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budget: MEPs want more flexibility and policy debate
September 22, 2010--Parliament wants more flexibility within the EU budget to meet current and future needs. In a resolution passed on Wednesday, it urges the Council to enter into policy negotiations on its budget proposal for 2007-2013. The current (March 2010) proposal is deemed too rigid to provide sufficient funding to meet new challenges, including those arising out of the Lisbon Treaty.
The Multiannual Financial Framework (MFF) sets annual ceilings for commitments and payments by category of expenditure. It had to be revised to bring it into line with the Lisbon Treaty, but a draft interim report by Reimer Böge (EPP, DE), approved today, criticises the Council proposal as "purely technical", and "insufficient for Parliament to give its consent."
"The Council proposal does not add the resources necessary to deliver initiatives that were not foreseen when the current MFF was adopted in 2006. The most obvious ones are the new priorities included in the Lisbon Treaty, like the external action service, climate change, energy, civil protection, sports and space. But even before the addition of these new priorities, the annual budgets could only be agreed by exhausting the existing margins", said Mr Böge, adding that "for the coming years, the remaining margins under the ceilings of the framework are estimated to be negligible."
To meet current and future needs, Parliament would like to see wider margins and reserves built into the framework. This means more flexibility to make changes within and between budget headings.
Parliament also calls on the Council and the Commission to consider rejigging the budget by establishing "positive" and "negative" priorities, bearing in mind the EU's added value. Commission and Council should finally come up with the long-awaited mid-term review (due in 2009), of all the aspects of EU spending and resources, so that a real policy debate can be held on future priorities.
The Böge report was approved with 445 votes in favour, 39 against and 18 abstentions.
Part 2 of Adopted text
Source: European Parliament
ETF Landscape: European STOXX 600 Sector ETF Net Flows, week ending week ending 17-Sep-10
September 22, 2010--Last week saw US$118.4 Mn net outflows from STOXX Europe 600 sector ETFs. The largest sector ETF net outflows last week were in Food & Beverage with US$74.6 Mn and Insurance with US$43.7 Mn while Banks experienced net inflows of US$54.4 Mn.
Year-to-date, STOXX Europe 600 sector ETFs have seen US$34.1 Mn net inflows. Banks sector ETFs have seen the largest net inflows with US$228.5 Mn, followed by Media with US$203.2 Mn while Food & Beverage has experienced the largest net outflows of US$148.3 Mn YTD.
The US$9.0 Bn AUM invested in the ETFs is greater than the US$3.3 Bn open interest in the sector futures. The ETF AUM is greater than the open interest in the corresponding futures contract in all 19 sectors.
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Source: Global ETF Research & Implementation Strategy Team, BlackRock
First ETF at WSE
September 22, 2010--The first Exchange Traded Fund - Lyxor ETF WIG20 – has started trading at the Warsaw Stock Exchange. Lyxor ETF WIG20 opens a new category of WSE-listed instruments and expands investment possibilities available to market participants.
WSE President Ludwik Sobolewski commented. „We strive to provide investors with the broadest possible range of instruments allowing them to pursue diverse investment strategies. ETFs are a popular and frequently used financial instrument on foreign exchanges.” he said.
Lyxor ETF WIG20 tracks the performance of the WIG20. The instrument allows investors to “purchase” the WSE’s twenty largest and most liquid stocks with one simple order. The experience of foreign markets with ETFs have shown that narrow tracking errors, low costs and the possibility to buy and sell the instruments at any moment during the trading session fuel the interest of retail and institutional investors in Exchange Traded Funds.
The Lyxor ETF on WIG20 is available in the continuous trading system and subject to the same trading rules as equities. The ticker for the instrument is ETFW20L. Two independent market makers are providing liquidity for the instrument: Societe Generale Corporate and Investment Banking and UniCredit Corporate and Investment Banking.
Source: Polish Market Online
EU Financial supervision package keeps national supervisors in the front line
September 22, 2010--Rules passed today which create three new European Supervisory Authorities (ESAs) and a European Systemic Risk Board (ESRB) keep national regulators at the fore whilst ensuring a common rule book to prevent future economic crises, Kay Swinburne MEP, European Conservatives and Reformists group economics spokesman, said today.
The package's adoption ends 18 months of negotiations that stemmed from the De Larosiere report prepared for the commission in 2009.
The ESAs, which will be up and running by January 2011, have the ability to mediate disputes between national supervisors, to guide national regulators, and to monitor how national authorities implement EU legislation. The ESRB will put in place a common set of indicators to permit fair and open comparisons between cross-border financial institutions and send out appropriate warnings.
Speaking after the vote, Dr Swinburne said:
"This deal ensures that cross-border markets can be supervised by cross-border institutions who coordinate the work of national regulators. It provides the markets with a common rule book and greater certainty over the key questions of who will regulate what and where.
"Instead of handing over the keys to the City of London, this deal places it in a kind of European Neighbourhood Watch programme. Peer oversight will provide us all with loudhailer warnings when there are macro systemic or particular risks.
"This package must be seen as the high-water mark of European financial supervision and not the first step towards handing over these powers to Brussels.
"With this new certainty the financial markets can begin to look to the future."
Source: Online News
Financial Supervision Package - Frequently Asked Questions
September 22, 2010--1. Why is reform of financial supervision needed?
Following the onset of the crisis, Commission President Barroso summoned a high level group of experts in financial services in October 2008 to advise on the future of European financial regulation and supervision.
Chaired by Jacques de Larosière, former President of the European Bank for Reconstruction and Development, the group identified some serious shortcomings in the existing system of financial supervision in Europe. There is a Single Market, they said, and financial institutions operate across borders, but supervision remains mostly at national level, uneven and often uncoordinated.
They concluded that a stronger financial sector in the EU in the future needed to have convergence between Member States on technical rules, and a mechanism for ensuring agreement and co-ordination between national supervisors of the same cross-border institution or in colleges of supervisors. A rapid and effective mechanism to ensure consistent application of rules would also be necessary, as well as co-ordinated decision-making in some areas in emergency situations. They concluded the current advisory financial services committees was not sufficiently equipped to carry out these functions.
Based on this report, the European Commission brought forward proposals in September 2009 (see IP/09/1347) On 22 September 2010, the European Parliament – following agreement by all Member States - voted through a new supervisory framework for financial regulation in Europe that will come into force in January 2011.
2. What is the current situation?
There are already three financial services committees at EU level, but in contrast to the new European Supervisory Authorities (ESAs) that will now be established, these committees have advisory powers and can only issue non-binding guidelines and recommendations. National supervisors of cross-border groups must co-operate within colleges of supervisors, but if they cannot agree, there is no mechanism to resolve issues. Many technical rules are determined at Member State level, and there is considerable variation between Member States. Even where rules are harmonised, application can be inconsistent. This fragmented supervision undermines the Single Market, imposes extra costs for financial institutions, and increases the likelihood of failure of financial institutions with potentially additional costs for taxpayers.
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Source: Europa
September 2010: Flash Consumer Confidence Indicator
September 22, 2010--In September 2010, the DG ECFIN flash estimate of the consumer confidence indicator remained broadly unchanged in the euro area (-11.2 after -11.4 in August) and dropped slightly in the EU (down to -11.8 from -11.2 in August).
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Source: Europa
3L3 Committees welcome European Parliament landmark vote to reform
September 22, 2010--The Level 3 Committees, CESR, CEBS and CEIOPS (“the 3L3 Committees”) welcome
today’s landmark decision of the European Parliament to endorse the EU financial supervision reform package.
The political agreement reached over the past weeks between Member States and EU legislators allows Europe to move into a new era of financial supervision. The new
European System of Financial Supervisors (ESFS) integrates the three European Supervisory Authorities (ESAs) and the European Systemic Risk Board (ESRB), establishing the key pillars of a new institutional infrastructure which aims to ensure a
stable, reliable and robust Single Market for financial services.
The European Parliament vote also launches the 3L3 Committees’ institutional transformation. This is a complex process, requiring the existing Committees (CESR, CEBS and CEIOPS) to evolve quickly into European Authorities by January 2011. It will entail significant enhancements to current competencies and the implementation of support structures for the new tasks ahead. This work is now well underway in each of the Committees, in close cooperation with the European Commission.
The 3L3 Committees are more than ever committed to enhance the existing EU financial supervisory architecture. This involves, amongst other things, upgrading the quality and consistency of supervision; reinforcing the oversight of cross-border groups; strengthening risk assessments and stress testing; establishing a single European rule book applicable to all financial institutions in the Single Market, which will lead to a high degree of convergence in the field of supervision; as well as an efficient dialogue with all market participants, investors and consumers of financial services; and a commitment to strengthen cooperation among the three ESAs.
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Source: CESR
Xetra Offers Liquid Trading of Deutsche Bank AG Subscription Rights
Continuous trading from 22 – 30 September and final auction on 1 October
September 22, 2010-- The subscription rights for the new shares from Deutsche Bank AG’s capital increase have been admitted to trading on the regulated market on the Frankfurt Stock Exchange (FWB) and will be tradable from 22 September until 1 October 2010, inclusive. The subscription rights (ISIN: DE000A1E8H87) will be traded in continuous trading on Xetra until 30 September, and in a final auction on their last trading day, 1 October.
The minimum order size on Xetra is 100 subscription rights. The pan-European network Xetra provides 250 banks and securities trading companies in 19 countries with direct access to trading in subscription rights – in the same infrastructure as they can trade the related underlings and derivatives. On the trading floor of the Frankfurt Stock Exchange the subscription rights are tradable in all order sizes (from one unit upwards) in one auction a day.
With its monitored and regulated infrastructure, Deutsche Börse offers efficient and liquid trading, arbitrage opportunities between the cash and derivative markets, as well as efficient risk management through clearing via the central counterparty.
Source: Deutsche Börse
Law firm introduces new fund structure for Jersey
September 22, 2010--A new fund structure for Jersey has been devised by Jersey-based law firm Crill Canavan and fund administrator Herald Fund Services.
The Standard Form Expert Fund, the first fund of which has been approved by the Jersey Financial Services Commission, aims to cut the time and cost involved in setting up funds domiciled in Jersey by about 70 per cent.
The new structure makes use of Jersey’s Incorporated Cell Company legislation and works in a similar way to an umbrella fund.
Individual investment funds are established as separate incorporated cells and an investment manager is appointed to each fund. Different investment managers can be appointed to each of the separate cells within the ICC.
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Source: ETF Express
Source Offers a Passive Alternative To Hedge Fund Investment
September 21, 2010--Source now offers a truly passive approach to alternative
investment, with the launch of two ETFs tracking the Merrill Lynch Factor Model strategy. This strategy, developed by BofA Merrill Lynch, aims to generate similar performance to
funds-of-funds without investing directly in hedge funds.
Instead, the Model uses a portfolio
of six liquid and well-known market indices to replicate the global performance of hedge
funds. The BofAML Hedge Fund Factor Source ETFs are available in US Dollars and Euro and will be listed on the London Stock Exchange and Xetra respectively. They are highly
liquid, UCITS III compliant and have a 0.7% per annum management fee.
Although the performance potential of hedge funds is attractive, there are still strong deterrents for some investors: lack of liquidity, lower transparency and single manager risk. The Merrill Lynch Factor Model was designed to generate similar returns to the broad hedge fund universe from a transparent portfolio of well-known market indices. Historically, the model has achieved returns comparable to the HFRI Fund Weighted Composite Index, a recognised benchmark for the hedge fund industry.
Commenting on the launch, Source CEO Ted Hood said: “Some investors love the idea of hedge fund exposure but find the potential illiquidity problematic. The new Source ETFs aim to provide broad, generic exposure to the hedge fund industry, without investing in individual hedge funds. These ETFs could be particularly interesting as part of a core-satellite approach, in combination with some top class individual managers, or as a liquid cash management solution for funds-of-funds.” These products are the latest additions to Source’s “alternative” range1,, which aims to complement Source’s existing range of exchange-traded equity and commodity products.
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Source: Source ETF
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