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ECB demands firm action on reform
September 27, 2010--The European Central Bank has warned eurozone governments that it will sound the alarm if they fail to agree reforms to Europe’s monetary union that are tough enough to prevent a future Greece-style crisis.
Jean-Claude Trichet, ECB president, set out on Monday a series of “five questions” the governments had to address in a system for surveying and imposing sanctions on countries that lose control of their finances
“If the responses were too timid in our opinion, we would make clearly the point,” Mr Trichet told the European parliament in Brussels.
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Source: FT.com
Monetary developments in the euro area: August 2010
September 27, 2010--The annual growth rate of M3 increased to 1.1% in August 2010, from 0.2% in July 2010.1 The three-month
average of the annual rates of change of M3 over the period June 2010 - August 2010 rose to 0.5%, from
0.1% in the period May 2010 - July 2010.
Regarding the main components of M3, the annual rate of growth of M1 decreased to 7.7% in August 2010,
from 8.1% in July. The annual rate of change of short-term deposits other than overnight deposits increased
to -4.5% in August, from -5.9% in the previous month. The annual rate of change of marketable instruments
increased to -5.1% in August, from -8.3% in July.
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Source: ECB
Lyxor launches 10 Global Sector ETFs on the London Stock Exchange
September 27, 2010--Lyxor Asset Management announced today that it has listed 10 Global Sector ETFs on the London Stock Exchange.
The 10 new Lyxor ETFs track MSCI World sectors and are:
Lyxor ETF MSCI World Consumer Discretionary TR
Lyxor ETF MSCI World Consumer Staples TR
Lyxor ETF MSCI World Energy TR
Lyxor ETF MSCI World Financials TR
Lyxor ETF MSCI World Health Care TR
Lyxor ETF MSCI World Industrials TR
Lyxor ETF MSCI World Information Technology TR
Lyxor ETF MSCI World Materials TR
Lyxor ETF MSCI World Telecommunication Services TR
Lyxor ETF MSCI World Utilities TR
They are listed in GBP and USD on the London Stock Exchange and have an annual Total Expense Ratio (TER) of 0.45%.
Source: Online News
STOXX Launches EURO STOXX 50 Investable Volatility Index - New Index Has Been Licensed To Serve As The Basis Of Exchange-Traded And OTC Products
September 27, 2010--STOXX Limited, a global index provider and creator of the leading European equity indices, today announced the launch of the EURO STOXX 50 Investable Volatility Index. The new index complements the existing VSTOXX index by measuring forward implied volatility in a replicable format that can serve as the basis of financial products.
The EURO STOXX 50 Investable Volatility Index was jointly developed with BofA Merrill Lynch and is owned, calculated and maintained by STOXX Limited. The index has been licensed to BofA Merrill Lynch to offer exchange-traded products and over-the-counter derivatives linked to the index.
“Volatility as an asset class has grown increasingly important among investors in recent years, especially as economic uncertainty continues to prevail in the world’s markets. The EURO STOXX 50 Investable Volatility Index measures this market sentiment in a manner that is well-suited for use in exchange-traded funds, structured products and other financial instruments,” said Hartmut Graf, chief executive officer, STOXX Limited. “Furthermore, the index offers the benefits of a transparent, rules-based methodology to those market participants seeking to include volatility in their portfolios.”
According to Eric Personne, Co-Head of Cross Asset Retail Sales and Head of Equity & Fund Structuring at BofA Merrill Lynch, the new index meets a growing demand from investors for an investable European volatility product: “BofA Merrill Lynch has for a number of years recognized the benefits of volatility as a diversifying asset in equity portfolios, and our clients are increasingly looking for a simple way to access this asset class. The EURO STOXX 50 Investable Volatility Index will allow investors to efficiently gain exposure to volatility through a liquid and transparent index product.
The EURO STOXX 50 Investable Volatility Index measures forward implied volatility - or the level of uncertainty and near-term expectations among investors in the Eurozone equity market. It is a rolling index that aims to capture a consistent three-month forward volatility exposure based on the implied volatility of EURO STOXX 50 Index options available on the international derivatives exchange Eurex. The index is calculated using the VSTOXX sub-indices representing the spot implied volatility of each option expiry date from one month out to one year.
The index is the latest addition to the VSTOXX index family that was first launched in April 2005 and later expanded in May 2010 to include 12 rolling sub-indices for each options expiry date. The VSTOXX is a key measure of market expectations of near and long-term volatility in the Eurozone based on the EURO STOXX 50 index options prices.
The EURO STOXX 50 Investable Volatility Index is available in total and excess return versions and calculated in euro. Daily history is available back to October 23, 2006.
Source: STOXX
UK institutions investing nearly third of portfolios in alternatives
September 27, 2010-- Institutional investors in the UK are now allocating nearly a third of their portfolios (28%) to alternative assets, up from 21% three years earlier, according to a survey by JP Morgan Asset Management (JPMAM).
JPMAM said the trend was likely to continue, with most respondents to the survey expecting to increase their alternatives allocations – at the expense of equities – to 31% over the next two to three years
Hedge funds accounted for the lion's share of alternative weightings, with an average allocation of 8.2%, up from 6.1% in 2007. Respondents said they aimed to boost this to an average of 9.2% over the next few years.
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Source: IP&E
EDHEC Risk Institute Survey Suggests that a Majority of European Pension Funds Have a “Blinkered View of their Risks”
September 27, 2010--In a new survey of 129 asset/liability management (ALM) specialists (pension funds, their advisers, regulators, and fund managers) representing assets under management of approximately €3 trillion, EDHEC Risk Institute finds, amongst other key conclusions, that the majority of respondents have a blinkered view of their risks: accounting risk (the volatility from the pension fund in the sponsor’s books) is managed by only 33% of respondents, and more than 50% ignore sponsor risk (the risk of a bankrupt sponsor leaving a pension fund with deficits).
In addition, pension funds generally do not assess the adequacy of their ALM, a failing that may lead to sub-optimal decisions’ being taken again and again.
According to Samuel Sender, Applied Research Manager at EDHEC Risk Institute and author of the “EDHEC Survey of the Asset and Liability Management Practices of European Pension Funds,” the first challenge for a pension fund involves meeting its liability by fully or partially hedging it away. The survey suggests that the liability-hedging portfolio (LHP) is modelled imprecisely at 45% of pension funds.
The second challenge for pension funds is to gain access to performance through optimal diversification within and between asset classes. Most respondents use market indices to define the investment benchmarks of investment funds, even though market indices are weighted by capitalisation and are known to be highly inefficient.
Additionally, even though they are the longest-term investors and are not subject to liquidity risk, pension funds invest relatively little in potentially illiquid assets and therefore do not benefit from the related risk premiums.
The last challenge for pension funds is to respect their minimum funding ratios by insuring risks away. To manage prudential constraints, 28% of respondents use risk-controlled investing (RCI) strategies, whereas 56% use economic/regulatory capital. Like RCI, economic capital relies on the measure of a risk budget and of a surplus. Economic capital, however, involves a discretionary, rather than rule-based, investment strategy, and possible delays.
view the EDHEC Survey of the Asset and Liability Management Practices of European Pension Funds
Source: EDHEC
FSA consults on improving auditors' reports on client assets
September 27, 2010--The Financial Services Authority (FSA) has today announced steps to improve the quality and consistency of auditors’ reports on client assets.
As part of its more intensive approach to supervision and enhanced focus on client assets, the FSA has reviewed the quality and consistency of auditors’ reports submitted in this regard.
A number of serious failings were identified – these were not localised to one or a limited number of auditors, but indicate a general deficiency by auditors in applying the FSA requirements on client assets, and a need to take steps to improve the quality of auditors’ reports.
The review identified the following material failings and weaknesses in a number of reports:
auditors providing ‘clean’ reports, despite the firm having committed significant breaches of the client asset rules;
auditors’ reports covering the wrong chapters of the Client Assets Sourcebook (CASS);
failure to provide the report on client assets because the auditor was not aware of, or did not understand, the reporting requirements;
auditors failing to provide adequate detail on the issues and exceptions identified in their report;
auditors submitting their reports several months late (in some instances, they were submitted years after the period they relate to); and
some auditors’ reports had ‘simple errors’, such as the auditor not signing or dating the report, quoting the wrong FSA firm reference number, or referring to another firm within the body of the report.
view CP10/20: Improving the auditor's report on client assets
Source: FSA.gov.uk
NASDAQ OMX Nordic Introduces Updated Volatility Guards To Protect Investors And Listed Companies
September 27, 2010--Stockholm, September 27, 2010 -NASDAQ OMX Group, Inc, announces that starting today it will introduce updated Volatility Guards on its Nordic and Baltic equity markets to protect investors and listed companies during times of volatile market conditions.
"Building on the previous common Nordic safeguard system, the updated Nordic Volatility Guards will meet the demands of modern high speed trading environments and advanced trading technologies. The introduction of Volatility Guards will further strengthen investor and listed company confidence in the price formation integrity of our Nordic and Baltic equities markets. One of the important lessons that we have learned from the recent market volatility and the financial crisis is the importance of a coordinated strategy to combat market instability, as well as the new complexity of modern, integrated and highly electronic markets", said Hans-Ole Jochumsen, President of NASDAQ OMX Nordic.
The NASDAQ OMX Nordic Volatility Guard is a trading pause and resumption process designed to restore an orderly market in a single security (shares and ETFs) listed on NASDAQ OMX Nordic and Baltic exchanges in Stockholm, Helsinki, Copenhagen, Iceland, Tallinn, Riga and Vilnius and the First North growth market.
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Source: NASDAQ OMX
Deutsche Börse: New ETF provider on Xetra
The new strategy ETF enables investors to participate for the first time in the performance of the C-QUADRAT European Equity Index, calculated by STOXX Ltd. The index tracks the daily price development of the futures contracts on the EURO STOXX 50 Index traded on Eurex multiplied by an exposure factor. The exposure factor is determined at 8 a.m. every day and can be -1, 0, 1, 1.5 or 2. It is determined using an indicator model with historical data. The product offering in Deutsche Börse’s XTF segment currently contains a total of 704 exchange-listed index funds, making it the largest offering of all European stock exchanges. This selection, together with an average monthly trading volume of €14 billion, makes Xetra Europe’s leading trading venue for ETFs. Independent Commission on Banking: publication of Issues Paper
Reform options related to the structure of banks
Separation of retail and investment banking
Narrow banking and limited purpose banking
Limits on proprietary trading and investing
Structural separability, including living wills and resolution schemes
Contingent capital
Structure-related surcharges
Reform options related to the structure of markets
Measures to reduce market concentration
Market infrastructure reform view the paper-Call for Evidence If you are looking for a particuliar article and can not find it, please feel free to contact us for assistace.
September 24, 2010-- The first exchange-traded index fund issued by C- QUADRAT has been tradable in Deutsche Börse’s XTF segment since Friday.
Asset class: Strategy index ETF
ISIN: LU0531943461
Total expense ratio: 0.70 percent
Distribution policy: non-distributing
Benchmark: C-QUADRAT European Equity Index
Source: Deutsche Börse
September 24, 2010--The Independent Commission on Banking publishes an Issues Paper today. The Commission has been asked to consider structural and related non-structural reforms to the UK banking sector to promote financial stability and competition, and to make recommendations to the Government by the end of September 2011.
The Issues Paper describes the Commission's initial approach to considering financial stability, competition and the other issues to which it must have regard under its Terms of Reference. The Paper then outlines a number of options for reform in broad terms, but emphasises that the list is not intended to be exhaustive and that the Commission has not moved towards any particular options at this stage. The options set out in the paper are:
Source: Independent Commission on Banking (ICB)
