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DB-Synthetic Equity & Index Strategy-Europe-ETF Handbook Series-Currency hedged ETFs
July 17, 2013--Volatile FX markets create demand for hedged ETFs
2013 is the year of the hedged ETF
The range of currency hedged ETF listings has grown at an unprecedented pace in 2013 as investors demand new hedged exposures.
This is partly a response to increased FX volatility, which can offset investment gains (Figure 1). The availability of currency hedged ETFs gives investors increased choice: the ability to decide whether to overlay a currency view on top of a market view, or to isolate a pure market view irrespective of currency.
That investors value the opportunity to detach equity and currency views in a cross-border investment is illustrated by cashflows into hedged ETFs this year. By end June, total AUM in hedged ETPs globally was in excess of USD 21bn – more than a 100% increase over Dec-2012 AUM. 2013 has seen significant new issue activity in the hedged ETF space. Europe has seen 35 new listings. The issuance of new hedged ETFs in the US this year has been unprecedented: Issued and registered for issue funds would more than double the total number of hedged ETFs available to investors at the end of 2012.
Deutsche Bank's currency strategists believe that we remain in the early stages of a broad-based dollar strengthening and yen weakness. Further currency moves are likely to prompt greater demand for hedged products.
This report focuses on currency hedged ETFs but also touches on the growing range of other hedges available, including interest rates and equity volatility.
Costs and risks
Currency hedged ETFs typically have higher TERs than comparable unhedged ETFs. Any costs arising from hedging will be reflected in NAV. Hedging can result in foregone gains from a weaker home currency.
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Source: Deutsche Bank -Synthetic Equity & Index Strategy -Europe
DB-Synthetic Equity & Index Strategy-Europe-ETF Research-European Weekly ETF Market Review
July 17, 2013--The most recent issue of the European Weekly ETF Market Review is now available.
The report includes key statistics on the European ETF market as well as global ETF market highlights. For more detailed coverage please refer to the monthly report, issued in the first week following the end of each month.
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Source: Deutsche Bank -Synthetic Equity & Index Strategy -Europe
IMF-United Kingdom: 2013 Article IV Consultation
July 17, 2013--KEY ISSUES
The economy remains a long way from a strong and sustainable recovery. Despite
recent improvements in economic and financial conditions, recovery will be protracted.
Domestic deleveraging pressures remain, while external demand is still weak. Looking ahead, activity is expected to pick up only gradually. Risks remain to the downside, with the key risk being permanent damage to the economy’s productive potential.
A multi-pronged policy strategy is needed. Securing growth momentum and rebalancing the economy are vital to boost incomes and income expectations, ensure the sustainability of public debt, and support bank balance sheets.
A multi-pronged policy strategy is thus needed to address both demand and supply constraints that the economy faces. In particular:
view the IMF-United Kingdom: 2013 Article IV Consultation
Source: IMF
MiFID II and FTT face post-summer push
July 17, 2013--Ahead of their summer exit from Brussels, European policymakers have set themselves a timetable for finalising the European financial transaction tax (FTT) and market reform rules under MiFID II, starting in September.
A final text for new market rules under MiFID II will be sought by Christmas as the European Parliament and Council of the European Union negotiate technical and political details of the regulatory regime.
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Source: The Trade
ESMA consults on non-EU counterparties OTC derivatives
July 17, 2013--The European Securities and Markets Authority (ESMA) has launched a consultation on draft regulatory technical standards (RTS) aimed at implementing the provisions of the European Markets Infrastructure Regulation (EMIR) related to OTC derivative transactions by non-European Union (EU) counterparties in certain cases, and aimed at preventing attempts by non-EU counterparties to evade EMIR's provisions.
The Consultation Paper clarifies the conditions where EMIR's provisions regarding central clearing or risk mitigation techniques would apply to OTC derivatives by two non-EU counterparties which have a direct, substantial and foreseeable effect in the EU. The proposed RTS would only apply when two counterparties to the same transaction are established outside the EU, their jurisdictions’ rules are not considered equivalent to EMIR, and where one of the following conditions are met:
one of the two non-EU counterparties is guaranteed by an EU financial counterparty for at least €8bn of the gross notional amount of OTC derivatives entered into and for an amount of at least 5% of the OTC derivatives exposures of the EU financial counterparty; or
the two non-EU counterparties execute their transactions via their EU branches.
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Source: ESMA
ABN AMRO Clearing Bank, BATS Chi-X Europe, DTCC and NASDAQ OMX Sign Landmark Agreement to Create New CCP, EuroCCP N.V.
July 17, 2013--The owners of EMCF-ABN AMRO Clearing Bank and NASDAQ-along with BATS Chi-X Europe, are signatories to the agreement.
EMCF and EuroCCP share the same vision about the development of European cash equities clearing and, through initiatives such as pan-European clearing and four-way interoperability, have fostered competition in the market. As such the two firms are a good strategic fit.
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Source: EuroCCP
Forecasts for the UK economy: July 2013
July 17, 2013--HM Treasury Forecasts for the UK economy: a comparison of independent forecasts is now available.
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Source: HM Treasury
London ETF trading surges
July 16, 2013--Dealing volumes for exchange traded funds and products on the London Stock Exchange surged in the first half of the year, illustrating the growing importance of ETP trading to the role of the LSE.
The total value of ETP (funds and products) trading reported to the LSE jumped 37.2 per cent to £90.1bn in the first six months of 2013, compared with the same period last year.
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Source: FT.com
SIX Swiss Exchange-ETF Quarterly Statistics-2nd quarter 2013
July 16, 2013--Development of the ETF segment of SIX Swiss Exchange in the 2nd quarter of 2013
In the second quarter of 2013, SIX Swiss Exchange posted an ETF trading turnover of CHF 27.2 billion. With
CHF 11.5 billion, ETFs based on equities from developed regions made up approx. 43% of total turnover.
Commodities and precious metals contributed almost 30% of the total turnover for the ETF segment with
CHF 8.1 billion.
In the second quarter of 2013, the selection increased by another 23 ETFs. As at the end of Q2, the ETF segment of SIX Swiss Exchange contained 919 products which represents a new peak. At the end of June, ETFs from 19 providers were being traded, with 22 official market makers providing liquidity.
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Source: SIX Swiss Exchange
Lyxor introduces ETF efficiency index
Ranks many of its own products at top of market
July 16, 2013--Lyxor Research has developed an ETF Efficiency Indicator to compare and evaluate ETF construction and performance, with several of Lyxor's own products being ranked highly as a result.
The framework shows that investors can experience a range of outcomes for similar ETFs tracking the same index. The Lyxor ETF Efficiency Indicator takes into account performance relative to the benchmark, tracking error volatility and liquidity spread, to produce a "probability-based, easy-to-understand assessment of the likelihood of future performance against the benchmark index".
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Source: Global Investor Magazine
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