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Europe lashes out at credit rating agencies
July 6, 2011-- Europe launched a barrage of fire at credit ratings agencies Wednesday after efforts to resolve the eurozone's debt crisis were plunged into new turmoil by a severe downgrade of Portugal's debt.
European Union officials and ministers reacted furiously after Moody's Investors Service downgraded Portuguese debt to junk status and warned that Lisbon may need a second bailout.
Europeans were particularly angry over the timing of the ratings cut, just as Portugal begins to implement tough austerity measures in return for a 78-billion-euro EU-IMF bailout agreed in April and as the eurozone struggles to craft a new rescue package for Greece.
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Source: EUbusiness
HSBC launches ‘physical’ Russian equity ETF
July 6, 2011--HSBC has launched the first European exchange traded fund to physically track the Russian stock market, the HSBC MSCI Russia capped ETF.
The launch follows a stream of critical comments from regulators about “synthetic” ETFs which use derivatives but HSBC has made an effort to distinguish itself from its rivals by offering a “physical” product which will buy the constituents of the benchmark which it is tracking, the MSCI Russia capped total return net index.
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Source: FT.com
ETFs Face U.K. Serious Fraud Office Review
July 5, 2011--U.K. fraud prosecutors are reviewing how exchange-traded funds are marketed and whether they have the proper tools to prosecute any wrongdoing in the industry, a person directly involved with the probe said.
The Serious Fraud Office, which prosecutes white collar crime, hired a consultant to interview bankers and lawyers to determine whether there is a risk that sales of the products may involve criminal conduct in the future. The Financial Services Authority and the Bank of England’s Financial Policy Committee have warned of a lack of transparency in the ETF market.
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Source: Bloomberg
Unscheduled free float adjustment in MDAX
Adjustment for Demag Cranes AG as of 8 July 2011
July 5, 2011--Deutsche Börse has announced an unscheduled adjustment to the free float of Demag Cranes AG in MDAX. Due to the takeover by Terex Industrial Holding AG, the free float of Demag Cranes AG altered by more than 10 percentage points.
According to the guideline to the equity indices the company’s free float will be reduced from the current 100 percent to 27.19 percent.
The adjustment will become effective next Friday, 8 July 2011.
The next regular review of the Deutsche Börse blue-chip indices will be on 5 September 2011.
Source: Deutsche Börse
STOXX Launches Index Basket to Cover Major World Markets
July 5, 2011--STOXX Limited, the market-moving provider of innovative, tradable and global index concepts, today introduced the iSTOXX World Select Index, an index basket which combines the well-known EURO STOXX 50, STOXX USA 50 and STOXX Japan 50 indices to access three major world markets through one index. The new index is designed to underlie exchange-traded funds and other investable products, as well as to be used to assess the performance of global equity portfolios.
“Derivatives and structured products that offer global equity exposure often combine different indices for the Euro zone, U.S. and Japanese markets,” said Hartmut Graf, chief executive officer, STOXX Limited. “With the launch of the iSTOXX World Select Index we offer market participants an innovative index basket to access three blue-chip indices for major, global markets. The added advantage of this basket is that the underlying indices follow the same consistent and transparent methodology, and are therefore highly compatible.”
The iSTOXX World Select Index consists of three components: the EURO STOXX 50, STOXX USA 50 and STOXX Japan 50 indices, thus providing a representation of three major world market’s highly liquid blue-chips. Within the basket, the exposure is equally distributed among the three underlying indices. As a result, the over-influence of U.S. companies that typically occurs in global indices that are weighted by market capitalization, is reduced. Within each underlying index, the respective components are weighted according to their free float market capitalization. The composition of the underlying indices is reviewed annually in September, and rebalancing takes place quarterly in March, June, September and December.
The iSTOXX World Select Index is rebalanced quarterly and weights of the three components are brought back to equal allocations. This takes place at the same time of the underlying index rebalancing. The composition of the index is not reviewed, as the basket is always comprised of the same three indices. In the case that other indices might need to be included, additional index version would be made available.
The new index is available in price, gross and net return versions in Euro, and price and net return versions in U.S. Dollar Daily history is available back to December 28, 2001.
Please visit www.stoxx.com for further information.
Source: STOXX
Parliament decides stance on derivatives, short selling, investor compensation
July 5, 2011--Three proposals making derivatives trading less fragile, reducing speculative practices linked to short selling and reducing the time for the setting up of investor compensation schemes received Parliament's backing on Tuesday ahead of negotiations with Member States.
With very significant differences expected between the position of the EP and, once adopted, that of Member States for the directive on investor compensation schemes, MEPs chose to close the first reading procedure today. In the case of the two texts on derivatives and short selling, however, the plenary vote was only used to collect significant majorities which should strengthen the hand of MEP negotiators in their ongoing talks with Member States. The final vote on investor compensation schemes was 566 votes in favour, 17 against and 88 abstentions. The amended proposals on derivatives and short selling were both adopted by a show of hands but the final votes on these two were postponed. For all three texts, the EP shares co-decision powers with Member States.
Compensation schemes capitalised faster and "bad advice" also grounds for a claim
On the compensation schemes legislation, Parliament voted to add protection to private investors against fraudulent and defaulting investment firms, particularly by adding "bad advice" as a case for claiming compensation. The rules would also halve the time allowed for fully capitalising national compensation schemes (5 years instead of 10) and enable local authorities and NGOs, as well as private individuals, to file compensation claims. The adopted text also imposes more EU-level harmonisation for the design of the schemes and imposes larger financial contributions on investment firms taking the biggest risks. However, MEPs did not follow the Economic Affairs Committee's suggestion of increasing the guaranteed minimum compensation to €100,000.
"I believe in the free market and the right to choose. But there must also be the right to protection. The ordinary man-in-the-street investor needs to know he is protected", rapporteur Olle Schmidt (ALDE, SV) told the House.
Clamping down on naked short selling and credit default swap trading
The report on short selling contains two major innovations. Firstly, it requires traders to settle their uncovered short positions by the end of each trading day. Secondly, it restricts purchases of credit default swap (CDS) contracts to owners of related government bonds or stakes whose performance is dependent on these bonds: for example, Greek bank bonds have a strong correlation to Greek sovereign bonds. MEPs also inserted a requirement that short sale transactions be reported less often. However, they beefed up the rules to ensure that fines are dissuasive.
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Source: European Parliament
UK official holdings of international reserves, June 2011
July 5, 2011--This monthly press notice shows details of movements in June 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 June 2011:
No intervention operations were undertaken.
Movements in reserves and levels of reserves were as follows:
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Source: HM Treasury
One in ten insurers fail European stress tests
July 5, 2011--Nearly 10 per cent of European insurers would need to raise fresh capital in the event of a severe economic shock accompanied by a plunge in share prices, tumbling interest rates, and a property market crash, the new European insurance regulator Eiopa said yesterday.
In that scenario, 13 insurers would rack up a collective €4.4bn (£4bn) shortfall relative to the minimum capital level required under the EU's proposed Solvency II capital rules, the watchdog said, as it revealed results of a stress test aimed at gauging the sector's financial resilience. The Solvency II rules, however, could change before they are implemented in 2013.
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Source: independent.co.uk
Unscheduled free float adjustment in DAX
Adjustment for MAN SE as of 7 July 2011
July 4, 2011--Deutsche Börse has announced an unscheduled adjustment to the free float of MAN SE in DAX. Due to the takeover by VW AG, the free float of MAN AG altered by more than 10 percentage points.
According to the guideline to the equity indices the company’s free float will thus be reduced from the current 69.47 percent to 44.10 percent.
The adjustment will become effective next Thursday, 7 July 2011.
The next regular review of the Deutsche Börse blue-chip indices will be on 5 September 2011.
Source: Deutsche Börse
Deutsche Börse has acquired a stake in currency options platform Digital Vega
Part of Deutsche Börse’s strategic objective to extend its positioning in off-exchange market segments/ Digital Vega software provides pre-trade price transparency in foreign exchange (FX) options for institutional investors, corporates and other FX market participants
June 4, 2011--Deutsche Börse AG today announced that it has acquired a minority stake in Digital Vega, a London based company, which provides electronic FX technology solutions to buy- and sell-side firms.
Digital Vega has developed a unique software solution, which broadcasts request for quotes (RFQ) from buy-side asset managers, corporates, hedge funds and regional banks for FX option transactions to sell-side liquidity providers. The service is supported by seven of the largest FX banks, with a further five banks looking to provide pricing services in the near future.
With this acquisition, Deutsche Börse is increasing its positioning in the provision of pre-trade price transparency in the derivatives area for institutional investors and taking an initial footprint in the FX derivatives space. An investment agreement was signed last week, whereby Deutsche Börse will pay a US dollar amount in the single digit million range.
“This investment in Digital Vega highlights our recognition of the changing industry landscape and aims to support the G20 commitments for improving the integrity and safety of the OTC markets. As a regulated exchange and clearinghouse we provide transparent trading, processing and clearing services. The software and processes provided by Digital Vega are an important element to achieve the regulator’s goal of higher transparency,” said Peter Reitz, Managing Director of Deutsche Börse and member of the Eurex Executive Board.
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Source: Deutsche Börse
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