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Turquoise will bolster the LSE's position
December 21, 2009-One down, six to go. With the London Stock Exchange set to absorb Turquoise, the share trading platform, the UK bourse can worry a little less about competitors snapping at its heels.
The nine banks that created Turquoise in 2006 as a way of forcing the LSE to lower its fees are now part of a joint venture with the exchange that will compete with the remaining six “multilateral trading facilities” left in Europe
They are Chi-X Europe, BATS Europe, Nasdaq OMX Europe, NYSE Arca Europe, Hungary-based Quote MTF and Equiduct, controlled by Citadel Securities of Chicago.
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Source: FT.com
EU predicts fewer, larger eurozone banks
December 21, 2009--The financial crisis has had limited impact on an existing process of consolidation among banks within the 16 countries that use the euro currency, the European Commission said on Monday.
"The findings show that banks in the euro area have become fewer, larger and more international. And this trend is likely to persist," it said in a report that looked into the question of banks that were "too big to fail."
Three out of every 10 banks across the eurozone have already disappeared since the single currency became a reality a decade ago.
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Source: EU Business
Turkey takes another small step towards EU
December 21, 2009--European Union nations on Monday allowed Turkey to take another small step towards joining the bloc, opening a new policy area for accession discussions, a diplomatic source said.
Meeting in Brussels, officials from the 27 EU member states agreed to open another of the 35 policy 'chapters' which all EU candidate countries must successfully negotiate prior to membership, in this case the chapter on environment.
That brings to 12 the number of chapters opened since Turkey began its formal membership talks back in October 2005.
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Source: EU Business
Irish Funds Industry Welcomes New Law to Enhance the Efficiency of Fund Re-Domiciliation to Ireland
December 21, 2009--The Irish Funds Industry Association (IFIA) has today announced that it welcomes the new legislation passed by Seanad Éireann - the upper house of the Irish parliament – on Friday, 18th December 2009. The Companies (Miscellaneous Provisions) Act 2009 will enable investment funds to re-domicile to Ireland simply and efficiently.
The new legislation provides a clear framework designed to address and minimise the challenges currently experienced when re-domiciling a fund. The legislation has been drafted to specifically allow a fund structured as a corporate entity in another domicile to re-register in Ireland with its original corporate identity retained, ensuring continuity of activity and continuation of arrangements.
In addition, the legislation simplifies the considerations involved when re-domiciling. These include the ability to re-domicile a fund at a single meeting of shareholders in the jurisdiction from which the fund is seeking to move; and a single filing of registration documentation with the Companies Registration Office in Ireland to include a statutory declaration from a director of the company. The simplified process should thus reduce the burden and cost of re-domiciling by eliminating unnecessary shareholder meetings, notary declarations, certificates and reports.
Responding to the immediate need for a simple and efficient legislative process and to shorten the time frame for the enactment of primary legislation, the legislative provisions were included in the Companies (Miscellaneous Provisions) Bill 2009 as amendments to the Bill.
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Source: Irish Funds Industry
Financial Stability Review December 2009
December 18, 2009--The extraordinary remedial actions taken by central banks and governments since late last year have been successful in restoring confidence in, and improving the resilience of, financial systems around the world. Financial system support measures have been addressing the funding challenges of key financial institutions and have bolstered their capital positions. These measures, together with sizeable macroeconomic policy stimuli, set in motion a mutually reinforcing process between financial system conditions and real economic performance, fostering improving business cycle prospects, as well as a fading of systemic risk.
An important reason for lowered systemic risk was an abatement of tail risk, thanks primarily to the downside protection by governments of financial institutions’ balance sheets. A recovery of risk appetite, underpinned by lowered systemic risk, contributed to the remarkable turnaround in financial markets since March 2009 and supported the trading income of large and complex banking groups (LCBGs). Many of these institutions also benefited from a considerable boost to net interest income on account of very steep yield curves. These better financial conditions strengthened the profitability of many LCBGs to such an extent that they were able to absorb considerable write-downs on securities and loans while still, on average, reporting material improvements in profitability over three consecutive quarters. Some were even able to return the capital they had received from governments, thus exiting from financial support.
Despite the recovery in financial markets and improved financial performance of euro area LCBGs, there are several grounds for caution in assessing the outlook for financial stability in the euro area. In particular, the main risks identified outside the euro area financial system include the possibility of:
vulnerabilities being revealed in non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions;
greater-than-expected household sector credit losses if unemployment rises by more than expected;
the surge of government indebtedness raising concerns about the sustainability of the public finances, as well as the crowding out of private investment; and
an adverse feedback between the financial sector and public finances as a result of financial system support measures, fiscal stimuli and weak economic activity.
view the full report-Financial Stability Review December 2009
read summary of the Financial Stability Review December 2009
Source: European Central Bank (ECB)
Ordinary share of Volkswagen AG to leave DAX
Volkswagen AG Vz to be included in DAX/ Unscheduled change effective 23 December 2009
December 18, 2009--Deutsche Börse has announced an unscheduled change in the composition of DAX. The freefloat of the ordinary share of Volkswagen AG has dropped below ten percent and does therefore no longer fulfill the requirements of the index.
The preferred share of Volkswagen AG (Vz) is to be included in DAX and will replace the ordinary share of Volkswagen AG (St). The Guide to Equity Indices of Deutsche Börse states that if a share of a company leaves the index, further classes of shares of that same company may rank among the candidates to be included in the index provided they qualify in agreement with the index rules.
This change will be effective 23 December 2009. The next equity index review is scheduled for 3 March 2009.
Source: Deutsche Börse
Ireland opens doors to hedge funds
December 18, 2009--The Irish government has passed legislation to make it easier for hedge funds based in the Cayman Islands and other tax havens to move to Dublin.
Brian Lenihan, the Irish finance minister, has identified the importance of the industry for the Irish economy, particularly at a time of high unemployment and with the public finances under strain.
He said opportunities “exist for Ireland to become the European hub for the international funds industry following recent European legislative changes”. He is to bring forward changes in the finance bill early next year to “strengthen Ireland’s competitive edge in this important sector”.
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Source: FT.com
Bank lists obstacles on path to stability
December 18, 2009--Strenuous efforts to steady the global financial system have borne solid results in recent months but the path to stability is strewn with potholes, the Bank of England warned in its half-yearly Financial Stability Report.
“Notwithstanding recent progress, many banks internationally still have high levels of leverage and unbalanced funding structures,” the Bank said, noting that financial institutions need to reduce their borrowings and extend the maturity dates on their remaining debt.
The financial sector faces a host of challenges, according to the report. Many institutions are heavily exposed to a commercial property sector where both rental incomes and values have fallen sharply. Some have made hefty loans to households whose finances will be strained as interest rates return to normal levels.
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Source: FT.com
EU employers concerned about Chinese protectionism
December 18, 2009--European employers complained Friday about China's treatment of foreign companies, raising concern about a new policy that could block access to Chinese markets.
In a letter to new EU Trade Commissioner Benita-Ferrero Waldner, BusinessEurope chief Philippe de Buck urged her and the EU's executive arm to urgently raise the matter with the Chinese authorities.
The recently issued rules for developing a catalogue of 'national indigenous innovation products' are a further worrisome example in a gradual trend towards impeding access for non-Chinese companies," he wrote.
Beijing stipulates that sellers of high-tech goods must have them accredited based on "indigenous innovation" -- meaning they must contain Chinese intellectual property -- to be included in a government procurement catalogue.
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Source: EU Business
DB Index Research -- Weekly ETF Reports -- Europe
December 17, 2009--ETF Liquidity Trends
ETF Volume
Exchange based Equity ETF turnover remained at about the same level on the previous week. Daily turnover for the previous week was E1.3bn. European fixed income ETF turnover rose by 4.7% to E180.2m.
In exchange based bond ETFs, iShares € Corporate Bond has the highest daily turnover of E12.03m. Among the Equity ETFs, iShares DAX (DE) has the highest daily turnover of E62.05m.
There were 7 new listings last week. HSBC issued one new ETFs on NYSE Euronext Paris. Barclays Capital issued two new ETNs and Source issued four new ETCs on Deutsche Borse. All new listings were primary listings.
European Style ETFs, led by short and leveraged products, kept its position as the leading product area with total turnover of E377m accounting for 29.78% of total ETF turnover, followed by European Regional ETFs with total turnover of E344m with 27.20% of total turnover. The DAX ETFs remain the dominant country products with total average daily volume of E172m across the fourteen listed products and accounting for 13.6% of all equity ETF volume.
DJ Euro STOXX 50 ETFs accounted for 12.7% of turnover trading E160m per day with liquidity split across 17 ETFs and 44 different listings on 9 exchanges.
Market Share
The Deutsche Borse XTF platform has the largest market share with 37.4% of total turnover. The Euronext NextTrack platform has 20.7% market share. The LSE’s combined Italian Exchange and London market share is now 25.1%.
Assets under Management (AUM)
Total European Equity related AUM remained at about the same level at E107.2bn during last week. AUM for DJ Euro STOXX 50 ETFs was E21.1bn accounting for 19.7% of total European AUM. Fixed Income ETF AUM remained at about the same level at E34bn.
Overall, the largest ETF by AUM was Lyxor ETF DJ Euro STOXX 50, an Equity based ETF, with AUM of E5.1bn. The largest Fixed Income ETF by AUM was the iShares € Corporate Bond with AUM of E3.2bn.
To request a copy of the report
Source: Aram Flores and Shan Lan -DB Index Research
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