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DB Global Equity Index & ETF Research: European Weekly ETP Market Review:Do ETF trackers track? European equity ETF tracking error under the microscope
September 6, 2010-When investors purchase index products such as ETFs, they have a very set and, seemingly, simple goal in mind: they expect them to track their stated benchmark, as closely as possible. This very specific investor expectation often raises the product evaluation bar and can even create undue expectations. Therefore, analyzing and understanding the dynamics that drive this very fine tracking balance is close to many investors’ heart.
Tracking error (TE) is perhaps the most popular measure of how well an ETF is performing against its benchmark. And while less TE is generally better than more TE, it is important to consider that mistracking can come not only in the form of underperformance but also in the form of outperformance. [Relative to an ETF’s benchmark]. Thus, while it is important to measure TE, it is also critical to understand its sources.
The most evident and quantifiable source of mistracking comes from management fees but that information is typically readily available and therefore easier to evaluate. Hence, it is more important to look beneath the surface, decompose an ETFs return stream and detect other possible sources of mistracking as well as resultant risks and benefits. Such information can enable investors to make much more effective beta investment decisions as well as give them a more insightful perspective in how to evaluate an ETF product.
* Benchmark underperformance is more immediately accepted as an index product flaw, however, our study has revealed that outperformance can also disguise information which is equally important to consider. A set of ancillary investment activities, which always fall within an ETF’s investment mandate, as well as market driven events, can both benefit or potentially expose an ETF to risks. * Trackers are meant to track. Do they track? What drives ETF TE? How common of a problem is mistracking? These are only a few questions which are tackled in this report. To answer them, we have put European domiciled equity ETF TE under the microscope by looking at 59 ETFs, representing approximately 40% of the European equity ETF market as of August 20th 2010. We have chosen to look at equity ETFs as their benchmarks are typically subject to higher volatility [than fixed income ETFs] and hence studying them can reveal more information about TE and its sources. To optimize our selection sample we have picked both physically as well as synthetic replicated ETFs, funds by 12 different providers as well as ETFs tracking both developing and emerging market benchmarks. A full list of assumptions pertaining to our study can be found in the ‘Study Assumptions’ section of this report. A full list of ETFs included in the study can be found in Appendix A.
STOXX Launches Country Subindices For France, Italy And Spain
September 6, 2010--STOXX Limited, a global index provider and creator of the leading European equity indices, today announced the launch of the EURO STOXX 50 Subindex France, EURO STOXX 50 Subindex Italy and EURO STOXX 50 Subindex Spain. The new country indices are subsets of the flagship EURO STOXX 50 Index, representing all French, Italian and Spanish companies from the EURO STOXX 50 Index, respectively.
“The EURO STOXX 50 Index is Europe’s most favored equity index, and valued worldwide for its rules based methodology, transparency and liquidity,” said Hartmut Graf, chief executive officer, STOXX Ltd. “The new EURO STOXX 50 Country Subindices are derived from the EURO STOXX 50 Index, thus offering market participants the same benefits on a single country basis.”
The EURO STOXX 50 Country Subindices follow the same methodology as the EURO STOXX 50 Index. They are weighted by float-adjusted market capitalization, calculated in EUR and US dollar, and are available in price, gross and net return versions. Daily history is available back to December 31, 2000. The indices are reviewed annually with the EURO STOXX 50 Index.
The EURO STOXX 50 Index was launched on February 28, 1998. It represents 50 supersector leaders in the 12 euro zone countries Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, the Netherlands, Portugal and Spain. The index captures approximately 60% of the free-float market capitalization of the EURO STOXX TMI Index.
For more information on the EURO STOXX 50 Country Subindices please visit www.stoxx.com.
Source: STOXX
NYSE Euronext lists 2 new COMSTAGE ETFs based on the PSI 20 and PSI 20 Leverage on Euronext Lisbon
September 6, 2010--NYSE Euronext is pleased to announce that COMSTAGE ETF has listed 2 new ETFs based on the PSI 20 and PSI 20 Leverage on Euronext Lisbon today:
Listing date:06/09/2010
ETF name: ComStage ETF PSI 20
ETF ISIN:LU0444605215
ETF Symbol: PPP
TER: 0,50%
Listing date: 06/09/2010
ETF name:ComStage ETF PSI 20 Leverage
ETF ISIN:LU0444605306
ETF Symbol:PP2
TER:0,50%
Currently, these products are the only listed ETFs based on PSI 20 index range.
NYSE Euronext now has 535 listings of 487 ETFs based on more than 300 indices. So far this year, 48 ETFs have been listed on NYSE Euronext’s European markets.
Souyrce: NYSE Euronext
ECB publishes book on the payment system and the role of the Eurosystem in this field
September 6, 2010--The European Central Bank (ECB) has today published a book entitled “The payment system – payments, securities and derivatives, and the role of the Eurosystem”. It provides comprehensive insight into the handling of financial transactions and the functioning of the related financial market infrastructure – a core component of the financial system. It also explains the role and policies of the Eurosystem – which comprises the ECB and the 16 national central banks of the euro area – in this field.
The book is in three parts. The first provides insight into the market infrastructure of modern economies with a view to examining key concepts which have general validity and are thus applicable around the world. Emphasis is placed on the principles governing the functioning of the relevant systems and processes and the presentation of the underlying economic, business, legal, institutional, organisational and policy issues. The second concentrates on issues concerning the market infrastructure for the handling of euro-denominated payments, securities and derivatives, as well as the most important EU legislation. The third explains the operational, oversight and catalyst roles of the Eurosystem and the policies established by the Governing Council of the ECB in this field. It also considers the legal basis for the Eurosystem’s involvement and describes the transparent and cooperative approach adopted by the Eurosystem with a view to pursuing its public policy objectives while acting within a modern market economy environment.
view the Payments,
securities and derivatives, and the role
of the Eurosystem
Source: ECB
Thomson Reuters MiFID Monthly Market Share Reports For August 2010
September 6, 2010--Trading is fragmenting between exchanges and competing venues. But by how much and which venues? Find out in the summarised monthly reports.
view All European Equities Market Activities by Trade Type-August 2009 to August 2010
view the Main Trading Venues For all European Equities
Monthly summarised data on a per market and index basis
view Monthly summarised data on a per market and index basis-by region & country
Source: Thomson Reuters
EPEX Spot/EEX Power Derivatives: Power Trading Results In August
Septemeber 6, 2010--In the framework of their cooperation, the European
Energy Exchange AG (EEX) and the French Powernext SA integrated their Power Spot
and Derivatives Markets in 2009.
In August 2010, a total volume of 86.0 TWh was traded on the joint subsidiaries EPEX
Spot SE and EEX Power Derivatives (same month of the previous year: 81.2 TWh).
Power trading on the day-ahead auctions on EPEX Spot accounted for a total of
20,570,802 MWh and can be broken down as follows:
read more
Source: European Energy Exchange AG (EEX)
EEX trading results for Natural Gas and CO2 Emission Rights in
September 6, 2010--In August, the trading volume on the EEX Spot Market for Natural Gas amounted to 1,472,150 MWh (GASPOOL and NCG market areas) compared to 115,704 MWh in August 2009.
The volume included 772,790 MWh traded in the Within-Day Gas product which was launched on 1 March 2010. The Spot Market price for the day-ahead delivery of Natural Gas ranged between EUR 14.40 per MWh and EUR 19.25 per MWh.
The volumes on the Derivatives Market for Natural Gas (GASPOOL and NCG market areas) amounted to 1,176,450 MWh (August 2009: 473,850 MWh). On 31 August 2010, the open interest was 19,980,593 MWh. On 31 August 2010 Natural Gas prices for delivery in 2011 were fixed at EUR 20.67 per MWh (GASPOOL) and EUR 20.70 per MWh (NCG), respectively.
read more
Source: EEX
CESR publishes the feedback statement on the Investor Protection and Intermediaries part of the MiFID review
September 6, 2010--The CESR has publishes the feedback statement on the Investor Protection and Intermediaries part of the MiFID review.
view the feedback statement
Source: CESR
German banks try to fend off Basel III
September 6, 2010--Germany’s top 10 banks will have to raise as much as €105bn ($135bn) of fresh capital under a global regulatory overhaul, the country’s banking industry has warned, in a last-ditch effort to change tough new rules
The so-called Basel III rules would stymie the banks’ ability to function, curtail lending and undermine Europe’s biggest economy, said the Bundesverband deutscher Banken, representing private sector banks.
e warning on Monday came a day ahead of a meeting of the Basel Committee on Banking Supervision, which is putting the finishing touches to rules governing the capital and liquidity requirements for banks.
read more
Source: FT.com
Troubles mount for EU bid to re-draw economic government
September 6, 2010--Plans to radically re-draw cross-border economic government across Europe hit a stumbling block on Monday, 10 days from a deadline for concrete action set by European Union leaders.
The fourth meeting of EU president Herman Van Rompuy's "task force," charged with learning the lessons of the global financial crisis and the debt chaos it left in its wake across the eurozone, ended with "too many voices, too may views," in the words of one minister, Slovakia's Ivan Miklos.
"The discussions are stuck, there's a block," admitted a European diplomat after some four hours of talks. "It can't be ruled out that with signs of economic trouble up ahead, certain governments are less inclined than before to toughen budgetary discipline."
An "in-depth discussion on national fiscal frameworks, macro-economic surveillance and sanctions," according to Van Rompuy, resulted in an order for experts to "pursue their work" enabling him to complete his "oral" report to national leaders at a summit on September 16.
read more
Source: EUbusiness
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