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Council conclusions on strengthening EU financial stability arrangements
2967th ECONOMIC and FINANCIAL AFFAIRS-
Luxembourg
October 20, 2009--The Council adopted the following conclusions:
1. The current crisis in global financial markets has severely tested the stability of the
European financial system and revealed that more fundamental changes to the financial stability
arrangements, supervisory and regulatory framework are needed to ensure enhanced coordination
among national supervisors, central banks and governments in a crisis situation, as well as an
integrated approach to crisis prevention, management and resolution in order to promote financial
stability.
2. Against this background, the Council RECALLS the conclusions adopted by the 9 June
2009 ECOFIN Council1 and the 18-19 June 2009 European Council2, which underscored the need
"to advance work on building a comprehensive cross-border framework for the prevention and
management of financial crisis". The Council STRESSES the need to move forward to ensure that
progress is made in parallel to the ongoing work on the EU supervisory framework.
read more -the Council conclusions on strengthening EU financial
stability arrangements
Source: COUNCIL OF THE EUROPEAN UNION
CESR to consult on common definition of money market funds
October 20, 2009-CESR published today a consultation paper aiming at a common European definition of money market funds. The paper sets out CESR’s proposals for a common definition of European money market funds.
The key purpose behind a harmonised definition of ‘money market fund’ is improved investor protection. A common definition will also help provide a more detailed understanding of the distinction between funds which operate in a very restricted fashion and those which follow a more ‘enhanced’ approach.
CESR invites stakeholder's views by December 31.
View consultation paper-A common definition of European money market funds
Source: COMMITTEE OF EUROPEAN SECURITIES REGULATORS (CESR)
Ministers agree on creation of macro-prudential oversight body
October 20, 2009--EU finance ministers met in Luxembourg on Tuesday to discuss a number of important issues and to prepare for the European Council in October and the G20 finance ministers meeting in November.
EU macro-prudential oversight will be strengthened
The ministers agreed on an approach regarding macro-prudential supervision. Ministers agreed to establish a specific body responsible for macro-prudential oversight across the EU financial system, the European Systematic Risk Board (ESRB). The ESRB will identify risks to financial stability and, where necessary, issue risk warnings and recommendations for action to address such risks.
As a consequence of the agreed approach and the broad political support on this matter, the Council invites the Presidency to start negotiations with the European Parliament on the Regulation, on the basis of this approach with a view to reaching agreement at first reading.
Swedish Minister for Finance Anders Borg was particularly pleased with the agreement to create a new body, responsible for macro-supervision: “This is a crucial step in putting in place a financial supervisory system that will help prevent future financial crises.”
Swedish Minister for Financial Markets Mats Odell added, “Today we have made serious progress on a matter of fundamental importance.”
read full story
Source: Swedish Presidency of the EU
EC actions to strengthen the safety of derivatives markets
(see MEMO/09/465 )
October 20, 2009--The European Commission has adopted a Communication for ensuring efficient, safe and sound derivatives markets. The Communication sets out future policy actions to increase transparency of the derivatives market, reduce counterparty and operational risk in trading and enhance market integrity and oversight. They follow the stakeholder consultation launched with the Communication in July ( IP/09/1083 ) and the public hearing in September. The Commission will come forward with legislative proposals in 2010. These proposals will be in line with the G20 Pittsburgh statement and will be accompanied by a thorough impact assessment. In order to avoid any risk of regulatory arbitrage and to ensure a global consistency of policy approaches, the Commission stands ready to work with authorities around the world when finalising the proposals.
Internal Market and Services Commissioner Charlie McCreevy said: "This Communication marks a paradigm shift away from the traditional view that derivatives are financial instruments for professional use and thus require only light-handed regulation. The Commission proposes a comprehensive approach that will ultimately enable markets to price risks properly. We cannot afford another situation where the risks of the financial sector are ultimately borne by the taxpayer."
This Communication lays out the Commission's future policy actions. It builds on the Commission's July Communication 1 ( IP/09/1083 ) and the subsequent stakeholder consultation and high-level conference.
The future policy actions will:
Reduce counterparty risk by (i)
proposing legislation to establish common safety, regulatory and operational standards for central counterparties (CCPs),
(ii) improving collateralisation of bilaterally-cleared contracts,
(iii) substantially raising capital charges for bilaterally-cleared as compared with CCP-cleared transactions, and on top of this
(iv) mandate CCP-clearing for standardised contracts;
Reduce operational risk by promoting standardisation of the legal terms of contracts and of contract-processing;
Increase transparency by
(i) mandating market participants to record positions and all transactions not cleared by a CCP in trade repositories,
(ii) regulating and supervising trade repositories,
(iii) mandating trading of standardised derivatives on exchanges and other organised trading venues, and
(iv) increase transparency of trading as part of the review of the Markets in Financial Instruments Directive (MiFID) for all derivatives markets including for commodity derivatives;
Enhance market integrity and oversight by clarifying and extending the scope of market manipulation as set out in the Market Abuse Directive (MAD) to derivatives and by giving regulators the possibility to set position limits.
The Commission will now start the process of drafting legislation, notably by launching impact assessments, in order to come forward with ambitious legislation to regulate derivatives in 2010.
The market for derivatives is global. To ensure an ambitious and convergent international regulatory outcome, the proposals are in line with the objectives agreed at the G20 meeting of 25 September 2009. The Commission intends to further develop the technical details in cooperation with its G20 partners in order to ensure a coherent implementation of these policies across the globe and thus avoid regulatory arbitrage. Such cooperation is particularly important with the US, which is also in the process of designing a new approach to derivatives markets.
Background
Derivatives play an important role in the economy but are associated with certain risks. The financial crisis – notably the events surrounding Bear Sterns, Lehman Brothers and AIG – has highlighted that these risks are not sufficiently mitigated in the OTC part of the market. In view of the central role played by derivatives markets in the financial crisis, on 3 July 2009 the Commission published a Communication on ensuring the efficiency, safety and soundness of derivatives markets, accompanied by a Commission Staff Working Paper and a Consultation Paper. The consultation resulted in over 100 replies, and 450 participants attended a high-level conference on 25 September in Brussels. The July Communication announced operational conclusions for the end of October, which is the subject matter of the present communication.
More information is available at:
http://ec.europa.eu/internal_market/financial-markets/derivatives/index_en.htm
1 :
Commission Communication "Ensuring efficient, safe and sound derivatives markets" - COM(2009) 332, Staff Working Paper SEC(2009) 905, and Consultation document SEC(2009) 914. See press release IP/09/1083 .
Source: European Commission
Now Over 500 Index Funds Listed on Europe’s Leading ETF Trading Platform Xetra
10 new iShares ETFs admitted to trading/ XTF segment reached market share of 44 percent in European ETF trade in the third quarter of 2009
October 20, 2009--Since Tuesday, ten additional exchange-listed index funds of the iShares issuer (Barclays Global Investment) are tradable on Xetra®. The offering in Deutsche Börse’s XTF segment has thus increased to a total of 507 index funds.
„With more than 500 ETFs on offer, our XTF segment has achieved a further milestone. Deutsche Börse continues to hold the top position in European ETF trade – based on both the number of tradable exchange-listed ETFs as well as monthly trading volume. In the third quarter, our XTF segment reached a market share of 44 percent in the trading volume of ETFs in Europe,” said Rainer Riess, Managing Director of Xetra Market Development at Deutsche Börse.
With the introduction of the XTF segment in April 2000, Deutsche Börse gave the starting signal for ETF trade in Europe and has since then been the market leader in Europe. The first three products in European ETF trade were launched on the leading benchmarks DJ EURO STOXX 50®, DJ STOXX 50® and DAX®. ETFs have continuously developed since then, and have become one of the most popular investment products even in times of crisis. ETFs on equities, bonds and commodities are available to private and institutional investors also when employing a variety of strategies such as short, dividend yields or value/growth. The iShares DAX ETF achieved the highest trading volume in the XTF segment by far with an average of €1.3 billion per month in 2009.
“Innovative indices and the ETFs launched on them offer a broad investor base cost-effective access to entire subjects, sectors and markets. Successful ETFs are based on transparent, strictly rule-based and tradable indices,” noted Dr. Hartmut Graf, head of Deutsche Börse’s index business.
The ten new iShares ETF on Xetra are comprised of seven equity-index and three bond-index ETFs. The equity index ETFs enable investors to participate in the performance of individual countries and regions. With the iShares MSCI World, investors participate in the performance of approximately 1,700 companies from more than 20 industrialized nations, which together constitute around 90 percent of market capitalization. With the iShares MSCI Europe, investors focus on the performance of around 400 medium to large-sized companies in Europe.
To track performance of US or Japanese companies, investors can invest in iShares ETFs S&P 500 as well as MSCI Japan. The S&P 500 Index contains 500 US blue chip companies, while the MSCI Japan Index comprises over 300 medium to large-sized Japanese companies. The iShares MSCI Emerging Markets offers the opportunity of participating in the performance of over 700 medium to large-sized companies from more than 20 emerging markets.
In contrast to the iShares ETFs on these indices that are already tradable in the XTF segment, the five new ETFs do not distribute earnings but reinvest them in the index portfolio instead. Thus investors participate in the respective fund’s earnings via share price performance.
For both the following iShares ETFs, the full amount of profit is distributed to investors on a semi-annual or quarterly basis. The MSCI Emerging Markets SmallCap Index comprises companies from emerging markets with a market capitalization of 200 million to 1.5 billion US dollars. The MSCI Pacific ex-Japan Index includes companies in the Asia-Pacific region with the exception of Japan on the basis of free-float market capitalization. It comprises the equity markets of Australia, New Zealand, Hong Kong and Singapore.
The three new iShares bond-index ETFs are based exclusively on government bonds denominated in euro. With the iShares Barclays Euro Government Bond 5-7 and the iShares Barclays Euro Government Bond 10-15 ETF, investors can track performance of highly liquid government bonds from Germany, France, Italy, Spain and the Netherlands, which have a minimum residual maturity of 5–7 or 10–15 years, respectively. The iShares Barclays Euro Treasury Bond ETF enables investors to participate in the performance of government bonds with a residual maturity of at least one year and a minimum outstanding volume of 300 million euros.
The iShares exchange-traded funds that were admitted to the XTF segment today are listed in the attachment to this message.
10 new iShares ETFs on Xetra pdf 6 KB
Source: Deutsche Börse:
Chi-X Europe Introduces Chi-Velocity
Proximity-hosted service allows Chi-X Europe trading participants to offer their end clients sponsored DMA access with a variety of pre-trade and risk management controls
October 19, 2009-Chi-X Europe Limited, operator of the largest pan-European equity
multilateral trading facility (MTF), today announced the launch of Chi-Velocity™. Available immediately,
Chi-Velocity is a proximity-hosted risk management software layer located next to the Chi-X Europe
primary matching engine that permits trading participants of Chi-X Europe to offer ultra-low latency
Sponsored Direct Market Access (DMA) to their underlying clients.
Chi-Velocity offers a suite of configurable pre-trade controls, open exposure risk management controls,
alerting functionality and a FIX order and trade feed that can be integrated with in-house risk
management systems. As part of Chi-Velocity’s pre-trade controls, trading participants can set a wide
variety of restrictions and controls such as restricted stock lists, daily consideration and order limits and
price range checking thresholds, among other features. Trading participants are able to license Chi-
Velocity from Chi-X Europe and are provided with dedicated software instances on servers managed and
maintained by Chi-X Europe.
Commenting on the announcement, Hirander Misra, COO of Chi-X Europe, said, “Since launching two
and half years ago, we have been keenly aware of our trading participants’ need for ultra-low latency
connectivity and the ability to pass this along to their end clients as sponsored direct market access. In
developing Chi-Velocity, we have sought to ensure that offering this low latency service to their end
clients does not compromise our trading participants’ risk management checks, as we have introduced
controls which are adaptable to suit individual requirements and can easily be integrated into their own
systems.”
Source: Chi-X Europe
European Commission: Simplified Procedures For Claiming Cross-Border Withholding Tax Relief – Frequently Asked Questions
(see also IP/09/1543 )
October 19, 2009--What is the recommendation designed to do?
The Recommendation aims to show EU Member States how they could simplify the procedures that they currently apply to verify investors' entitlement to relief from withholding tax on cross-border securities income. The objective is both to facilitate investors who wish to invest across borders and to ensure that EU-based financial intermediaries can provide services freely across borders, as they are entitled to do under Article 49 of the EC Treaty. The Recommendation also suggests ways in which Member States could ensure that the proposed simplifications would not open their tax bases to errors or fraud.
What is the scope of the Recommendation?
The Recommendation applies to withholding taxes levied on securities income (mainly dividends and interest) that is sourced in an EU Member State, and that is paid to EU resident investors, via one or more financial intermediaries established in the EU or in an EFTA country that provides for a level of administrative assistance to other countries equivalent to that applicable by EU Member States under EU legislation.
Why is the Recommendation necessary?
Under the bilateral double taxation treaties that EU Member States have with each other, Member States generally agree to reduce source country withholding taxes on securities income, in order to share taxing rights between the two treaty partner countries. Some Member States even apply a reduced withholding tax or exemption on securities income paid to foreign investors under their domestic law where certain conditions are met. However, the procedures to reduce the withholding tax rates at the payment stage or to claim refunds of tax withheld are often so complicated and varied that investors do not bother claiming relief or refunds and may even be discouraged from investing abroad.
How would the Recommendation benefit investors?
The recommendation would benefit investors in the first place because it suggests that Member States should apply at source (i.e. at the time of payment of the securities income), rather than by refund, any withholding tax relief to which an investor is entitled.
Second, in cases where investors are not able to obtain withholding tax relief at source , the recommendation encourages Member States to apply quicker and simpler tax refund procedures, including the following elements:
permission for any authorised financial intermediary in a custody chain to submit refund applications on behalf of the investors;
use of a single contact point for the introduction and handling of all the refund applications and publication of the relevant information on refund procedures on a website;
use of common formats for refund applications, and permission to file them electronically;
refunding in a reasonable period of time, i.e. normally within 6 months;
allowing investors and financial intermediaries to provide alternative proofs to certificates of residence in connection with their claims.
read more
Source: European Commission
Irish Government Appoints Nomura As Primary Dealer
October 19, 2009--Nomura, the preeminent Asian-based global investment bank, today announced that it has been named as a Primary Dealer for Irish Government bonds.
Nomura is the only Asian bank to be granted this status and will bring the total number of Primary Dealer firms in the Irish Government bond market to 12. Nomura's role as a Primary Dealer will be to continuously make two way markets in Irish Government bonds and to participate in competitive auctions organised by the Irish National Treasury Management Agency.
We are very proud to be appointed as a Primary Dealer for Irish Government bonds," said Kieran Higgins, Co-Head of Fixed Income for Europe, Middle East and Africa at Nomura. "Nomura's Fixed Income business has been keenly focusing on increasing its market making activities in Europe and internationally, and this development is yet another validation of our strategy."
Brian Healy, Director of Traded Markets, Development, Operations at the Irish Stock Exchange, said: "The addition of Nomura as a Primary Dealer in Irish Government bonds is a significant and welcome development. The involvement of Nomura, a major player in European and global fixed income markets, underscores the strong international interest in the market for Irish Government debt. We look forward to building further on this relationship with Nomura as we continue to expand our trading membership base."
Since the beginning of 2009, Nomura has secured its position as a Primary Dealer for UK, US and Indian Government bonds. It is also a Primary Dealer in Germany, Italy, France, Greece and Austria and will continue to develop its position in the sovereign debt markets.
Source: Nomura
Securities income: Commission recommends simplified procedures for claiming cross-border withholding tax relief
October 19, 2009--The European Commission has adopted a recommendation that outlines how EU Member States could make it easier for investors resident in EU Member States to claim withholding tax relief on dividends, interest and other securities income received from other Member States. The recommendation also suggests measures to eliminate the tax barriers that financial institutions face in their securities investment activities while at the same time protecting tax revenues against errors or fraud. The recommendation is designed to provide guidance to Member States in how to ensure that procedures to verify entitlement to tax relief do not hinder the functioning
Internal Market and Services Commissioner McCreevy said: "If we are serious about promoting cross-border investments in securities in the Internal Market, EU Member States will have to simplify their withholding tax relief procedures, so that foreign investors receive any tax refunds to which they are entitled more quickly and so that tax rules do not hinder financial institutions from getting involved in managing such cross-border investments."
Taxation and Customs Commissioner Kovács said: "While it is true that complicated refund procedures may discourage cross-border investment, Member States must be allowed to have sufficient safeguards in place to protect their tax systems against errors and fraud. The recommendation contains solutions that are designed to balance these opposing concerns."
The recommendation:
encourages Member States to apply at source rather than by refund any withholding tax relief applicable to securities income under double taxation treaties or domestic law;
encourages Member States to apply quick and standardised refund procedures where they cannot provide relief at source, for example because the investor has not provided all necessary information, and lists possible elements of such refund procedures;
encourages Member States to accept alternative proofs of investors' entitlement to tax relief besides certificates of residence ;
suggests how Member States can involve financial intermediaries in making claims on behalf of investors and, in particular, how the procedures could operate where there is a chain of financial intermediaries, in different Member States, between the issuer of the securities and a beneficiary;
encourages greater acceptance by Member States of electronic rather than paper information;
suggests that Member States could apply a risk-based approach to setting requirements of proof of entitlement to tax reliefs;
suggests how Member States could set up single or joint audits or even external audits to investigate the compliance of financial intermediaries with obligations created in line with the recommendation;
suggests follow-up discussions with Member States on the implementation of the Recommendation.
encourages greater use of existing channels for exchange of information between Member States and the exploration of new channels.
Background
The tax laws of Member States usually provide for withholding taxes on dividend and interest income paid to non-resident investors. These withholding taxes are often reduced under Member States' bilateral double taxation conventions, when the two treaty partner countries involved agree on sharing taxing rights. In certain circumstances, some Member States even unilaterally reduce withholding taxes or apply exemptions on securities income paid to foreign investors.
However, Member States' procedures to verify claims for withholding tax reliefs are often so complicated and time consuming that investors may forego the reliefs to which they are entitled or even be discouraged from investing across borders. Furthermore, these procedures often do not take into account the present-day multi-tiered financial environment where there may be a chain of financial intermediaries, based in several countries, between the issuer of the securities and the investor. In fact, a study by the Commission services shows that the costs related to these present reclaim procedures are estimated to a value of € 1.09 billion annually whereas the amount of foregone tax relief is estimated at € 5.47 billion annually.
The amount of cross-border holdings within the European Union was 16.7 trillion dollars in 2006, composed of 6.4 trillion dollars in equity securities and 10.3 trillion dollars in debt securities. The European Union accounts for more than 50 % of the worldwide amount of such holdings, both with respect to the origin and the destination of the investments.
The recommendation is based on the (2006-2007) reports of the EU Clearing and Settlement Fiscal Compliance Experts' Group (FISCO) ( IP/07/1569 ), follows upon an extensive stakeholders' consultation and has been discussed on several occasions with the financial services industry and tax administrations in Member States. Background documents are available at:
http://ec.europa.eu/internal_market/financial-markets
http://ec.europa.eu/taxation_customs/index_en.htm
Source: European Commission
STOXX Ltd. Launches Dow Jones Euro STOXX 50 PutWrite Index
October 18, 2009--STOXX Ltd., the leading European index provider, today announced the launch of the Dow Jones EURO STOXX 50 PutWrite Index. The new index replicates a "reverse convertible" investment strategy and measures the performance of a hypothetical portfolio consisting of monthly put options on the Dow Jones EURO STOXX 50 Index. The monthly put options are fully collateralized by money-market investments in the three month Euribor market (euro interbank offered rate).
The Dow Jones EURO STOXX 50 PutWrite Index is the first of its kind in Europe and is designed to underlie financial products such as exchange-traded funds.
"The Dow Jones EURO STOXX 50 PutWrite Index is a unique and objective measurement tool for market participants who want to follow a collateralized put strategy for the euro zone," said Ricardo Manrique, chief executive officer, STOXX Ltd. "By combining money market investments and put options on Europe's most liquid listed options contract - based on the Dow Jones EURO STOXX 50 Index, we are adding another highly tradable and replicable index to the Dow Jones STOXX Strategy Index family."
The Dow Jones EURO STOXX 50 PutWrite Index replicates a "reverse convertible" investment strategy in which a variable number of put options are written on the Dow Jones EURO STOXX 50 Index on a monthly basis. These are fully collateralized by an investment into the three month Euribor market whose amount in euro is equal to the index close on the day before the options are written plus the premium from selling the put options.
Each month the Dow Jones EURO STOXX 50 PutWrite Index rolls from the previously expiring put options contracts into the new one-month put options contracts. The number of put options is determined by the total amount of the collateralization. The money market investment, the option premium and the interest earned must cover the potential worst-case loss on the underlying options contracts.
Since inception on December 31, 1999, the Dow Jones EURO STOXX 50 PutWrite Index has gained 102.06%[1], whereas the Dow Jones EURO STOXX 50 Index is down -41.00% over the same time. Historical data for the Dow Jones EURO STOXX 50 PutWrite Index is available back to December 31, 1999.
The Dow Jones EURO STOXX 50 PutWrite Index is part of the Dow Jones STOXX Strategy Index family, which comprises the Dow Jones EURO STOXX 50 BuyWrite, Dow Jones STOXX EURO STOXX 50 Leveraged, Dow Jones EURO STOXX 50 Short, Dow Jones EURO STOXX 50 Double Short, Dow Jones STOXX 600 Double Short and Dow Jones STOXX 600 Supersector Short indexes, as well as the VSTOXX.
Further information on the Dow Jones STOXX Strategy Indexes is available at www.stoxx.com.
Source: STOXX