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Spain- Financial System Stability Assessment
June 8, 2012--EXECUTIVE SUMMARY
1. The past four years have witnessed a crisis in the Spanish financial sector
unprecedented in its modern history. While external factors contributed to the turmoil, a domestic real estate boom-bust exposed weaknesses in the savings bank sector, shortcomings
in the policy and regulatory framework, and an over-reliance on wholesale funding.
2. A major and much-needed restructuring of the banking sector is now under way (Figure 1). This has involved an important reform of the savings banks’ legal framework
together with financial support from the state-owned recapitalization vehicle Fondo de Reestructuración Ordenada Bancaria (FROB). Substantial progress has been made in
addressing balance sheet weaknesses and recently announced measures show promise of further progress.
3. The team’s stress tests show that while the core of the system appears resilient, vulnerabilities remain. Although important caveats attach to the team’s assessment, including the extent to which lender forbearance—which the supervisory authorities have indicated they are monitoring closely—may have affected the underlying data and the risk of an even more severe downside shock than embodied in the analysis, the results suggest that:
view the IMF Country Report-Spain Financial System Stability Assessment
Source: IMF
Statistical release: UK Official holdings of international reserves May 2012
June 7, 2012--This monthly press notice shows details of movements in May in the UK's official holdings of international reserves, which consist of gold, foreign currency assets and International Monetary Fund assets.
These reserves are maintained primarily so that the UK Government’s reserves could be used to intervene to support Sterling, or the Bank of England’s reserves could be used to support the Bank’s monetary policy objectives. If such interventions were to occur, then they would be shown and explained in this release. The Background note at the end of this release explains more about the reserves, and about these statistics.
In summary this month's release shows that, in May 2012: No intervention operations were undertaken.
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Source: HM Trasury
NYSE Euronext Monthly ETF Activity Report-May 2012
June 7, 2012--Listings
In May, there were no new ETF listings. At the end of the month NYSE Euronext had 686 listings of 590 ETFs from 16 issuers.
Trading activity
The average daily value traded on-book last month was €267.3 million, down 34.4% vs. May 2011. The total value traded on-book amounted to €5.8 billion, up 3.9% month-on-month;
An average of 6,852 on-book trades (single-counted) was executed daily last month, a decrease of 15.1% vs May 2011, but up 0.1% month-on-month;
A total of €842.1 million was exchanged in block trades in May, up 2.7% from the €819.9 million in the previous month. Overall, block trade volume represented 14.3% of total regulated market ETF trading activity on NYSE Euronext.
Assets Under Management (AUM)
At the end of May 2012, the combined AUM of all ETFs listed on the NYSE Euronext European markets totalled €129.9 billion.
Market Quality
Last month, NYSE Euronext welcomed Citigroup Global Markets as a new Liquidity Provider; Citigroup now officially provides liquidity on two EasyETF products.
Our high-capacity, low-latency technology, combined with the flow from client orders, competitive market makers and our 23 first-class Liquidity Providers, contributed to a median spread for all listed ETFs of 31.15 bps.
view the NYSE Euronext Monthly ETF Activity Report-May 2012
Source: NYSE Euronext
Corruption and crisis linked in Europe, says world watchdog
June 7, 2012--Links between Europe's financial crisis and corruption can no longer be ignored, with Greece, Italy, Portugal and Spain doing the least against malpractice, Transparency International said Wednesday.
More accustomed to tracking corruption in poorer African or Asian states, the organisation said links between the private and public sector favoured abuse of power, misappropriation and fraud, while also undermining economic stability.
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Source: EUbusiness
Bankers warn Basel III leading to credit crunch
June 7, 2012--Top bankers warned Thursday that problems raising fresh capital were pushing European banks to cut back on lending so as to meet tough new regulations and urged a delay in putting them into force.
"De-leveraging in many European financial entities and the European economy at large has gone too far," said Charles Dallara, director general of the bank lobby Institute of International Finance.
Under pending international Basel III rules and European directives, banks must significantly increase their capital-to-assets ratios to strengthen their ability to withstand future financial crises.
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Source: EUbusiness
ESMA publishes the responses to the call for evidence on transaction reporting
June 7, 2012--ESMA has published the responses to the call for evidence on transaction reporting.
view responses
Source: ESMA
UK and overseas financial services regulators need the power to stop carbon trading mis selling, says CISI
The City of London is at risk of serious reputational damage owing to the FSA's lack of power in regulating carbon trading, says the Chartered Institute for Securities & Investment (CISI).
In the June edition of its member magazine Securities & Investment Review, the CISI says the carbon trading industry is opening a window on potential problems in the wholesale markets in the form of lack of proper management of carbon trading back offices, and of cyber-crime.
Bulletin boards and internet chat rooms offer carbon trading and other ‘green’ investments that promise balm to worthy consciences, keen to help prevent global warming and save humanity, while offering annualised returns of up to 500%.
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Source: Chartered Institute for Securities & Investment (CISI)
London Stock Exchange-May 2012
June 7, 2012--London Stock Exchange Group (LSE.L) sits at the heart of the world's financial community, offering international business unrivalled access to Europe's capital markets.
In May a total of 34.1 million trades were carried out across the Group’s electronic equity order books, an increase of 10 per cent on April 2012. They had a combined value of £170.2 billion (€211.7 billion), up 10 per cent on last month (£154.3 billion).[1]
The average daily number of trades across the Group’s electronic equity order books was 1.5 million, a 7 per cent decrease on last month. The average daily value traded was £7.7 billion, down 6 per cent on last month.
UK Equities Order Book
During the month, the average daily value traded on the UK order book was £4.3 billion (€5.3 billion), down 6 per cent month-on-month; the average daily number of trades decreased 4 per cent to 759,666.
The LSE’s share of trading in the total UK order book for May was 63.6 per cent.
Derivatives On the Group’s derivatives platforms, the average daily number of contracts traded was 377,667, up 17 per cent compared with April.
Exchange Traded Products
The average daily value traded in Exchange Traded Products across the Group’s order books in May was up 9 per cent month-on-month to £432 million (€538 million). The average daily number of trades was up 1 per cent at 16,083.
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Source: London Stock Exchange
ETFs set to keep on trucking in Europe by Deborah Fuhr
June 6, 2012--More financial advisers and institutional investors in the US are using exchange traded funds (ETFs) in a greater variety of ways, paving the road ahead for the younger European market.
A new study in the US found the use of ETFs has evolved into a segment of advisers and asset managers who provide dedicated ETF advice on portfolio construction and implementation guidance, in outsourced managed accounts or defined contribution model portfolios.
This segment has grown significantly since 2008 when the Guide to ETF Investment Managers listed 25 managers and $5.8 billion (£4.6 billion) in total assets under management. Today, it is tracking more than 200 ETF strategies from more than 100 managers who represent $46 billion in assets, marking an 800% increase in assets.
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Source: City Wire
EDHEC-Risk Research Reveals Benefits of Diversifying Equity Portfolios with Volatility Derivatives
June 6, 2012--Following the collapse of worldwide equity markets in 2008, and the subsequent rally in long positions in equity volatility, interest has grown in the possible use of equity volatility derivatives as diversifiers for traditional and alternative portfolios.
In a new publication entitled “The Benefits of Volatility Derivatives in Equity Portfolio Management,” produced with the support of Eurex Exchange, EDHEC-Risk researchers show how volatility derivatives can be used to optimise access to the equity risk premium in a controlled volatility risk environment, and to engineer equity portfolios with attractive downside-risk properties.
The key findings of the research are as follows:
A long volatility position shows a strongly negative correlation with respect to the underlying equity portfolio and adding a long volatility exposure to an equity portfolio results in a substantial improvement of the risk-adjusted performance of the portfolio.
The benefits of the long volatility exposure are found to be the strongest in market downturns, where they are needed the most.
The benefits of adding volatility exposure to equity portfolios are also found to be robust with respect to the introduction of trading costs associated with rolling over volatility derivatives contracts.
view the EDHEC-Risk Publication Benefits of Volatility Derivatives in Equity Portfolio Management paper
Source: EDHEC-Risk
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