. Executive Summary
This document sets out the technical advice of CESR in relation to the equivalence between the US
legal and supervisory framework and the EU regulatory regime for credit rating agencies, in
accordance with the European Commission’s mandate of 12th June 2009.
CESR concludes that, overall, the US legal and supervisory framework is broadly equivalent to the
EU regulatory regime for credit rating agencies in terms of achieving what CESR considers to be the
overall objective of:
“assuring that users of ratings in the EU would benefit from equivalent protections in terms of the credit rating agencies integrity, transparency, good governance and reliability of the credit rating activities”.
However, there are a number of differences between the US legal and supervisory framework and the EU regulatory regime as set out below and explained in detail in this advice, that mainly relate to the issue of disclosure of credit ratings and the quality of credit ratings and credit rating methodologies.
CESR recommends the identified differences be addressed to allow for further convergence between both regimes and considers that reducing the difference may be achieved by future regulatory amendments to the Securities and Exchange Commission’s (SEC) rules.
view the report
Source: CESR
LSE hints at building own clearing house
May 21, 2010--The London Stock Exchange signalled on Friday a big shift in how the clearing business operates in the City of London by saying it was “reviewing” its long-standing relationship with LCH.Clearnet, the clearing house.
The move makes it more likely that the LSE will build its own clearer in London. The 210-year old bourse is one of the last big exchanges yet to fall into line with a global trend towards exchange ownership of post-trade businesses, especially in derivatives.
Ownership of a clearing house helps generate extra revenues in the form of clearing fees on top of the trading fees already charged by exchanges. It has become increasingly important strategically to exchanges as they vie for business in equities and derivatives.
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Source: FT.com
Dutch parliament seeks speculative trading ban
May 21, 2010-- Dutch lawmakers on Thursday called on the government to ban some forms of speculative trading on financial markets to confront Europe's debt crisis, the ANP news agency reported.
The 150-seat lower house of parliament backed a motion asking the government to follow the example of Germany, which this week banned so-called naked short selling of eurozone government bonds.
Naked short selling is when an investor sells on the market a security they do not hold, hoping to be able to buy it later in the day at a lower price, thereby earning a profit.
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Source: EUbusiness
Risk, not returns, drives German sustainable investments
May 21, 2010--The need to optimise risk management, rather than to boost investment returns, is the main reason German institutional investors consider sustainable investments, according to a study by Union Investments.
Almost three quarters (74%) of institutional investors surveyed cited this as the main driver, a year-on-year increase of 4 percentage points. It was particularly important for insurers, of whom 92% stated this as the main factor, compared to 87% of foundations, 84% of banks, 73% of pension funds and 30% of large companies.
“The recent turmoil in the capital markets has shown that risk assessments based entirely on short-term key performance indicators (KPIs) are not adequate,” said Alexander Schindler, member of the board of managing directors of Union Asset Management. “The concept of sustainability is a valuable addition because the assessments are expanded to include qualitative factors."
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Source: IP&E
European ETP Market Weekly Review: The €9 billion DivTAX Nomads
May 20, 2010--Market Update
While volatility persisted across equity markets, major indices recovered roughly half the losses suffered in the prior week with Euro Stoxx 50, iBoxx Euro Sovereign 3-5 Year and Gold (USD) all rising by 5.4%, 2.8% and 2.1% respectively. Despite overall rising market performance, the European.ETP market finished the week flat, with AUM declining -0.1%. The lack of steam in asset growth is primarily attributable to equity ETF outflows. More specifically, it has largely been driven by three substantial outflows from ETFs that offer exposure to the German DAX index dividends. The iShares DAX (DE), the iShares DivDAX (DE) and the ETFlab DAX ETFs lost a collective of €8.7 billion or €5.4 billion, €2.6 billion and €742 million respectively.
These are the same three ETFs that experienced similarly large inflows last week (€6.0 billion, €2.5 billion, €1.3 billion), discussed in our last weekly ETP Market Review issue. While those inflows helped the European ETP market finish the week with positive AUM growth despite strong negative equity market performance last week, this week’s outflows have significantly contributed to overall negative ETP market flows of €6.6 billion. Adjusting for these three large outflows, the European ETP market saw overall inflows of €2.1 billion, primarily attributable to fixed income and commodities. It is interesting to observe that these Div DAX flows are likely directed by a few decision makers, a conclusion that can be drawn when looking at their size and the fact that they have occurred over a narrow time frame. These are unlikely to be individual investors, their size points to flows directed by financial institutions. The duration of their stay in the three ETFs that track exposure to DAX dvidends suggests two possible scenarios: (1) that the flows occurred in order to facilitate tax benefits from dividend collection or (2) that they represent ‘short parking’ stays on the back of other pending transactions. Given the narrow investment focus of the ETFs that received these flows we tend to think that these inflows have occurred in order to benefit from tax relief relating to dividend income that is specific to the German market. Additionally, we would expect these to recur in future dividend seasons, assuming earnings point to dividend payments.
New Listings and De-listings
New product launch activity picked up this week with seven new products launched-Deutsche Bank (4) and Lyxor (3). While the number of new launches was by no means extraordinary, it is worth noting that new launches include US and UK sovereign short (exposure, not duration) and Asian fixed income indices as well as real estate indices.
Cash Flows
Gold (€602.8 billion) and sovereign fixed income (€367.9 million) inflows account for the majority (71%) of inflows in fixed income and commodities, two asset classes that enjoyed the strongest interest during this week.
Equity ETP inflows over the week, outside the three DAX dividend funds, remained very subdued with the maximum single fund daily inflow of €281 million.
Turnover
Average daily (on-exchange) turnover increased among all major asset classes and reached nearly €3 billion average per day, a new high, up 13.3% from last week. This increase follows an all-time high of €2.5 billion last week.
Equity ETPs remain by far the most traded asset class, with a daily average (on-exchange) turnover of €2.3 billion representing a 13% increase from last week.
Fixed Income average daily (on-exchange) turnover was led by sovereigns (€169 million) and money market (€55 million), both of which experienced rises of 6% and 13% respectively from the prior week.
Commodities saw the largest average daily (on-exchange) turnover, reaching €321 million, up 19% from last week. Gold leads turnover activity, with average daily (on-exchange) turnover of €171 million, followed by Broad Commodity Indices, €27 million, and Crude Oil, €26 million.
Assets Under Management (AUM)
ETP AUM finished the week flat (-0.1%) totaling €192 billion, primarily due to three very big outflows, totaling €8.7 billion, from ETFs that track DAX dividend performance.
Equity ETPs declined by -2.5% and ended the week with €120 billion and 62.5% of market share, down from 64% last week.
They were followed by Fixed Income funds rose by 2.5% to finish the week with €40 billion and 21% of market share, unchanged from last week.
Commodities saw the biggest rise among major asset classes and rose by 6.3%, and finished the week with 30 billion. So far this year, commodities are up 33%, reflecting the continued popularity of this asset class with investors.
European ETP AUM are up 13.0% YTD.
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Source: Christos Costandinides-Deutsche Bank - Equity Research
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