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Speculators do not drive commodity prices: OECD study reinforces previous EDHEC-Risk research results
June 17, 2010--In a comprehensive research report entitled 'Speculation and Financial Fund Activity', the Organisation for Economic Co-operation and Development (OECD) has reinforced the conclusion of previous EDHEC-Risk position papers, notably "Oil Prices: the True Role of Speculation", November 2008, and "Has There Been Excessive Speculation in the US Oil Futures Markets?", November 2009, that there is no link between the increase in financial investment in commodities and the volatility of the prices of the physical commodities themselves.
At a time when numerous politicians are attempting to pin the blame on participants in the financial industry for all the current ills, this contribution is welcome. As an academic research centre, EDHEC-Risk Institute has long maintained that the questions of regulation should be based not on emotion or populism but on facts.
view the Speculation and Financial Fund Activity report-OECD
view the Oil Prices: the True Role of Speculation EDHEC report
view the Has There Been Excessive Speculation in the US Oil Futures Markets? EDHEC-Risk paper
Source: EDHEC
Should regulators judge culture?
June 17, 2010--Unacceptable culture within firms was a major contributor to the financial crisis and so regulators should play a greater role in judging how culture drives firms’ behaviour and impacts on society as a whole, according to the chief executive of the Financial Services Authority (FSA).
In a speech at the Chartered Institute for Securities & Investment (CISI) conference in London entitled, ‘Do regulators have a role to play in judging culture and ethics?’, Hector Sants discussed his personal view that many of the causes of the financial crisis were deeply rooted in behavioural issues.
He commented that ‘even after all the supposed lessons learned exercises, we are still seeing some decisions by management in major firms that we would judge not to be prudent’ and, as a result, greater intervention is needed from regulators to ensure decisions made by firms deliver the outcomes society expects.
Hector Sants, said:
“Historically regulators have avoided judging culture and behaviour as it has been seen as too judgemental a role to play.
“However, given the issues we continue to see over time, I believe this one-dimensional approach has to be questioned. Every other aspect of the regulatory framework is under scrutiny and we should not shy away from debating the culture question.”
read more
Source: FSA.gov.uk
FSA Chairman welcomes Chancellor's plans for regulatory reform
June 16, 2010--The Chairman of the Financial Services Authority (FSA), Lord Turner, has welcomed the changes to financial regulation outlined by the Chancellor of the Exchequer in his Mansion House speech this evening, and Hector Sants’ agreement to remain as Chief Executive of the FSA, leading the transition and the creation of a new prudential authority.
Lord Turner said: "The FSA now has the clarity of direction and timescale as well as the leadership that we need to meet the challenges ahead.
"In particular I am delighted that Hector, who has done so much to transform the FSA during the past few years, has agreed to lead the transition to the new structure in 2012, and to become the first Chief Executive of the Prudential Authority and a Deputy Governor of the Bank of England."
"The crisis demonstrated the need for new regulatory approaches and more intense supervision, and the FSA has already implemented major change. But it also demonstrated the need to bridge the gap between macro-prudential policy and the supervision of individual firms. The Chancellor's proposals for prudential regulation will enable us to do that, while building on the major changes we have made over the last few years. The timescale will enable us to manage the transition in a smooth and orderly way.
"On retail customer protection, the FSA has recognised the need for a shift in our past approach, moving to the more interventionist approach which we set out in our recently published Retail Conduct Strategy. The new Consumer Protection and Markets Authority will have a strong focus on this challenge, while also maintaining strong focus on conduct issues in wholesale products.
"There are important issues still to be resolved – in particular the arrangements for our Enforcement activities and for those Markets activities which relate to exchanges, clearing infrastructure and prudential issues – and we look forward to working closely with the government in considering the relative merits of different possible arrangements for these. But the overall future shape of financial regulation is now much clearer and we are in a strong position to create a future regulatory system which builds on the FSA's achievements over the last few years of major change."
Source: FSA.gov.uk
CESR Publishes The Reponses To The Consultation On CESR's Advice In The Context Of The MiFID Review: Non-Equity Markets Transparency
June 17, 2010--CESR has published the reponses to the consultation on CESR's advice in the context of the MiFID Review: Non-equity markets transparency.
view responses
Source: CESR
Three new Lyxor ETFs launched in the XTF segment
June 17, 2010--Three more exchange-listed index funds from the ETF offering of Lyxor International Asset Management, a subsidiary of Société Générale, have been tradable on Xetra since Thursday.
ETF name: Lyxor ETF EURO STOXX 50 Dividends
Asset class: equity index ETF
ISIN: FR0010869529
Total expense ratio: 0.70 percent
Distribution policy: distributing
Benchmark: EURO STOXX 50 Dividend Points Futures Index
ETF name: Lyxor ETF Daily ShortDAX x2
Asset class: equity index ETF
ISIN: FR0010869495
Total expense ratio: 0.60 percent
Distribution policy: distributing
Benchmark: ShortDAX x2
ETF name: Lyxor ETF Daily Double Short Bund
Asset class: bond index ETF
ISIN: FR0010869578
Total expense ratio: 0.20 percent
Distribution policy: distributing
Benchmark: SGI Daily Double Short Bund Index
Lyxor ETF EURO STOXX 50 Dividends gives investors the opportunity to participate for the first time in the performance of EURO STOXX 50 Dividend Points (DVP) Futures Index issued recently by STOXX. This index tracks the performance of a hypothetical portfolio in which an equal amount is invested in Eurex futures contracts. The futures contracts are traded on the dividend yields of the companies from the EURO STOXX 50 Index and have maturities of one to five years.
Lyxor ETF Daily ShortDAX x2 allows investors to participate in the inverse performance of the DAX index with a double leverage factor. The DAX index is calculated by Deutsche Börse and comprises the 30 German companies with the highest turnover and market capitalization that are listed on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse - FWB).
The third Lyxor ETF now launched on Xetra offers investors the chance to participate for the first time in the performance of the Lyxor ETF Daily Double Short Bund Index. This strategy index, which was developed by Société Générale, tracks the inverse performance of 10-year German government bonds with a double leverage factor.
The product offering in Deutsche Börse’s XTF segment currently contains a total of 674 exchange-listed ETFs, making it the largest offering of all European stock exchanges. This selection, together with an average monthly trading volume of around €14 billion, makes Xetra Europe’s leading trading venue for ETFs.
Source: Deutsche Börse
Deutsche Börse: Deutsche Börse and Eurex name new manager for the office in London
Stuart Heath takes over responsibility from Hartmut Klein
June 17, 2010--
Deutsche Börse and Eurex announced today the appointment of a new Head of
the Representative Office for Deutsche Börse/Eurex in the United Kingdom. As of
1 July 2010, Stuart Heath (44) will succeed Hartmut Klein (57) as general
manager of the representative office in London.
In his new assignment, Stuart Heath
will be responsible for relationship management with existing members and
the acquisition of new customers as well as Deutsche Börse’s and Eurex’s
business development in the UK.
“Since the establishment of our office in London, Hartmut Klein has been an integral part of our UK operations and significantly developed the business for our customers and Deutsche Börse and Eurex, thus I would like to thank him for his achievements and wish Hartmut all the best for his professional and personal future”, said Michael Peters, member of the Eurex Executive Board.
Mr. Klein will join a leading City consultancy firm in London as a senior associate.
Michael Peters added: “I am confident that Stuart will build upon this
success and continue to extend our business in one of our core markets. I am looking forward to working with him to realize our international growth strategy.”
Source: Deutsche Börse
EU agrees to introduce bank taxes
June 17, 2010--European leaders tackled the thorny question of how to tax the financial sector on Thursday, deciding to introduce national bank levies but leaving global transactions tax plans for the G20 to consider.
At a summit in Brussels, the 27 EU heads of state and government agreed on the bank taxes that could fund future bailouts in the wake of Europe's debt crisis, though they were short on details.
In a bid to avoid competition distortions, they agreed that "member states should introduce systems of levies and taxes on financial institutions to ensure fair burden sharing and to set incentives to contain systemic risks."
view the European Council 17 June 2010 Conclusions
Source: EUbusiness
EU leaders agree to publish bank stress test results
June 17, 2010-- European Union leaders agreed on Thursday to publish, by the end of July, the results of so-called stress tests for banks in a bid to reassure investors, diplomats told AFP.
After Spain and Germany separately agreed to go public with analyses of their banks, the remaining heads of EU government and state decided to do likewise at a summit in Brussels focused on economic worries.
"We agreed that a stress test of the banks will be published at the latest at end-July," one diplomat said.
The source said that a call for "transparency on the communication of stress tests" was being inserted into the summit's formal conclusions.
read more
Source: EUbusiness
ETF Landscape: European STOXX 600 Sector ETF Net Flows, week ending 11-Jun-10
June 16, 2010--Last week saw US$19.1 Mn net inflows to STOXX 600 sector ETFs. The largest sector ETF inflows last week were in Retail with US$19.0 Mn and Food & Beverage with US$18.6 Mn while Basic Resources experienced net outflows of US$76.9 Mn.
Year-to-date, Media has seen the largest net inflows with US$301.6 Mn net new assets, followed by Industrial Goods & Services with US$86.9 Mn. Basic Resources sector ETFs have had the largest net outflows with US$312.2 Mn YTD. In total, STOXX 600 sector ETFs have seen US$308.2 Mn net outflows YTD.
The assets invested in the ETFs are greater than the open interest in the corresponding futures contract in 17 out of 19 sectors.
to request report
Source: Global ETF Research & Implementation Strategy Team, BlackRock
EDHEC-Risk’s annual European ETF Survey sees room for growth in spite of a maturing market
June 16, 2010--EDHEC-Risk Institute has announced the results of the EDHEC European ETF Survey 2010, which presents the results of a comprehensive survey of 192 institutional investors, asset managers and private wealth managers conducted between January and March 2010.
On the whole, the results of the survey suggest that, as a consequence of strong growth, the industry has entered a phase of increased maturity. As ETFs are now very widely used, investors are embracing more advanced ways of trading and using ETFs, such as OTC trading and securities lending, and the positive impact of ETFs on the market as a whole, including their underlying assets and other related instruments, is being felt by an increasing number of market participants.
Despite this maturity, there is still room for growth. In particular, survey respondents see a need for new products on emerging markets and alternative asset classes. Likewise, ETFs are still used mostly in static strategies and on broad market indices; their potential contribution to dynamic asset allocation and to allocation strategies in precisely defined market segments or styles is not yet fully exploited.
Among the key findings of the 2010 survey:
1. ETFs are widely used and are becoming even more important to investors
Satisfaction rates have reached astonishing highs of about 90% for equity, government bond, and infrastructure ETFs, and above two-thirds for other ETF products. Dissatisfaction with corporate bond, real estate, and hedge fund ETFs, reported after the financial crisis and evident in last year’s survey, is much less in evidence. ETFs are particularly popular in the equity (96%) and commodity (80%) sectors. As the market has matured, the percentage of investors using ETFs is increasing at a much slower rate than in the past, but ETFs account for a fast-growing share of the portfolio assets of those who do use them. Indeed, assets in ETF investment account for at least one-fifth of total investment in each asset class. So, although the percentage of investors who use ETFs may have levelled off, the intensity has not, as shown by the significant growth of the most recent year.
2. New trends in the use of ETFs have emerged First, the number of investors who reported that they trade more than 90% of their ETF investments on OTC markets rose from 6% in 2009 to 12% in 2010. Our 2010 respondents also report an increase in the number of their trading counterparties. In addition to these changes in the ways ETFs are traded, the use of advanced products such as options on ETFs has grown in the last twelve months. In addition, there is a broader consensus on the preferred means of replicating indices when constructing an ETF. Pure replication ETFs are the favourite, but interest in synthetic replication ETFs is growing; statistical replication, on the other hand, is falling out of favour, a trend that, despite the 2008 financial crisis, which led to a slight dip in the popularity of synthetic replication, has been taking shape over the last four years.
3. ETFs provide investors with information and increase market efficiency Investors use ETFs as sources of information on market developments and state that they observe improvements in market efficiency after the introduction of ETFs. These results dovetail with the evidence found by much of the literature; that is, that the introduction of ETFs has improved the price efficiency in the spot and future markets.
4. Future developments in the ETF industry For traditional asset classes, investors would like to have a broader choice of relatively risky products. For example, 52% of investors would like to see the development of emerging market equity ETFs; 37% and 34% would like to see more emerging market bond ETFs and high yield bond ETFs. Although 80% of investors who invest in commodities allocate to commodity ETFs, 39% of respondents would like to see these ETFs developed still further. New products such as currency ETFs and hedge fund ETFs are also on investors’ wish-lists.
5. ETFs are mainly used as static asset allocation vehicles ETFs are used largely for passive holdings of broad market indices. 70% of all ETF users, for example, report that they frequently rely on ETFs to obtain broad market exposure; and for more than 60% of the respondents ETFs are predominantly long-term or buy-and-hold investments. By contrast, fewer than 50% of respondents state that they frequently rely on ETFs for short-term investments or for exposure to specific market sub-segments. And the large majority of investors who take a core-satellite approach to portfolio management report that they rely mainly on broad market indices, especially in the core. But the wide range of ETFs for sub-categories and styles is left partly unused.
6. Investor views of ETFs and of other indexing vehicles Although futures rival ETFs, ETFs are seen as clearly superior to traditional index funds on all available quality criteria. For investors, the main advantages of ETFs are the ease with which they can be used and the wide product range. Although there are more than 800 ETFs or ETF-like products offered in Europe (Fuhr and Kelly 2009) and growth in the use of ETFs has stabilised, the ETF industry is still developing. As investors have begun using ETFs in a more sophisticated fashion (OTC trading of ETFs, for example) and embraced innovative products (ETFs on new asset classes, leveraged ETFs, and so on), it is clearly in the interests of the ETF industry to continue making new products available and proposing innovative ways to use them.
This survey was sponsored by Amundi ETF.
view the EDHEC European ETF Survey 2010
Souce: EDHEC
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