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CPSS - IOSCO review of standards for payment, clearing and settlement systems
February 2, 2010--The Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) have launched a comprehensive review of their existing standards for financial market infrastructures such as payment systems, securities settlement systems and central counterparties.
There are three sets of standards involved, namely:
the 2001 Core principles for systemically important payment systems
the 2001/2 Recommendations for securities settlement systems
the 2004 Recommendations for central counterparties
Financial market infrastructures generally performed well during the recent financial crisis, and did much to help prevent the crisis becoming even more serious than it actually was. Nevertheless, the committees believe that there are lessons to be learned from the crisis and, indeed, from the experience of more normal operation in the years that have passed since the standards were originally issued. It thus seems timely to review the standards with a view to strengthening them where appropriate.
Robust financial market infrastructures make an essential contribution to financial stability by reducing what could otherwise be a major source of systemic risk. Moreover, insofar as they enable settlement to take place without significant counterparty risk, they also help markets to remain liquid even during times of financial stress.
The review will be led by representatives of the central banks that are members of the CPSS and those of the securities regulators that are members of the IOSCO Technical Committee. The International Monetary Fund and the World Bank are also participating in the review. The review is part of the Financial Stability Board's work to reduce the risks that arise from interconnectedness in the financial system.
The committees will coordinate with other relevant authorities and communicate with the industry, as appropriate, as the work progresses. They aim to issue a draft of all the revised standards for public consultation by early 2011.
Separately, as announced in the press release on 20 July 2009, the CPSS and the Technical Committee of IOSCO are already in the process of providing guidance on how the 2004 Recommendations for central counterparties should be applied to CCPs handling OTC derivatives. The guidance will also cover other relevant infrastructures handling OTC derivatives such as trade repositories. This aspect of the work has been put on a fast track because of the new CCPs for OTC derivatives and trade repositories that have recently started, or are about to start, operating. A consultative document on the guidance will be issued within the next few months. This new guidance will not entail amendments to the existing recommendations for CCPs but will of course be incorporated into the general review of the standards that has now begun.
Source: IOSCO
FSA steps up cross-border fraud probes
February 2, 2010--Investigations of overseas banks and companies were dramatically stepped up by the City watchdog last year as the financial crisis brought to light potentially improper behaviour that crossed international lines.
The Financial Services Authority’s enforcement division investigated 30 overseas businesses, a six-fold jump over the five it looked at in 2008, according to information obtained by Freshfields, the law firm, through a freedom of information request. Overseas companies accounted for 15 per cent of probes, up from 2.4 per cent the previous year.
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Source: FT.com
Currency ETC Assets Rise to $49mn and Trading Volumes Soar as Investors Build Long US Dollar Positions and Turn Negative on the Euro as Greek Debt Crisis Worsens
Assets rise to over $49 million following successful launch on the LSE
Trading volume reach weekly record, up 240% since start of 2010
February 2, 2010--ETF Securities (ETFS), which launched the world’s largest and Europe’s first platform of Exchange Traded Currencies (Currency ETCs) in November 2009, has seen assets in the platform grow to $49 million since inception with weekly trading volumes continuing their growth, up 240% since the start of 2010.
Currency ETCs which are Long USD and short G10 currencies have seen the most interest from investors, making up 81% of assets. The interest has occurred as the USD strengthened 6.7% versus the Dollar Index (DXY index) since the recent low on 25th November 2009 to 29th January 2010. ETFS Short EUR Long USD (SEUR) has been the most popular trade in 2010, capturing 50% of new assets, while the Australian dollar held the most net long positions. The platform has seen continuous increases in turnover since inception. 80% of trading volumes have occurred in ETCs which are long USD and short G10 currencies, with ETFS Short EUR Long USD (SEUR) taking 21% share of trading volumes, followed by ETFS Short AUD Long USD (SAD) and ETFS Short GBP Long USD (SGBP) with 18% each.
Martin Arnold, Senior Analyst, ETF Securities, commented:
“Sentiment in the foreign exchange market has changed dramatically over the past week as investors increasingly question whether the strong price performance of risk assets in 2009 can be sustained in 2010. The Eurozone is firmly in the spotlight for FX investors, with Greece’s debt problems weighing heavily on the Euro. Monetary tightening in China and India has also been a catalyst for increasing risk aversion. The market pessimism has pushed currency volatilities higher in recent days, and it should come as no surprise that the highest yielding currencies are also under pressure. Investors are not only looking to ETFS Short EUR Long USD (SEUR) to implement ‘safety’ strategies, but are beginning to unwind risk via ETFS Short AUD Long USD (SAD) and ETFS Short NZD Long USD (SNZD)”.
Currency ETCs which were Long USD (except for Japanese Yen) performed best as the USD strengthened. The table below shows the best performing currencies since inception of the Currency ETCs on 12th November 2009 and also the past 12 months. Over the last 12 months, long versions of the higher yielding G-10 currency indices were in the top five performers such as the Australian Dollar and New Zealand Dollar.
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Source: ETF Securities
Source adds J.P. Morgan and Nomura as shareholders
February 1, 2010--Launched less than one year ago, Source promised investors that it would offer exchange-traded products with reduced counterparty risk and increased liquidity in a fragmented and opaque market.
Adrian Valenzuela, managing director and global co-head of equity distribution at J.P. Morgan, says: “We are delighted to become a partner of Source in leading the transformation of the ETF market place, responding to investors’ demand for enhanced liquidity and control standards.”
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Source: ETF Express
ETF Exchange (ETFX) announces the addition of Barclays Capital to join the world’s first third generation ETF platform today
Issuing 3rd generation ETFs pioneered by ETF Securities.
ETFX offers a total of 21 equity ETFs comprising Europe’s first platform of resource-equity ETFs and double leveraged (2x) and double short (-2x) ETFs.
Equity AUM growth up over 65% in three months to over $350m.
February 1, 2010--ETF Securities Ltd (ETFS), the global pioneers in Exchange Traded Commodities (ETCs) and independent provider of Exchange Traded Funds (ETFs), is pleased to announce that Barclays Capital has joined ETF Exchange (Europe) (ETFX), the world’s first third generation ETF platform, as an authorised participant and swap provider.
ETF Securities is initially working with BofA Merrill Lynch, Citi, Rabobank International, and Barclays Capital who are participants on the platform, with scope to add additional participants in the future.
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Source: ETF Securities
Longevity association to kick-start hedging activity
February 1, 2010--A group of eight banks, insurers and reinsurers has launched the Life and Longevity Markets Association (LLMA) to help promote the hedging and trading of longevity risk.
The association’s first tasks will be to develop consistent standards and documentation, to create indices and create standardised valuation models to effectively price derivatives when longevity assumptions change.
Pension funds, holders of longevity risk, and reinsurers holding mortality risk, are natural counterparties.
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Source: IP&E
Be aware of ETF ownership rights, says ICGN
February 1, 2010--Investors need to be aware that they cannot exercise their ownership rights with certain types of exchange-traded funds (ETFs), according to the International Corporate...
“Investors have a right to vote with their shares,” said Carl Rosén, executive director at the ICGN. “With ETFs gaining a lot of market share in Europe, it is important to highlight the fact that investors invested in ETFs which use derivatives to mimic an index are not able to exercise their voting rights.”
ETFs that own their underlying assets and do not use derivatives normally have corporate governance and voting policies in place, allowing investors to exercise their rights, said Rosén. He believes a lot of institutional investors lack the understanding of how ETFs are structured, which is why he is calling for more transparency on the issue.
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Source: IP&E
London Stock Exchange's new retail bond market goes live
Broad support for new platform
February 1, 2010--The London Stock Exchange today launched its new electronic Order book for Retail Bonds. Introduced in response to strong private investor demand for greater access to fixed income, it offers continuous two-way pricing for trading in UK gilts and retail-size corporate bonds on-exchange for the first time.
Initially, 49 gilts and ten corporate bonds are available for trading including securities issued by Tesco, BT, National Grid, GlaxoSmithKline, Morgan Stanley, GE Capital, Enterprise Inns and a bond issued specifically for this new service by Royal Bank of Scotland. Investors can see prices on-screen, and trade in increments as low as £1 for gilts and £1,000 for corporate bonds, in a process similar to share dealing.
The new market is supported by dedicated market makers. Evolution Securities has committed to a leading role and will make markets across all of the gilts and corporate securities on the service. In addition, Shore Capital Stockbrokers will make markets in corporate bonds and ABN Amro is committed to quoting in the new RBS bond.
The new initiative is modelled on Borsa Italiana’s highly successful MOT market which, with €230 billion worth of trading in 2009, is Europe’s largest retail fixed income market.
To mark the start of trading on the electronic Order book for Retail Bonds, the Exchange today welcomed key politicians and market participants to speak at its Paternoster Square headquarters.
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Source: London Stock Exchange Group
CESR updates the list of measures recently taken by Members regarding short-selling.
February 1, 2010--CESR published on 22 September 2008 a statement that facilitates an overview of actions taken by CESR Members in relation to short-selling. The statement paper includes either the statements or links to the statements published by CESR Members explaining the measures taken. This paper is not a comparison of the measures taken.
CESR updates the list of measures recently taken by Members regarding short-selling. The documents will be updated on a continuous basis; the latest update has been provided by the French supervisor AFM, who prolonged their measures for an infinitive period, and the German supervisor BaFin, whose ban on naked short selling expired on Jan 31.
Updated Measures adopted by CESR Members on short selling
Source: CESR
Boerse Stuttgart sees strong growth in ETF trading
February 1, 2010--In April 2009, Boerse Stuttgart had a trading volume of some EUR 10.2 billion according to its order book statistics, a decline of 6 percent in comparison with March 2009 and of almost 15 percent compared with April 2008.
Trading in investment fund units accounted for more than EUR 312 million and was up by almost 75 percent in comparison with the same month in the previous year.
Most of this, around EUR 268 million, can be attributed to passively managed funds, known as ETFs. Trading volumes here had therefore more than doubled compared with April 2008. Among the securitised derivatives, reverse convertible bonds showed particularly large rates of increase, growing to EUR 126.6 million and were up by almost 100 percent in comparison with the same month in the previous year. In comparison with March 2009, the Stuttgart stock exchange recorded a growth of more than 52 percent in these products.
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Source: Boerse Stuttgart
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