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Breaking Down the UK Equity Market: Executable Liquidity, Dark Trading, High Frequency and Swaps
January 24, 2011--Executive Summary
The purpose of this study is to shed light on the composition of the UK equity market and thus demonstrate how much of the daily traded turnover is made up of meaningful, executable liquidity versus what is just ‘noise’ created by the re-reporting of already conducted trades.
We also show the levels of activity in the electronic dark market as well as amongst different market participants from hedge funds to asset managers to high frequency market makers. In addition we estimate how much UK equity trading is conducted using Contracts-for-Difference (CFDs), primarily to bypass stamp duty.
With turnover of €3,898 billion in 2010, the UK market is the largest market in Europe and represents approximately 21% of all European turnover. However only 65% of turnover represents meaningful and executable liquidity since 35% of reported turnover is made up of reprints of already-conducted trades. Although views of the market are most commonly discussed in terms of total turnover, it is the executable liquidity that is most relevant and points to the true size of the market. As such it should form the basis for sizing a market opportunity or considering regulatory change.
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Source: TABB Group
New db x-trackers ETF launched on Xetra
New ETF tracks S&P 500 Index with currency hedging for first time
January 21, 2011--An additional db x-trackers index fund from Deutsche Bank’s ETF offering has been tradable on Xetra since Thursday.
ETF name: db x-trackers S&P 500 (EUR) ETF
Asset class: equity index ETF
ISIN: LU0490619193
Total expense ratio: 0.30 percent
Distribution policy: non-distributing
Benchmark: S&P 500 Total Return Net-Index
Currency hedging: yes
The db x-trackers S&P 500 (EUR) ETF enables investors, for the first time, to invest in the performance of the S&P 500 Total Return Net Index while being hedged against exchange rate fluctuations between the euro and the US dollar. The S&P 500 Total Return Net Index is weighted according to free float market capitalisation and tracks the performance of the 500 largest US stock corporations. The index calculation takes all dividends and distributions into account after any tax deductions.
The product offering in Deutsche Börse’s XTF segment currently contains a total of 764 exchange-listed index funds, making it the largest offering of all European stock exchanges. This selection, together with an average monthly trading volume of around 13 billion euros, makes Xetra Europe’s leading trading venue for ETFs.
Source: Deutsche Börse
Emissions Trading: Q & As following the suspension of transactions in national ETS registries for at least one week from 19:00 CET on Wednesday 19 January 2011
January 21, 2011--Why has the Commission shut down the European carbon market?
The Commission has not shut down the European carbon market. The Commission has temporarily removed the possibility for account holders in national EU ETS registries to initiate certain transactions, notably external and internal transfers of allowances and Kyoto Protocol units.1
This implies that delivery of allowances cannot be executed. Since the European carbon market consists mainly of futures, where delivery does not take place immediately, this suspension of certain transactions will have a minimal effect on the overall market. It affects only the spot market, which accounted for less than a fifth of overall market activity in 2010.
Why did the Commission decide to suspend transactions in national EU ETS registries?
The Commission decided to suspend transactions in national registries following a series of cyber attacks. Three attacks have taken place since the beginning of the year and other registries are known to be vulnerable to similar attacks.
EU ETS legislation allows the Commission to suspend access to national registries if there is a security breach that threatens the integrity of the overall registries system.
In actual fact, the Commission has not suspended access completely; the normal cycle of allowance allocation, submission of verified emissions and surrender of allowances and Kyoto Protocol units for compliance purposes can continue.
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Source: Europa
EU to ban controversial China, India carbon credits trade
January 21, 2011-- Europe is to ban a highly lucrative trade in polluting rights obtained by European-based companies under a UN scheme to favour environmentally-friendly industrial investment in the likes of China or India.
The Kyoto Protocol's Clean Development Mechanism, an international tool in the fight to tame global warming, gives firms from industrialised countries incentives to invest in greenhouse gas reduction projects in developing countries, traditionally huge polluters.
In return, these investments generate rights to emit gases which are said to trade at 78 times the cost of destroying by-product gases, but the European Union will remove them from its Emissions Trading System registries as of May 1, 2013, the European Commission said Friday.
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Source: EUbusiness
Emissions trading: Commission welcomes vote to ban certain industrial gas credits
January 21, 2011--The European Commission welcomes today's vote by Member States to ban from use in the EU Emissions Trading System (EU ETS) emission offset credits from certain projects which destroy industrial gases. Essentially, the ban means that companies will be able to use these credits for 2012 compliance under the EU ETS until 30 April 2013, but not thereafter.
Connie Hedegaard, Commissioner for Climate Action, said: "I very much welcome the Committee's decision to back this Regulation, less than 5 months after I first proposed the idea. These projects raise concerns relating to their environmental integrity, value-for-money and geographical distribution. Not only are some of these credits of doubtful value, continuing to use them is also not in the EU's interest as doing so could discourage host countries from supporting cheaper and more direct action to cut these emissions. Our aim is not to reduce the number of credits available but to ensure the international carbon market is based on a better quality and distribution of credits."
The EU Climate Change Committee, which brings together representatives of the 27 Member States, voted for the ban today on the basis of a proposal tabled by the Commission last November (see MEMO/10/614).
The ban will apply to projects which destroy two industrial gases: trifluoromethane (HFC-23) produced as a by-product of chlorodifluoromethane (HCFC-22) production, and nitrous oxide (N2O) from adipic acid production. HFC-23 and N2O are both powerful greenhouse gases which contribute to climate change.
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Source: Europa
FSA confirms professional standards for investment advisers from 2013
January 20, 2011--The Financial Services Authority (FSA) has today confirmed that, after extensive consultation, retail investment advisers will need to hold a Statement of Professional Standing (SPS) if they want to give independent or restricted advice after January 2013.
The statement will provide customers with evidence that the adviser subscribes to a code of ethics, is qualified, and has kept their knowledge up to date.
The SPS will be issued by FSA accredited bodies which satisfy the following criteria:
they act in the public interest and further the development of the profession;
they carry out effective verification services;
they have appropriate systems and controls in place and provide evidence to us of continuing effectiveness; and
they cooperate with the FSA on an ongoing basis.
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Source: FSA.gov.uk
Government announces new steps to strengthen financial discipline in the public sector
January 20, 2011--The Government has today published further details of a new Finance Transformation Programme which will make financial implications inherent to every decision taken in the public sector. The Economic Secretary to the Treasury, Justine Greening, set out the foundations for this programme at the Government Finance Profession’s annual training event, and these are published today in Managing Taxpayers’ Money Wisely.
Following commitments in the Programme for Government and the Spending Review Framework, as well as consultation with stakeholders, Managing Taxpayers’ Money Wisely sets out four key areas of focus for the Finance Transformation Programme:
effective leadership, driving performance from the top;
a cost conscious culture so that every decision is built on informed financial assessment;
professionalism so that all public servants demonstrate financial awareness;
expert central functions – ensuring a coherent approach to financial management from the centre of government.
view report-Managing taxpayers' money wisely
Source: HM Treasury
SIX Swiss Exchange And Liquidnet Enter Agreement To Provide A Platform For The Execution Of Large Block Trades In European Securities
January 20, 2011--SIX Swiss Exchange and Liquidnet, the institutional equities marketplace, announced today that they have signed an agreement by which SIX Swiss Exchange members and Liquidnet’s buy side market participants will be able to execute large block trades efficiently in both Swiss and other European equities.
The liquidity in Liquidnet’s exclusive liquidity pool will be available to SIX Swiss Exchange members and Liquidnet members will benefit from the additional liquidity provided by SIX Swiss Exchange members. SIX Swiss Exchange members will be able to use their existing front-end trading systems to trade in approximately 3600 international securities covering initially Switzerland, UK, France, Germany and the Netherlands. This offering is expected to go live in the second quarter of 2011.
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Source: SIX Swiss Exchange, Liquidnet
EU disarray makes it easy for carbon credits hackers
January 20, 2011-- Europe boasts that its control of polluting rights makes it a leading light in moves to save the planet, but patchwork national systems for trading carbon credits have simply left hackers licking their lips.
As of 7:00 pm on Wednesday (1800 GMT), the EU Emissions Trading Scheme (ETS), which allows around 12,000 companies including huge multinationals to buy and sell rights to pump industrial gases into the atmosphere, now and in the future, has been shut down.
It won't re-open for a week after cyber criminals scuttled in and swiped two million "certificates" -- free polluting permits issued by national European Union governments that are currently worth some 14 euros each.
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Source: EUbusiness
Three new UBS ETFs launched on Xetra
January 19, 2011-- Since Wednesday three further ETFs issued by UBS ETFs plc have been tradable in Deutsche Börse’s XTF segment. They are based on the HFRX Global Hedge Fund Index.
ETF name: UBS ETFs plc HFRX Global Hedge Fund Index SF (EUR) A-acc
Asset class: equity index ETF
ISIN: IE00B54DDP56
Total expense ratio: 2.00 percent
Distribution policy: non-distributing
Benchmark: HFRX Global Hedge Fund Index
Trading currency: euro
ETF name: UBS ETFs plc HFRX Global Hedge Fund Index SF (USD) A-acc
Asset class: equity index ETF
ISIN: IE00B53PTF40
Total expense ratio: 2.00 percent
Distribution policy: non-distributing
Benchmark: HFRX Global Hedge Fund Index
Trading currency: US dollar
ETF name: UBS ETFs plc HFRX Global Hedge Fund Index SF (USD) A-acc
Asset class: equity index ETF
ISIN: IE00B55LFL81
Total expense ratio: 1.50 percent
Distribution policy: non-distributing
Benchmark: HFRX Global Hedge Fund Index
Trading currency: US dollar
These three UBS ETFs enable investors to participate in the performance of the HFRX Global Hedge Fund Index in the fund and trading currency euro and US dollar. The composition of the underlying index represents the entire hedge fund universe, comprising all available hedge fund strategies, including convertible arbitrage (exploiting differences in valuation between convertible bonds and equities), distressed securities (investing in companies in financial or operational difficulty) and equity hedge (simultaneously buying undervalued equities and selling overvalued equities). The different strategies are weighted to reflect the distribution of assets in the hedge fund sector. The UBS ETFs plc HFRX Global Hedge Fund Index SF – (USD) I-acc is aimed primarily at institutional investors.
The product offering in Deutsche Börse’s XTF segment currently contains a total of 763 exchange-listed index funds, making it the largest offering of all European stock exchanges. This selection, together with an average monthly trading volume of €13 billion, makes Xetra Europe’s leading trading venue for ETFs.
Source: Deutsche Börse
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