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European Senior Fixed-Income Investor Survey Q410
Cautious Optimism for Corporates and Banks Amid Persistent Sovereign Gloom and Contagion Concerns
December 8, 2010--Highlights
Fitch Ratings’ latest quarterly survey of fixed?income investors across Europe
signalled rising optimism regarding the outlook for corporates and banks. However, similarly to Q3, investors also felt contagion concerns from sovereign debt problems were the greatest risk to credit market stability, as borne out by recent events. Conducted from early October until 5 November 2010, the survey preceded Ireland’s request for financial assistance from the EU and IMF on 19 November, which has negatively impacted market access for banks in peripheral economies.
The survey responses show that austerity measures in progress by the euro zone and UK governments are overall regarded as well balanced, although a significant
minority are concerned that cuts are too severe and may backfire, especially in the UK. The Q4 results remained broadly consistent with the last quarter, with sovereigns remaining the asset class least favoured by investors (36%), facing the greatest refinancing challenge (51%) and the area where most investors expect further deterioration in credit fundamentals (52%).
Respondents’ concern over bank refinancing subsided and there was a clear bias in anticipation of improving credit fundamentals, despite the interconnectedness between sovereign credit risk and the financial system. Banks as an asset class saw the highest expectations for increasing debt issuance.
ETF Landscape: European STOXX 600 Sector ETF Net Flows week ending 03-Dec-10
December 8, 2010--For the week ending 03 December 2010, there were US$358.0 Mn net outflows from STOXX Europe 600 sector ETFs. The largest sector ETF net outflows last week were in basic resources with US$174.5 Mn and banks with US$118.3 Mn while insurance experienced net inflows of US$145.2 Mn.
Year-to-date, STOXX Europe 600 sector ETFs have seen US$118.7 Mn net inflows. Banks sector ETFs have seen the largest net inflows with US$103.9 Mn, followed by personal and household goods with US$72.2 Mn while food and beverage has experienced the largest net outflows of US$175.8 Mn YTD.
As of 03 December 2010, there is US$9.6 Bn AUM invested in the STOXX sector ETFs which is more than double the US$4.6 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in 17 out of 19 sectors.
Strengthening sanctions for violations of EU financial services rules: the way forward
December 8, 2010-The European Commission adopted today a communication setting out possible ways to reinforce sanctioning regimes in the EU's financial services sector. Today, rules vary greatly between Member States and, arguably, often do not serve as an effective deterrent. Based on a review of national sanctioning regimes for violations of national rules transposing some of the most important EU directives relating to financial services, the Communication presents areas for improvement and suggests possible EU actions in order to achieve greater convergence and efficiency of these regimes. Interested stakeholders can send their contributions up until 19 February 2011.
Internal Market and Services Commissioner Michel Barnier said: "If a financial institution does not abide by EU rules in the area of financial services, traders and executives must realise that they won't get away with it and that the response will be tough, wherever in Europe the violation occurs. Now, too often, that is not the case. Today's Communication sets out a way forward to ensure that sanctioning powers will be stronger and more convergent across Europe so we can better protect citizens' interests."
The Communication is based on a cross-sectoral stocktaking exercise of the coherence, equivalence and actual use of sanctioning powers in the Member States carried out by the three Committees of Supervisors (Committee of European Banking Supervisors - CEBS, Committee of European Insurance and Occupational Pensions Supervisors - CEIOPS and Committee of European Securities Regulators - CESR).1 The exercise covered some of the most important Directives applicable in the financial sector including securities, banking and insurance legislation.
Markets In Financial Instruments Directive (MiFID): Frequently Asked Questions
December 8, 2010--1. What is MiFID?
MiFID is the Markets in Financial Instruments Directive – or Directive 2004/39/EC1. It replaces the Investment Services Directive (ISD) which was adopted in 1993. It was agreed unanimously by the Member States and by a strong Parliamentary majority, and is a cornerstone of the EU's regulation of financial markets. It seeks to improve the competitiveness of EU financial markets by creating a genuine single market for investment services and activities, and to ensure a high degree of harmonised protection for investors in financial instruments, such as shares, bonds, derivatives and various structured products. Greater competition across Europe in the provision of services to investors and between trading venues is intended to contribute to deeper, more integrated and liquid financial markets. It also has the potential of driving down costs for issuers, delivering better and cheaper services for investors, and contributing to economic growth and job creation in Europe.
2. Why is MiFID being reviewed only three years after entry into force?
In keeping with its intended objective, MiFID has contributed to a more competitive and integrated EU financial market. However, recent events and market developments have demonstrated weaknesses in some of the underlying principles of MiFID, as well as highlighted areas needing reinforcement or revision. Such measures are necessary in order to bolster investor confidence and achieve all of MiFID's original objectives. Ensuring a more robust framework of regulation will also serve to address the more complex market reality we are now faced with, a reality which is characterised by increasing diversity in financial instruments and methods of trading. Similar discussions are taking place elsewhere in the world.
3. Did MiFID contribute to the crisis?
The financial crisis was caused by multiple factors. The original objectives of MiFID were to improve the resilience of EU financial markets through free competition and high levels of market transparency and investor protection. To some extent these have been achieved. However, the full effects of MiFID are yet to play out. While it is true that the Directive has not entirely delivered on its objectives, it is mistaken to assign all developments, such as the growth of trading in newer trading functionalities (for example high frequency trading) and dark environments (for example all dark pools – see question 6) to MiFID. These have more to do with technological developments.
Financial services: improving European rules for a more robust framework for all financial actors and instruments
December 8, 2010--As part of its work in creating a more transparent and stable financial system, the European Commission has today launched a consultation on the review of the Markets in Financial Instruments Directive (MiFID). In force since November 2007 (see IP/07/1625), MiFID provides a comprehensive framework for investment firms offering services in relation to financial instruments, as well as rules to protect investors. It allows trading venues and investment firms to operate freely across the EU.
It has increased competition and integration in EU financial markets, and led to significant improvements in investor protection. However, rapid technological advances, the complexity and changing make-up of financial markets and the lessons of the financial crisis call for an extensive review targeted at addressing all of the areas where shortcomings have been revealed or improvements are needed. The purpose of this consultation is to gather input from all stakeholders in order to inform the legislative proposals due in the spring of 2011. The deadline for replies is 2 February 2011.
Internal Market and Services Commissioner Michel Barnier said: "The original aim of this key piece of European legislation, MiFID, was to create a robust common regulatory framework for Europe's securities markets. In many ways, it has been a success. But the world has changed. And we all know the current framework needs improvement. My objective is to ensure that the revision of MiFID will lead to a stronger regulatory framework, adapted to the new trends and players on financial markets. And a framework which leads to greater market transparency and efficiency, as well as more protection for investors."
Russell Investments Expands Global Index Business With Senior European Appointment
December 8, 2010--Russell Indexes, a leading global equity index provider, has appointed Scott Stark to the role of Director of Russell Indexes Europe. This new role continues the rapid expansion of Russell’s European index business and will focus on its global, regional and country indices as both performance benchmarks and as the basis for financial products including exchange traded funds (ETFs), structured products and index funds.
Scott has extensive European index experience covering major asset classes including equity, fixed income, currency and commodities. Scott previously worked for Markit where he was in charge of European index business development, and EuroMTS where he was CEO of their index division and responsible for the launch of a series of pan-European bond indices. These indices currently have over €1 trillion in benchmarked assets. Prior to EuroMTS, Scott was CEO of STOXX Ltd where he was key in establishing the EuroSTOXX 50 index as Europe’s leading index for financial products.
Europe takes aim at 'scandalous' commodities speculation
December 8, 2010--Europe's markets watchdog called Wednesday for a crackdown on the "scandalous hyper-speculation" in commodities causing swings in food prices.
European internal markets commissioner Michel Barnier announced an arsenal of proposals to "impose transparency" on the commodities sector.
view the Preventing abuse in wholesale energy markets - guide
Amundi ETF launches two new products on NYSE Euronext Paris tracking emerging market equities and bonds
December 8, 2010--Amundi ETF continues to enhance its product range with the listing of two new products tracking emerging market equity and bond indices on NYSE Euronext Paris.
Emerging markets span more than 30 countries across four regions (Asia, Latin America, Emerging Europe and Africa). Over the last few years, these economies have experienced higher growth than developed countries, including during crisis periods, whilst showing increasingly strong fundamentals (improved balance sheets, reduction in default risk…). Exposure to emerging equity and bond markets is becoming essential for many investors as demonstrated by the 10 billion US dollars of net inflows registered since the beginning of the year*.
In line with its competitive pricing policy, Amundi ETF launches two products with a TER significantly lower than similar competitor products**:
An ETF tracking the MSCI Emerging Markets Index®
This ETF seeks to replicate the performance of the MSCI Emerging Markets Index whether the trend is rising or falling. This index, considered as a flagship benchmark for many investors, allows exposure to around 20 emerging countries and covers approximately 85% of the market capitalisation in each country. This product is offered with a TER of only 0.45% vs an average of 0.69% for similar competitor products2.
NYSE Euronext European ETF activity highlights for November 2010
December 7, 2010--At the end of November, NYSE Euronext had 567 listings of 497 ETFs from 16 issuers. These ETFs cover more than 300 indices exposed to an extended range of assets and strategies (Equity, Fixed Income, Commodities, Short, Leverage, etc.).
The number of ETFs increased by 10.7% YTD compared to the end of 2009.
At the end of November, 100 new ETF listings had occured in 2010, while 9 ETFs had been the subject of mergers by absorption and 21 ETFs had been delisted.
Both the daily average number of trades and daily average turnover figures again showed impressive YOY growth in November 2010:
On average, there were 9 603 trades on a daily basis, representing an increase of 19.5% versus November 2009.
Daily average turnover increased from €336.3 million in November 2009 to €443.1 million in November 2010, or 31.8%.
At the end of November, the combined Assets Under Management of all ETFs listed on the NYSE Euronext European markets totaled €129.1 billion, an increase of 28.4% from the €100.5 billion at the end of November 2009.
The combination of the flow of 23 first-class Liquidity Providers, competitive market makers, client orders and our high capacity, low latency technology contributed to a median spread of 26.8 bps of all listed ETFs, down from 30.8 bps in November 2009.
At the end of November 2010, NYSE Euronext’s Liquidity Providers program featured 23 Liquidity Providers that had a total of 1118 liquidity provision agreements, providing firm bid/ask quotes with minimum size and maximum spread requirements for the entire trading session on all ETFs.
Visit www.euronext.com/etf for more info.
European Commission Pushing For “Bad Policy” On Short Selling And Credit Default Swaps, Warns London MEP
December 7, 2010--A leaked report from the European Commission has highlighted the “efficiency of CDS markets in sovereign debt” and praises credit default swaps for keeping national bond yields low. The leaked document even says that CDS has benefited Greece by providing it with added liquidity.
This paper is at odds with the European Commission's current draft regulation which imposes restrictions and reporting requirements on sovereign CDS.
Commenting on the leaked reported Syed Kamall, Conservative MEP for London who is the key ECR Group negotiator in the European Parliament for the Short Selling Regulation, is “concerned that the Commission has not considered the findings of its own paper when drafting its Regulation on Short Selling and Credit Default Swaps” and even worse, the Commission never made its research public.
Syed Kamall MEP for London said:
"It is hardly surprising that the European Commission kept a tight lid on this paper - it goes against its own legislation. In a nutshell, the paper says that restrictions on credit default swaps of sovereign bonds is bad policy. Yet this is exactly what the Commission regulation is pushing for.
