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Euro-Parliament bans 'naked' credit default swaps
November 16. 2011--The European parliament voted on Tuesday to ban "naked" credit default swaps, a controversial financial instrument used by traders to bet on the risk of a country failing to pay off debt.
"For the first time, Europe will ban a financial product used to speculate on a country's debt," Green group lawmaker Pascal Canfin, a leading negotiator for the legislation, told the parliament before the vote.
"This rule will make it impossible to buy CDS' for the sole purpose of speculating on a country's default," the French MEP said.
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Source: EUBusines
October 2011 Euro area annual inflation stable at 3.0% EU up to 3.4%
November 16, 2011--Euro area annual inflation stable at 3.0%
EU up to 3.4%
November 14, 2011--Euro area1 annual inflation was 3.0% in October 20112, unchanged compared with September. A year earlier the rate was 1.9%. Monthly inflation was 0.3% in October 2011.
EU3 annual inflation was 3.4% in October 2011, up from 3.3% in September. A year earlier the rate was 2.3%. Monthly inflation was 0.3% in October 2011.
These figures come from Eurostat, the statistical office of the European Union.
Inflation in the EU Member States
In October 2011, the lowest annual rates were observed in Sweden (1.1%), Ireland (1.5%) and Malta (2.4%), and the highest in the United Kingdom (5.0%), Estonia (4.7%) and Slovakia (4.6%). Compared with September 2011, annual inflation fell in nine Member States, remained stable in five and rose in thirteen.
The lowest 12-month averages4 up to October 2011 were registered in Ireland (0.8%), Sweden (1.6%), the Czech Republic and Slovenia (both 2.0%), and the highest in Romania (6.6%), Estonia (5.2%) and the United Kingdom (4.3%).
Euro area
The main components with the highest annual rates in October 2011 were transport (5.8%), housing (5.1%) and alcohol & tobacco (4.4%), while the lowest annual rates were observed for communications (-1.9%), recreation & culture (0.3%) and education (0.9%). Concerning the detailed sub-indices, fuels for transport (+0.52 percentage points), heating oil (+0.19), gas (+0.12) and electricity (+0.11) had the largest upward impacts on the headline rate, while telecommunications (-0.16), rents (-0.11) and vegetables (-0.10) had the biggest downward impacts.
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Source: Eurostat
Two new Source ETFs launched on Xetra
November 16, 2011- Two additional equity index funds issued by Source have been tradable on Xetra since Wednesday.
ETF name: MSCI Emerging Markets Source ETF
Asset class: equity index ETF
ISIN: DE000A1JM6G3
Total expense ratio: 0.45 percent
Distribution policy: non-distributing
Benchmark: MSCI Emerging Markets USD Net Total Return Index
ETF name: S&P 500 Source ETF
Asset class: equity index ETF
ISIN: DE000A1JM6F5
Total expense ratio: 0.20 percent
Distribution policy: non-distributing
Benchmark: S&P 500 Net Total Return Index
The MSCI Emerging Markets Source ETF enables investors to participate in the performance of the MSCI Emerging Markets USD Net Total Return Index. The index represents 85% of emerging market countries’ market capitalisation from various sectors, including energy, healthcare, industry and utilities. It currently tracks around 770 shares from the following countries: Brazil, Chile, China, Columbia, the Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Morocco, Mexico, Peru, the Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.
The S&P 500 Source ETF enables investors to participate in the performance of the S&P 500 Net Total Return Index. The index is weighted according to free float market capitalisation and tracks the performance of the 500 largest US stock corporations. The index is calculated on the basis of the reinvestment of dividends after the deduction of any tax.
The product offering in Deutsche Börse’s XTF segment currently comprises a total of 891 exchange-listed index funds, while average monthly trading volume stands at €16 billion.
Source: Deutsche Börse
Mario Monti to announce new Italian government
Prime minister designate has 'defined picture' of administration amid concern over possible role for Berlusconi ally
November 16, 2011--Mario Monti is grappling with the problem of whether to include Silvio Berlusconi's right-hand man, Gianni Letta, in his government as the price of securing the outgoing prime minister's support.
Italy's president, Giorgio Napolitano, asked the former European commissioner on Sunday to form a new government. Monti is due on Wednesday to tell the president whether it would enjoy credible support in parliament.
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Source: Guardian
ESMA details future rules for alternative investment fund managers
November 16, 2011--ESMA publishes today its final advice (ESMA/2011/379) on the detailed rules underlying the Alternative Investment Fund Managers Directive (AIFMD). The rules proposed by ESMA will establish a comprehen-sive framework for alternative investment funds, their managers and depositaries.
They are also designed to help achieve the AIFMD’s objective of increased transparency and tackling systemic risk, ultimately contributing to a more sound protection of investors. ESMA’s advice follows a 2010 request by the Com-mission, originally sent to ESMA’s predecessor, CESR, asking ESMA to deliver its final advice by 16 No-vember 2011.
Moody's blasts plan to curb ratings agencies - report
November 16, 2011--A European Union plan to impose tougher rules on credit rating agencies is "dangerous" as it is bound to limit the "quality and independence" of the rating process, the president and chief operating officer of Moody's Investor Services told Le Figaro newspaper.
"I see it as reflecting an obsession to challenge the rating process itself, and to hold rating agencies responsible for the European debt crisis," Michel Madelain said in an interview.
"These proposals cannot make investors confident again nor facilitate the access of companies and European states to credit markets," he added.
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Source: Reuters
Active ETFs to lose competitive advantage post-RDR
November 15, 2011--Swiss & Global is planning to launch a new range of "Smart" ETFs in the New Year which will be actively managed despite an industry-wide lack of conviction for such products.
The house view at Swiss & Global, a member of the GAM group, is that most passive ETFs which simply track indices give too much weighting to components that are unattractive and so do not offer investors good returns.
Stefan Angele, head of investment management at the company said, for example, that the eurobond index gives a large weighting to Italy because of its high levels of debt and, as investors have seen in recent weeks, this does not necessarily present an attractive investment proposition.
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Source: Portfolio Advisor
Risks in the financial system 2011-Swedish Financial Supervisory Authority- Finansinspektionen
November 15, 2011--Sweden has remained relatively stable in a turbulent period but during this time the risk level in the Swedish financial system has also risen. The uncertainty in surrounding markets has meant that banks’ liquidity risks and the impact of low interest rates on life insurance undertakings remain in focus. Finansinspektionen also believes there is a risk that the sale of complex products to consumers will increase.
Uncertainty in the global economy increased during 2011 and the situation in several European companies deteriorated. This development has meant that banks’ liquidity risks are still in focus. During this time, however, the Swedish banks have handled the turbulence better than many European banks thanks to their strong capitalisation and Sweden’s strong government finances. The current financial turbulence demonstrates that banks and authorities still have a need for tools that will help them handle this kind of uncertainty.
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Source: Finansinspektionen:
Antitrust: European Commission Makes Standard & Poor's Commitments To Abolish Fees For Use Of US International Securities Identification Numbers Binding
November 15, 2011-- - The European Commission has made legally binding commitments offered by Standard & Poor's (S&P) to abolish the licensing fees that banks pay for the use of US International Securities Identification Numbers (ISINs) within the European Economic Area (EEA)1.
Moreover, for direct users, information services providers (ISPs) and service bureaus (i.e. outsourced data management service providers), S&P committed to distribute the US ISIN record separately from other added value information, on a daily basis for USD15.000 per year, to be adjusted each year in line with inflation.
ISINs are key identifiers for securities, allocated and distributed by national numbering agencies (NNAs). They are essential for managing securities and reporting. The Commission had concerns that S&P, which is the only NNA for US ISINs, may have charged unfairly high prices for their use and distribution in Europe, in breach of EU antitrust rules on the abuse of a dominant market position (see MEMO/09/508). The Commission is satisfied that the commitments, revised in light of observations received in the course of a market test (see IP/11/571), are suitable to solve the competition concerns.
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Source: EUROPA
Frequently asked questions: legislative proposal on credit rating agencies (CRAs)
November 15, 2011--I. GENERAL CONTEXT AND APPLICABLE LAW
1. What is a credit rating?
A credit rating is an opinion issued by a specialised firm on the creditworthiness of an entity (e.g. an issuer of bonds) or a debt instrument (e.g. bonds or asset-backed securities). This opinion is based on research activity and presented according to a ranking system (e.g. AAA, BBB. For full list, please refer to the annex attached to this memo.)
2. What is a credit rating agency?
A credit rating agency (CRA) is a service provider specialised in the provision of credit ratings on a professional basis. The three biggest rating agencies are Standard & Poor's, Moody’s and Fitch. They cover approximately 95% of the world market. Smaller rating agencies make up the remaining part. For a list of all European CRAs already registered under the CRA Regulation, see:
http://www.esma.europa.eu/popup2.php?id=7692
3. Why do we need to regulate credit rating agencies?
CRAs have a major impact on today's financial markets, with rating actions being closely followed and impacting on investors, borrowers, issuers and governments: e.g. sovereign ratings play a crucial role for the rated country, since a downgrading has the immediate effect of making a country's borrowing more expensive. A downgrading also has a direct impact for example on the capital levels of a financial institution.
The financial crisis and recent developments in the context of the euro debt crisis have revealed serious weaknesses in the existing EU rules on credit ratings. In the run up to the financial crisis, CRAs failed to appreciate properly the risks inherent in more complicated financial instruments (especially structured financial products backed by risky subprime mortgages), issuing incorrect ratings that were far too high.
The market for structured finance products grew rapidly, and CRAs were happy to both advise the issuer on the design of these innovative structures and afterwards rate them. These conflicts of interest were poorly managed, contributing further to rating inflation.
The 2008 crisis highlighted how far many of these instruments had been overrated. The large majority of the ratings that large CRAs made on instruments linked to subprime in 2006 had to be downgraded between mid-2007 and mid-2008 causing substantial losses for investors.
In this context a number of legal proceedings have been launched in particular in the US by investors accusing CRAs of issuing misleading ratings.
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Source: Europa
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