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Deutsche Börse recognised again for its achievements in sustainability
October 20, 2011--Deutsche Börse has been confirmed for the seventh time in a row as a member of the Dow Jones Sustainability Indexes (DJSI World and DJSI Europe). The analysts gave particular recognition to the company for its group-wide compliance and risk management, corporate governance and active stakeholder engagement.
The Dow Jones Sustainability Indexes are based on an analysis of the economic, environmental and social criteria of the 2,500 largest companies in the world, as measured by free-float market capitalisation. General and industry-specific criteria are evaluated and only companies with a sustainability profile in the top ten percent are admitted to the indices.
In addition, Deutsche Börse has fully met the admission criteria for the FTSE4GOOD Index Series (FTSE4Good Global Index and FTSE4Good Europe Index) since 2009. This index series admits companies which meet strict ethical, social and environmental criteria. Since 2002, the company has also been represented on the EURO STOXX Sustainability Index and STOXX Europe Sustainability Index.
Moreover, the Carbon Disclosure Project (CDP) has confirmed Deutsche Börse’s renewed inclusion in the Carbon Disclosure Leadership Index (CDLI). The CDLI consists of 30 companies which provide particularly transparent and extensive data on their greenhouse gas emissions and climate strategy. Deutsche Börse is ranked 12th this year. The Carbon Disclosure Project (CDP) represents 551 institutional investors, which manage a fund volume totaling approximately US$71 trillion.
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Source: Deutsche Börse
The Spanish Stock Exchange trades the first ETF on the IBEX 35® DOUBLE LEVERAGE index
October 20, 2011--This new strategy domestic equities index started to be calculated and disseminated in real time on May 19th
The Spanish Stock Exchange today started trading a new exchange-traded fund issued by Lyxor Asset Management, called LYXOR ETF IBEX 35® DOBLE APALANCADO DIARIO.
This issue brings the number of ETFs listed on the Spanish stock exchange to 66, in this way increasing the number of assets linked to strategy indices in the Spanish market.
The IBEX 35® DOUBLE LEVERAGE offers double exposure to the daily return on the IBEX 35® NET RETURN, through the investment of an initial capital plus an equivalent loaned capital. A positive daily return on the IBEX 35® NET RETURN yields an also positive return, but double that amount, for the IBEX 35® DOUBLE LEVERAGE and viceversa.
In September the trading volume in the ETF segment of the Spanish Stock Exchange was €207million, up 11.8% year on year. The number of trades on the ETF segment in the same period was 4,058, up 3.9% from the same period last year.
Source: Bolsa De Madrid (BME)
Bats Merger With Chi-X Wins Provisional U.K. Antitrust Clearance
October 20, 2011--Bats Global Markets Inc.’s acquisition of Chi-X Europe Ltd., the region’s biggest alternative trading system, was provisionally cleared by U.K. antitrust regulators, who said sufficient competition remains.
Customers of both exchanges will still have the power to prevent the merged companies from raising trading fees by threatening to take their business to competitors, the U.K. Competition Commission said today.
“The customers of both these exchanges are in a particularly powerful position to combat any attempt by the merged company to raise trading fees, reduce service quality or otherwise exploit any loss of competition,” said Malcolm Nicholson, chairman of the regulator’s inquiry group.
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Source: Bloomberg BusinessWeek
DB Global Equity Index & ETF Research :European ETF Market Weekly Review: : Decreasing outflows as the European ETF investor contemplates market direction
October 20, 2011--Investment Outlook: Cash out flows in commodity and fixed income products
In the week that ended on October 14th, European domiciled ETPs registered net cash outflows of €360 million. Most of the European equity benchmarks ended higher than the previous week’s close: DAX, CAC, Euro Stoxx 50 & the FTSE 100 gained 5.1%, 4%, 3.8% and 3.1% respectively. This rally extended into precious metals as well with gold and silver prices [US$/oz] advancing by 2.8%and 3.7% respectively, week on week. ETF investors chose to stay on the sidelines and this was reflected in muted cash flows and a dip in on exchange turnover levels.
Commodity ETPs registered cash outflows of €283 million over the last week. Gold products attracted cash flows totaling €178 million, which were more than offset by outflows from ETFs tracking broad commodity indices [€336 million].YTD cash flows for commodity ETPs are now at €3.5 billion which represents 9% of 2010 year end assets.
Fixed Income ETFs registered cash outflows of €130 million over the last week. ETFs offering credit exposure and those tracking sovereign benchmarks, witnessed an exit of €130 million and €58 million over the last week. Money market ETFs collected a modest €62 million in weekly cash inflows.
Equity ETFs registered flat flows of €54 million in the past week taking their YTD flows tally to €14.4 billion. Within equities, ETFs tracking emerging market (EM) benchmarks registered cash outflows of €276 million in the past week. European developed country ETFs (mostly Germany) attracted inflows of close to €400 million. ETFs offering exposure to developed non-European countries lost €147 million in cash outflows over the last week. ETFs tracking European and Eurozone sector products registered positive flows on €98 million and €47 million respectively.
Assets Under Management (AUM): Moderate increase in assets
Total European ETP assets increased by 1.5% and ended the previous week at €227.5 billion. Equities gained over €4 billion to end the week with €137.5 billion in assets. Overall commodity assets ended the week with €44.1 billion with a weekly decrease of €231 million. ETFs tracking broad commodity indices lost close to €229 million in assets, week on week. Fixed income ETF assets declined by close to €500 million to end the week at €43.8 billion. ETFs with sovereign exposure lost €373 million over the past week.
Exchange Total Weekly Turnover: Equity and commodities pull down turnover levels
Weekly on-exchange ETP total turnover decreased by 17.7% to end the week at €12 billion. Equity turnover lost over 10% from its previous levels and ended the week at €9.5 billion. Commodity turnover almost halved from its previous levels and ended at €1.3 billion in weekly totals. Fixed Income turnover lost €216 million to reach €1.2 billion.
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Source: Christos Costandinides, European Head of ETF Research & Strategy, Deutsche Bank
EU quest to save euro raises fear of 'two-speed' Europe
October 20, 2011--In the scramble for tighter policing of Europe's economies to save the euro, the bloc faces breaking up into "in" and "out" nations of a two-speed EU -- and Britain risks dropping off the map altogether.
At a summit Sunday to chart an escape route from Europe's sovereign debt crisis, European Union leaders will look at ways of putting a single pilot in the seat to steer the 17 nations that share the troubled nearly 13-year-old currency back to economic health.
But any decision to tighten economic governance and budgetary discipline will leave 10 of the EU's 27 nations sitting on the outside, including four -- Britain, the Czech Republic, Denmark and Hungary -- which to date have refused to join the euro-club.
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Source: EUBuisness
Deutsche Börse AG publishes preliminary Q3/2011 figures
October 19, 2011-- On Wednesday, Deutsche Börse AG published its preliminary figures for the third quarter of 2011. Compared to the same period in the previous year sales revenue increased by some 20 percent to around €605 million (Q3/2010: €504.3 million).
In addition to sales revenue, the Group generated net interest income from banking business of approximately €20 million (Q3/2010: €15.8 million) and other operating income of also around €20 million (Q3/2010: €11.7 million). The other operating income includes a book gain from the sale of an equity investment in the amount of some €5 million.
At around €250 million, operating costs in the third quarter 2011 were up year-over-year (Q3/2010: 235.4 million). The increase is mainly attributable to around €25 million costs relating to the planned business combination with NYSE Euronext. Adjusted for merger related costs and restructuring expenses, operating costs amounted to approximately €225 million (Q3/2010 adjusted: €222.5 million).
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Source: Deutsche Börse
Regulation on Short Selling and Credit Default Swaps - Frequently asked questions
October 19, 2011--What is short selling?
Short selling is the sale of a security that the seller does not own, with the intention of buying back an identical security at a later point in time in order to be able to deliver the security. Short selling can be divided into two types:
1."Covered" short selling is where the seller has borrowed the securities, or made arrangements to ensure they can be borrowed, before the short sale.
2."Naked" or "uncovered" short selling is where the seller has not borrowed the securities at the time of the short sale, or ensured they can be borrowed.
Who engages in short selling and why?
Short selling is used by a variety of market participants including hedge funds, traditional fund managers such as pension funds and insurance companies, investment banks, market makers and individual investors. Short selling can be used for the following reasons:
for speculative purposes (e.g. to profit from the expected decline of a share price);
to hedge a long position (e.g. to limit losses in comparable shares in which a long position is held);
for arbitrage (e.g. to profit from the difference in price between two different but inter-related shares); and
for market making (e.g. to meet customer demand for shares which are not immediately available).
What is a Credit Default Swap?
A Credit Default Swap (CDS) is a derivative which is sometimes regarded as a form of insurance against the risk of credit default of a corporate or government (or sovereign) bond. In return for an annual premium, the buyer of a CDS is protected against the risk of default of the reference entity (stated in the contract) by the seller. If the reference entity defaults, the protection seller compensates the buyer for the cost of default.
In addition to short selling on cash markets, a net short position can also be achieved by the use of derivatives, including Credit Default Swaps (CDS). For example, if an investor buys a CDS without being exposed to the credit risk of the underlying bond issuer (a so-called "naked CDS"), he is expecting, and potentially gaining from, rising credit risk. This is equivalent to short selling the underlying bond.
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Source: EUROPA
EU to ban controversial 'naked' credit default swaps
October 19, 2011--The European Union decided late Tuesday to ban "naked" credit default swaps, a controversial financial instrument that traders use to bet on a country's failure to pay off debt.
EU states and the European parliament reached a deal after long negotiations to prohibit the highly speculative instrument partly blamed for exacerbating Europe's debt crisis.
A CDS serves as an insurance against the risk of default by a company or a government. In a "naked" CDS, the investors do not own the debt, betting they can purchase it later at a cheaper price if a default occurs.
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Source: EUbusiness
Lyxor embarks on ETF transparency drive
October 18, 2011-Lyxor, one of the largest provides of exchange traded funds in Europe, has moved to shed more light on the products it offers clients amid intensifying calls for transparency in the burgeoning ETF sector.
Lyxor, a wholly-owned subsidiary of Societe Generale and the second-largest provider of ETFs in Europe, has launched an online and paper document for its clients that sets out it commitment to" transparency, efficiency and liquidity", according to the group.
The ETF charter, commits the provider to, among other things, the daily publication of all directly owned securities, a list of counterparties to all derivatives entered into by Lyxor ETFs and disclosure of counterparty risk on each of them.
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Source: Financial News
European Parliament: Crack Down On Short Selling And Sovereign Debt Speculation
October 18, 2011--Lead MEPs and the Polish Presidency on Tuesday clinched a deal on the regulation beefing up standards and requirements for the practices of short selling and trading in credit default swaps (CDS), a financial product insuring against default. The rules will impose much more transparency, increase the powers of the EU's financial watchdog and virtually ban certain CDS trades, thereby making speculation on a country's default more difficult.
This is one of the key regulations pushed through by the Commission to tackle the financial crisis. It will strengthen rules on short selling and CDS trading, two practices accused of fuelling market volatility. CDS trades have been widely blamed for potentially aggravating Greece's troubles.
Limiting speculation on a country's default - a key win for Parliament
Parliament's negotiators obtained a ban on naked CDS trading (purchasing default insurance contracts without owning the related bonds), with the sole exception of an option for a national authority to lift the ban temporarily in cases where its sovereign debt market is no longer functioning properly. Even this possibility would be closely circumscribed, because the text specifies a limited number of indicators which could justify the regulator's action. Moreover, within 24 hours, the European Securities and Markets Authority (ESMA) would publish an opinion on its web site as to the utility of suspending the ban. A negative opinion from ESMA would have a political weight.
Welcoming the ban, rapporteur Pascal Canfin (Greens, FR) said: "The majority in Parliament composed of Greens, Socialists and the EPP fought hard to put an end to sovereign debt speculation in Europe. These rules also prove that the EU can act against speculation when the political will is there. Today's compromise will make it impossible for a hedge fund to buy Greek or Italian CDS without already owning the bonds of those countries, for the sole purpose of speculating on the country's default."
ESMA in the driving seat
MEPs from groups sponsoring the deal also managed to preserve the powers of the EU's financial markets watchdog, ESMA, in particular to restrict short selling, as an arbiter of a national authority's wish to introduce measures to address exceptional situations, and also to require other authorities to introduce exceptional measures to deal with difficult situations.
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Source: EUROPA
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