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UK suffers hedge fund blow
May 13, 2010--European Union countries led by France and Germany plan to push through controversial new hedge fund regulations next week after turning down British pleas to defer a vote in Brussels.
The refusal by Paris and Berlin to delay a decision on the new rules, which are opposed by the UK, has set up a bruising early confrontation with David Cameron’s new government>
British diplomats tried on Wednesday to persuade Paris and Berlin that Mr Cameron’s coalition needed more time to prepare for Tuesday’s meeting of EU finance ministers.
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Source: FT.com
Bail-out worries weigh on the euro
May 13, 2010--The euro slid back to a fresh 14-month low against the dollar as the tremors from Monday’s €750bn eurozone bail-out package continue to reverberate.
The single currency in the final minutes of the session touched $1.2516, below last week’s nadir before the bail-out package was implemented, and well off Monday’s high of $1.31 just after the rescue was announced.
“Global investors prefer to allocate funds towards areas with more favourable growth prospects. In addition, the EU crisis package will ensure that the [European Central Bank] will keep a loose monetary policy for longer,” says UBS.
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Source: FT.com
Europe 2020: A strategy for smart, sustainable and inclusive growth
May 13, 2010--Over the last two years, we have faced the world's worst economic crisis since the 1930s. This crisis has reversed much of the progress achieved in Europe since 2000. We are now facing high levels of unemployment, sluggish structural growth and excessive levels of debt. The economic situation is improving, but the recovery is still fragile. At the same time, the world is moving fast and long-term challenges – globalisation, pressure on resources, climate change, ageing – are intensifying.
Europe can succeed if it acts collectively, as a Union. The Europe 2020 strategy put forward by the Commission sets out a vision of Europe's social market economy for the 21st century. It shows how the EU can come out stronger from the crisis and how it can be turned into a smart, sustainable and inclusive economy delivering high levels of employment, productivity and social cohesion. To deliver rapid and lasting results, stronger economic governance will be required.
view the Europe 2020: A strategy for smart, sustainable and inclusive growth report
Source: European Commission
BlackRock ETF Landscape: European STOXX 600 Sector ETF Net Flows, week ending 07-May-10
May 12, 2010--Highlights
Last week saw US$401.1 Mn net outflows from STOXX 600 sector ETFs. The largest sector ETF inflows last week were in Industrial Goods & Services with US$68.5 Mn and Oil & Gas with US$43.0 Mn while Banks experienced net outflows of US$421.0 Mn.
Year-to-date, Media has had the largest net inflows with US$359.8 Mn net new assets, followed by Oil & Gas with US$97.0 Mn YTD. Banks sector ETFs have had the largest net outflows with US$303.3 Mn YTD. In total, STOXX 600 sector ETFs have seen US$340.6 Mn net outflows YTD.
to request report
Source: Global ETF Research & Implementation Strategy Team, BlackRock
CPSS and IOSCO consult on policy guidance for central counterparties and trade repositories in the OTC derivatives market
May 12, 2010--The Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO) have today issued two consultative reports containing proposals aimed at strengthening the OTC derivatives market.
The first report, Guidance on the application of the 2004 CPSS-IOSCO Recommendations for Central Counterparties (RCCP) to OTC derivatives CCPs, presents guidance for central counterparties (CCPs) that clear over-the-counter (OTC) derivatives products.
The second report, Considerations for trade repositories in OTC derivatives markets, presents a set of considerations for trade repositories (TRs) in OTC derivatives markets and for relevant authorities over TRs.
"These two complementary sets of high-level guidance constitute an important response of the CPSS and IOSCO to the recent financial crisis. They also reflect the G20's recommendations for the strengthening of the OTC derivatives market," said William C Dudley, CPSS Chairman, and Kathleen Casey, Chairman of the Technical Committee of IOSCO.
Guidance on the application of the 2004 CPSS-IOSCO Recommendations for Central Counterparties to OTC derivatives CCPs
In response to the recent financial crisis, authorities in many jurisdictions have set out important policy initiatives encouraging greater use of CCPs for OTC derivatives markets. Recently, several CCPs have begun to provide clearing and settlement services for OTC credit default swaps. A CCP interposes itself between counterparties to financial transactions, acting as the buyer to every seller and the seller to every buyer.
Mr Dudley and Ms Casey said: "This is a positive development because a well designed CCP can reduce the risks and uncertainties faced by market participants and contribute to financial stability. As the greater use of CCPs for OTC derivatives will increase their systemic importance, it is critical that their risk management should be robust and comprehensive. Moreover, because of the complex risk characteristics and market design of OTC derivatives products, clearing them safely and efficiently through a CCP raises more complex issues than the clearing of exchange-traded or cash products does."
These issues were not fully discussed in the 2004 report of the existing RCCP. Consequently, the CPSS and the Technical Committee of IOSCO have identified such issues and developed international guidance tailored to the unique characteristics of OTC derivatives products and markets. The aim is to promote consistent interpretation, understanding and implementation of the RCCP across CCPs that handle OTC derivatives.
view the Considerations for trade repositories in OTC derivatives markets
Source: CPSS and IOSCO
EU defends hedge-fund rules in face of US pressure
May 12, 2010-- EU internal market commissioner Michel Barnier on Wednesday defended Europe's right to set tough new hedge-fund rules as he sought to heal a transatlantic spat.
Ending a three-day US visit, Barnier met Treasury Secretary Timothy Geithner to discuss rules that could force speculative US investors to obtain a "passport" to operate in European Union markets.
In a statement after the meeting, the two men said they had agreed broad principles to move forward, but did not give details.
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Source: EUbusiness
EC report looks to relaunch single market
May 12, 2010--A report for the European Commission calls for a replacement for the Lisbon strategy, a strategy which, according to Euro-Parliament president Jerzy Buzek, has not been a success. The report, presented to MEPs by former Commissioner Mario Monti, stresses the need to "seek a balance between economic factors, such as competitiveness, and the rights of consumers and workers in order to "relaunch" the single market before 2012.
As the EU (established in 1992 by the Maastricht Treaty) approaches its 20th anniversary, Mario Monti was asked by José Manuel Barroso in October 2009 to draw up a strategy to revitalise the single market by 2012. Six months later, Professor Monti presented the fruit of his work, done in parallel with a similar parliamentary project, to EP President Jerzy Buzek and MEPs.
"The Lisbon strategy, let's be frank, was not a success", said Mr Buzek. "It was based on the co-ordination method. We must learn from this. It is the Community method, reinforced by the Lisbon Treaty and defended by Parliament, which is right. It is this method that will enable us to revitalise the internal market. Relaunching it is essential to the European economy in the years to come, but also to emerging from the current crisis".
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Source: EUbusiness
FESE statement - CESR Consultation Paper on Equity Markets
May 12, 2010--FESE welcomes the CESR Consultation Paper on Equity Markets, April 2010, which aims to assist CESR on providing the European Commission (EC) with technical advice on the MiFID Review regarding equity markets by July 2010.
The CESR CP confirms that about 38% of all EU trading is OTC, a figure which has been the subject of much public debate for a year. FESE therefore welcomes this finding and the CP, which confirms our estimates of the OTC business done in EU markets based on the best publicly available figures.
FESE statement - CESR Consultation Paper on Equity Markets
Source: FESE
db x-trackers expands ETF range and launches seven daily leveraged ETFs
May 12, 2010--db x-trackers, Deutsche Bank’s Exchange Traded Fund (ETF) platform, has listed seven new daily two times leveraged ETFs on the London Stock Exchange; three tracking daily leveraged short indices and four tracking daily leveraged long indices from recognised index providers. The three daily leveraged short ETFs track indices that provide two times daily inverse exposure to the DAX®, Euro STOXX 50® and S&P 500. The four daily leveraged long ETFs track indices that provide two times daily long exposure to the DAX®, Euro STOXX 50®, FTSE 100 and S&P 500. The launch of the daily leveraged ETFs complements the range of 16 daily one times short equity ETFs from db x-trackers, the leading provider of such products in Europe.
The daily leveraged ETFs are suitable for financially sophisticated institutional investors who want to use them for short-term trading or hedging strategies to react in real time to intra-day market fluctuations and take advantage of rising or declining markets. As they are ETFs they are easy and convenient to use and can be traded and settled in the same way as any listed stock or security. For some investors they can be an effective substitute for other short term derivatives such as futures and CFDs/swaps without the need for opening or maintaining a margin account or entering into derivatives agreements.
Manooj Mistry, head of db x-trackers UK said: “Our experience of marketing the range of db x-trackers short ETFs has shown that there are many institutional investors who want to take tactical leveraged or short positions in their portfolios but do not necessarily have the infrastructure to use derivatives or to go short through borrowing ETF shares. When used correctly, the daily leveraged ETFs can provide sophisticated institutional investors with a liquid and efficient way to implement short term trading or hedging strategies within their portfolios.”
