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Traders in limbo as short-selling rules bite
November 12, 2012--It was a particularly harrowing Halloween week for some dealers and trading firms this year. If the impact of the Hurricane Sandy wasn't enough to contend with, the first pan-European legislation on short selling also came into effect.
The rules, enforced on November 1, require much tougher disclosures around short positions and clamp down on “naked” shorting – the selling of shares without arranging to borrow them first.
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Source: Financial News
Environment MEPs discuss future of EU emissions trading
November 12, 2012--Progress towards a global deal to curb aviation emissions and proposals to delay the release of greenhouse gas allowances in the Emissions Trading System (ETS) dominated a special meeting of the Environment Committee on Monday.
Aviation emissions
Climate Action Commissioner Connie Hedegaard relayed a new Commission proposal to "stop the clock" on enforcing international aspects of aviation in EU emissions trading. The proposed suspension of obligations was to recognise recent progress at the International Civil Aviation Organization (ICAO) and look towards a global deal to be reached by autumn 2013.
Some MEPs questioned whether the level of progress in ICAO merited a suspension of the rules. In the debate and in a press statement, Environment Committee Chair Matthias Groote (S&D, DE) and Peter Liese (EPP, DE), rapporteur for the legislation adopted in 2008, cautiously welcomed the progress.
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Source: European Parliament
EU Races to Meet Basel III Deadline .
November 12, 2012--European Union legislators are ramping up meetings beginning Monday in an effort to agree on legislation governing banks' capital standards before the end of this year.
Last week, the U.S. Federal Reserve said that due to the wide range of views and volume of comment received on Basel III—a global effort to significantly increase the size of capital reserves held by banks in the aftermath of the financial crisis—the U.S. won't be able to meet the deadline of Jan. 1, 2013 to implement the rules.
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Source: Wall Street Journal
BNY Mellon to Launch Europe Brokerage Business
November 12, 2012--BNY Mellon (BK) is launching a new European agency brokerage, a move into the sales and trading arena that places the custody bank in competition with bulge-bracket investment banks at the most competitive and tumultuous time for the industry in recent decades.
BNY Mellon, which has $27.1 trillion in assets under custody, registered BNY Mellon Capital Markets Emea with the UK Financial Services Authority last month, Financial News has learnt.
The U.S. bank has "received permission from the Financial Services Authority to provide services in the U.K. and European Community through BNY Mellon Capital Markets Emea Limited," according to a spokesman.
The new business is registered to London's Canary Wharf, and will "provide services on an agent broker basis across a broad range of equity and fixed-income securities."
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Source: BNY Mellon
Europe bracing for all-out ETF price war
November 11, 2012--A full-blown price war between exchange traded fund providers is on its way in Europe, according to experts and an Ignites Europe poll.
Despite claims from Lyxor that its decision to lower fees will not spark a battle, the firm’s announcement this month that it has reduced charges across seven of its largest ETFs could do just that.
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Source: FT.com
DB-Synthetic Equity & Index Strategy-Europe-Monthly ETF Market Review-October sees strong cash flows into Europe
November 9, 2012--Global Summary
Global ETF industry assets were flat in October and closed the month at $1.59 trillion (YTD +22%) while the European ETF industry ended the month at €242.3 billion (YTD +16.85%).
Global cash flows took a pause with monthly flows of $10.7 billion in October as compared to $39.3 billion recorded in September. Market activity in Europe declined in October, with ETF turnover levels registering a 6.9% drop over September levels.
Regional cash flow summary
Cash flow activity dips in the US
US domiciled ETFs put up a weak show in October with monthly cash flows totaling a very modest $1.4 billion. This represents the lowest monthly cash flows in 2012 for US domiciled ETFs.
Fixed income ETFs registered cash inflows of $5.5 billion while commodity ETVs collected $1.8 billion over the same period. Equity ETFs witnessed cash outflows of $4.2 billion which is in sharp contrast to the $31.1 billion of cash flows received during the month of the September.
Notwithstanding the outflows in October, equities continue to remain the top asset class for YTD cash flows with $74.6 billion, trailed by fixed income ETFs and commodity ETVs with $51 billion and $9.4 billion, respectively.
Equity led strong cash flow performance in Asia
ETFs domiciled in Asia received cash flows of $5.6 billion in October, second only to those received in May which totaled $13.4 billion. A large part ($2.3 billion) of the October accrued to a single ETF which is listed on Shenzhen Stock Exchange and tracks Chinese equities.
New product issuances also brought in cash flows of close to $1 billion in October. Asia domiciled products have attracted close to $30 billion in YTD cash flows, making 2012 one of the strongest years in terms of cash flows.
Healthy cash flows across the board in Europe
October has emerged as the strongest cash flow month in 2012 for Europe domiciled ETFs, which attracted close to €2.9 billion in new money in the month. Equity ETFs, Fixed Income ETFs and commodity ETPs received €1.3 billion, €1.4 billion and €1 billion in monthly cash flows, respectively. Fixed Income ETFs had a very good month as compared to September where monthly cash flows totaled a very modest €242 million.
Among European ETPs, equities have the lions’ share of assets (60%), followed by commodities (20%) and fixed income (19%). However, YTD cash flows into the three major asset classes have been comparable, ranging between €6.3 billion to €6.5 billion.
European ETF industry growth attribution
The European ETF industry has achieved a growth of 16.8% (€ terms) in 2012 as of the end of October. Although this is less than what the industry has exhibited over comparable periods in the past, this may still be interpreted positively given the difficult markets conditions and the weak economic outlook which have persisted in the region through most of the year.
As we move to a more granular level and analyze changes by asset class, the picture for growth in European ETFs becomes more diverse. Equity, which is the dominant asset class, owes a large portion of its growth to price movements (11.4%) and a much smaller (4.6%) to cash flows. This is in contrast to fixed income ETFs, which have seen 14.9% of their asset growth come from cash flows and 4.5% through price increases. Commodities present a more balanced picture with cash flows and price growth accounting for 8.8% and 8.1%, respectively. For the European ETF market overall, price increases have contributed 9.4% and cash flows 7.4% towards asset growth year to date.
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Source: Deutsche Bank - Synthetic Equity & Index Strategy - Europe
Risks In The Financial System 2012-Finansinspektionen
November 9, 2012--The situation on financial markets has improved since last year, but a deepened sovereign debt crisis in Europe is still the greatest risk to the Swedish financial system.
A low interest rate environment in Sweden has been putting pressure on life insurance undertakings for some time. Finansinspektionen (FI) now sees a risk of consumers ending up in a squeeze when life insurance undertakings review their business models. FI is also concerned about developments on the financial advice market, where customers are at risk of making unsuitable investments.
During 2012, unease on financial markets has subsided slightly, mainly due to central bank measures but the underlying structural problems remain in some of the European countries.
Swedish banks are well-capitalised today with robust resilience. At the same time, they are reliant on market funding, making the banking system vulnerable in the event of the debt crisis intensifying. However, the banks have built up buffers and Swedish authorities have tools to manage poorer conditions.
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Source: Finansinspektionen
Newsflash: new daily record in the Eurex KOSPI Product on 7 November 2012
November 8, 2012--The Eurex KOSPI Product traded 352,562 contracts on 7 November 2012-a new daily record since the June 2012 introduction of the 500,000 KRW contract multiplier.
The trading value of this daily record equals 121 billion Korean Won.
Average daily volume year-to-date: 139,431 contracts Average daily volume 2011: 71,454 contracts
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Source: Eurex
Guinness Asset Management Challenges the ETF Market with a Low Cost Share Class for its Actively Managed Global Equity Income Fund
November 8, 2012--Guinness Global Equity Income Fund extends its lower cost, clean fee share class at a TER of 0.74% to all investments over £100,000
The 22 month old Fund reached $25 million after its initial book build earlier this year which offers qualifying investors an actively managed fund at exceptionally low cost for a limited period
The Fund's retail share class (AMC: 1.5%) was 3rd in the IMA Global Equity Income sector in 2011, and is now 3.8% ahead of the MSCI World Index since launch
Guinness Asset Management is making its "Z" share class - with an AMC of 0.25% and a maximum TER of 0.74% - available to investors in its Global Equity Income Fund.
Tim Guinness, CEO and manager of the US$280m Guinness Global Energy Fund, commented, "I believe strongly in charging fairly for managing investments and that is what we are setting out to do. It saddens me to see that the City I remember has changed and that fees for raising capital or managing investments have risen to such an extent over recent years."
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Source: Guinness Asset Management
Hedge Funds Forced to Reveal most Shorted Stocks by FSA
November 7, 2012--HEDGE funds have had their short selling activities made public for the first time, as regulations enacted this week expose some of the massive bets made by firms involved in the secretive industry.
The Financial Services Authority will now force all funds to declare any short position that represents more than 0.5 per cent of a target company’s total share capital. The data is collected every 24 hours and published on a daily basis.
In a short sale, traders borrow shares in the hope that share prices will fall, enabling them to buy them back at a lower price and profit from the difference.
Yesterday’s release showed BlackRock, the world’s biggest hedge fund, dominating the top 10 biggest short positions with bets against firms such as Ocado and Mears.
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Source: City AM
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