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Sharp rise in use of ECB deposit facility
June 2, 2010--Eurozone banks are parking record sums overnight at the European Central Bank in the latest sign of heightened nervousness across the 16-country region’s financial sector.
Use of the ECB’s “deposit facility” rose to €316.4bn on Tuesday – exceeding even levels seen after the collapse of Lehman Brothers in September 2008, the ECB reported on Wednesday.
The high use of the facility, which pays an interest rate of just 0.25 per cent, highlights the excess liquidity demanded by banks in recent weeks, but which they have nowhere else to place. Libor – the interest rate at which banks lend to each other – has also been rising in recent weeks, on concerns about banks’ exposure to the debt of certain eurozone sovereigns.
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Source: FT.com
Berlin backs naked short-selling ban
June 2, 2010--The German government made good on Wednesday on a pledge to crack down on financial speculators by agreeing to block the speculative “naked” short-selling of German stocks and eurozone sovereign bonds.
Berlin took a step back, however, from an immediate legal ban on speculative trading in euro currency derivatives, although the bill approved by the cabinet will allow the market regulator Bafin to impose one in case of market turbulence.
The government wants the German parliament to sign off on the regulations – Berlin’s reaction to recent speculative attacks on the euro and eurozone sovereign bonds – before the summer recess begins on July 9.
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Source: FT.com
Financial sector: preventing the next crisis
June 2, 2010-New legislation for pan-European supervision of credit rating agencies and a public debate on how financial institutions are managed.
Draft rules on credit rating agencies were already planned as part of the EU’s new system for supervising the financial industry - endorsed by EU leaders last year. But they come amid fresh calls for tighter oversight of these private companies.
Investors rely on rating agencies to provide information on the risks of assets. The agencies are important to the stability of the financial markets and have a huge impact on the availability and cost of credit. They have drawn criticism for contributing to the financial crisis by underestimating the risks, and, more recently, for acting in a way that worsened the Greek debt crisis.
Until now, most financial supervision has been done at the national level. The new system calls for the creation of a European supervisory authority to oversee securities and markets. This new body would have direct and exclusive oversight of credit rating agencies registered in the EU, including European branches of agencies based outside the EU. Three of the most popular agencies - Fitch, Moody’s and Standard & Poor’s – have headquarters in New York.
Under the measures tabled today, the securities authority, expected to be up and running by 2011, would have the power to launch investigations, carry out inspections and propose penalties and fines. Credit institutions, banks and investment firms would have to make information available to agencies they do not use, so that those agencies could produce independent ratings.
It is believed that centralised supervision of the agencies will lead to more transparency in operations, more protection for investors and increased competition in the credit ratings industry.
The commission also launched a public consultation on corporate governance rules for the financial sector, including insurance companies. Among the issues up for debate: how to improve the functioning and composition of corporate boards for the purpose of supervising senior management and how to involve shareholders, financial supervisors and external auditors in corporate governance.
The EU is also seeking feedback on how to pay bankers without encouraging excessive risk-taking. The commission has issued recommendations on remuneration policies but two EU reports published today show many countries have yet to act on the advice.
Commission adopts proposal to amend Regulation (EC) No 1060/2009 of the European Parliament and of the Council on credit rating agencies
Commission’s proposal- (provisional version)
Source: European Commission
Starting from June 4th 2010, 16 new ETFs will be listed on the Borsa Italiana
June 1, 2010--Borsa Italiana welcomes on the ETFplus market 16 ETFs issued by the newcomer UBS ETF Sicav, the new offer is composed as follow:
- 16 ETFs on developed countries: EURO STOXX 50 A, EURO STOXX 50 I, MSCI EMU A, MSCI EMU I,
MSCI EMU VALUE A, MSCI EUROPE A, MSCI EUROPE I, MSCI JAPAN I, MSCI JAPAN A, MSCI PACIFIC (EX JAPAN) A, MSCI USA A, MSCI USA I, MSCI WORLD A, MSCI WORLD I, MSCI CANADA A, MSCI CANADA I.
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Source: Borsa Italiana
European Commission to unveil credit rating supervisory plan
June 1, 2010--The European Commission will on Wednesday propose a new system for supervising credit rating agencies, an EU source said.
The European Securities and Markets Authority, alongside two more pan-EU bodies to oversee banks and insurers, is due to be up and running by the start of 2011, although its precise shape is still subject to negotiation.
The EU source said on Tuesday that monitoring of powerful rating agencies Moody's, Fitch and Standard & Poors will now fall into its remit under the latest plans for financial supervision to be outlined in Brussels.
That confirmed a report in the German business daily Handelsblatt, although EU member states and the European parliament are still at loggerheads over how much teeth the new bodies should have ahead of a December 7 target date to complete their design.
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Source: EUbusiness
Average Daily Volume of 16.2 Million Contracts at Eurex and ISE in May
Combined total monthly trading volume rose by 42 percent y-o-y/ Eurex: new monthly turnover record with 256.5 million contracts
June 1, 2010--At the international derivatives markets of Eurex, an average daily volume of 16.2 million contracts was traded in May (May 2009: 11.8 million). Thereof, 12.2 million contracts (May 2009: 7.4 million) were traded at Eurex; another 4.0 million contracts (May 2009: 4.4 million) were traded at the International Securities Exchange (ISE). The strong increase of Eurex turnover of 65 percent y-o-y is due to the increasing use of exchange-traded and centrally cleared derivatives in the current market environment, which was driven by high volatility and uncertainty as well as the dividend season.
In total, 335.7 million contracts were traded on both exchanges compared with 237 million contracts in May 2009, which is an increase of 42 percent. Eurex saw a new monthly turnover peak of 256.5 million contracts; the previous record was from September 2008 with 229 million contracts. On 6 May a new daily turnover record was achieved with 25 million contracts.
At Eurex, the equity index derivatives segment totaled 101.4 million contracts (May 2009: 56.2 million). The future on the Euro STOXX 50 was once again the most successful product with 47.7 million contracts; the Euro STOXX 50 option achieved another 38.0 million contracts. Both the DAX future and DAX option reached turnover with 4.9 million contracts and 8.2 million contracts. Dividend derivatives traded more than 543,000 contracts, while the volatility derivatives recorded almost 218,000 contracts for both VSTOXX futures and options.
The Eurex segment of equity-based derivatives (equity options and single stock futures) was the most successful segment with 101.9 million contracts (May 2009: 57.7 million), setting a new monthly record. Thereof, equity options totaled at 29.75 million contracts (May 2009: 26.5 million). The dividend season led to a strong increase of incentivized block trades of single stock futures, which totaled 72.15 million contracts (May 2009: 31.1 million) – a new monthly record.
Eurex’s interest rate derivatives segment grew by 52 percent y-o-y with 52.4 million contracts (May 2009: 34.4 million). Approximately 21.5 million contracts were traded in the Euro-Bund-Future, 13.3 million contracts in the Euro-Schatz Future, 12.0 million contracts in the Euro-Bobl-Future and almost 128.000 contracts in the Euro-BTP-Future.
Eurex Repo, which operates CHF- and EUR repo markets, recorded for both repo markets an average outstanding volume of 184.6 billion euros (May 2009: 198.7 billion euros). The secured money market segment GC Pooling set a new monthly record with an average outstanding volume of 95.1 billion euros (May 2009: 75.9 billion euros). Thus, the EUR repo market totaled at the new peak of 119.6 billion euros (May 2009: 105.5 billion euros).
The electronic trading platform Eurex Bonds, which rounds out Eurex’s fixed-income product range, saw a volume of 8.8 billion euros (single counting) in May, or a y-o-y rise of 41 percent. In May 2009, the figure was 6.2 billion euros, and in April 2010 volume was 11.6 billion euros.
Source: Eurex
Xetra Turnover in May up 73 Percent
20.7 million trades executed on Xetra/ Total volume of 177 billion euros traded on all stock exchanges in Germany
June 1, 2010--In May, 163.4 billion euros were traded on Xetra and on the floor at Börse Frankfurt – an increase of 69 percent year-on-year (May 2009: 96.3 billion euros) and an increase of 29 percent compared to April 2010 (126.0 billion euros).
Of the 163.4 billion euros, 155.4 billion euros were traded on Xetra, an increase of 73 percent year-on-year (May 2009: 89.7 billion euros). 8 billion euros were traded on the floor, an increase by 23 percent (May 2009: 6.5 billion euros).
Turnover in German equities on Deutsche Börse’s cash markets amounted to 141 billion euros, while foreign equities turnover stood at 18.8 billion euros. Xetra and the floor at Börse Frankfurt accounted for 97 percent of the transaction volume in German equities on all stock exchanges in Germany. 89 percent of foreign equities traded on stock exchanges in Germany were traded on Xetra and on the floor in Frankfurt.
In May, 20.7 million transactions were executed on Xetra, an increase of 40 percent against the same period last year (May 2009: 14.7 million).
According to the Xetra liquidity measure (XLM), Deutsche Telekom AG was the most liquid DAX blue chip in May with 6.3 basis points (bp) for an order volume of 100,000 euros. EADS was the most liquid MDAX stock with 20.4 bp. The most liquid ETF was DB X-TR.II-EONIA T.R. 1C with 0.6 bp. The most liquid foreign stock was Royal Dutch Shell with 15.7 bp. XLM measures liquidity in electronic securities trading on the basis of the implicit transaction costs. It is expressed in basis points (1 bp = 0.01 percent); a low XLM denotes high liquidity in a security.
Deutsche Bank AG was the DAX stock with the highest turnover on Xetra in May at 10.7 billion euros. HeidelbergCement AG was the top MDAX stock at 1.5 billion euros, while A. Springer AG led the SDAX stocks at 28.2 million euros and Aixtron AG headed the TecDAX at 1.2 billion euros. At 2.9 billion euros, the iShares DAX was the exchange-traded fund with the highest turnover.
On all stock exchanges in Germany 177.8 billion euros were traded in May according to orderbook turnover statistics – an increase of 58 percent compared year-on-year (May 2009: 111.9 billion euros). This total includes 170.6 billion euros in equities, warrants and exchange-traded funds, as well as 7.2 billion euros in fixed-income securities.
Source: Deutsche Börse
Financial Stability Review June 2010
May 31, 2010--Many euro area large and complex banking groups (LCBGs) returned to modest profitability in 2009, and their financial performances strengthened further in the first quarter of 2010. These developments, together with a bolstering of their capital buffers to well above pre-crisis levels, suggest that most of these institutions have made important progress on the road to financial recovery. The broad-based enhancement of shock-absorption capacities during 2009 meant that systemic risks for the financial system dissipated to some extent and risks within the financial sector became more institution-specific in character. Indeed, the dependence of the financial system, especially of large institutions, on government support and the enhanced credit support measures of the Eurosystem tended to wane. That said, the profitability performances of some large financial institutions in receipt of government support remained relatively weak.
Outside the financial system, the progressive intensification of market concerns about sovereign credit risk among the industrialised economies in the early months of 2010 opened up a number of hazardous contagion channels and adverse feed back loops between financial systems and public finances, in particular in the euro area. By early May, adverse market dynamics had taken hold across a range of asset markets in an environment of diminishing market liquidity. Ultimately, the functioning of some markets became so impaired that, for the euro area, it was hampering the monetary policy transmission mechanism and thereby the effective conduct of a monetary policy oriented towards price stability over the medium term.
To help restore a normal transmission of monetary policy, the Governing Council of the ECB decided on 9 May 2010 on several remedial measures. Taking into account that these decisions have not only a European but also a global outreach, the G7 and G20 welcomed the ECB’s action in their communiqués. In parallel, the EU Council adopted a regulation establishing a European Financial Stabilisation Mechanism. Subject to strong conditionality, this back-stop device will have funds of up to €500 billion at its disposal. Following the implementation of these measures, market volatility was significantly contained.
Considering the financial stability outlook, although the profile of ECB estimates of the potential write-downs on loans confronting the euro area banking system displays a peak in 2010, it is probable that loan losses will remain considerable in 2011 as well. This prospect, combined with continued market and supervisory authority pressure on banks to keep leverage under tight control, suggests that banking sector profitability is likely to remain moderate in the medium term.
Overall, although the main risks to euro area financial stability essentially remain the same as those to which attention was drawn in the last issue of the FSR, their relative importance has changed significantly over the past six months.
The main risks for the euro area financial system include the possibility of:
concerns about the sustainability of public finances persisting or even increasing with an associated crowding-out of private investment; and
adverse feedback between the financial sector and public finances continuing.
Other, albeit less material, risks identified outside the euro area financial system include the possibility of:
vulnerabilities being revealed in euro area non-financial corporations’ balance sheets, because of high leverage, low profitability and tight financing conditions; and
greater-than-expected euro area household sector credit losses if unemployment rises by more than expected.
Within the euro area financial system, important risks include the possibility of:
a setback to the recent recovery of the profitability of large and complex banking groups and of adverse feedback with the provision of credit to the economy;
vulnerabilities of financial institutions associated with concentrations of lending exposures to commercial property markets and to central and eastern European countries; and
heightened financial market volatility if macroeconomic outcomes fail to live up to expectations.
A key concern is that many of the vulnerabilities highlighted in this FSR could be unearthed by a scenario involving weaker-than-expected economic growth.
The measures taken by the ECB to stabilise markets and restore their functioning as well as the establishment of the European Financial Stabilisation Mechanism have considerably lowered tail and contagion risks. However, sizeable fiscal imbalances remain, and the responsibility rests on governments to frontload and accelerate fiscal consolidation so as to ensure the sustainability of public finances, not least to avoid the risk of a crowding-out of private investment while establishing conditions conducive to durable economic growth.
view complete publication-Financial Stability Review
Source: ECB
Doubt rises over regular bond indices
May 31, 2010--Conventional bond indices are being found wanting by fund managers as worries grow about the credit-worthiness of developed countries, particularly in the eurozone.
There is a “rumbling in the market over indices weighted by market cap because they allocate the greatest weight to the most indebted countries”, said Ben Horsell, chief operating officer for fixed income at Lombard Odier Investment Managers.
Broad government bond indices typically weight country exposure by bond issuance. Indebted nations issue the most bonds, with the result that highly indebted countries make up the biggest proportion of these indices.
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Source: FT.com
NASDAQ OMX Completes Nord Pool ASA Acquisition
May 31, 2010--The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today announced that it has received the necessary regulatory approval for the completion of its acquisition of Nord Pool ASA.
Nord Pool ASA holds a Norwegian exchange license and operates the Nordic Power market and the European Carbon market on one trading platform.
Through this acquisition, the NASDAQ OMX Commodities offering now includes the world's largest power derivatives exchange and one of Europe's largest carbon exchanges.
"We are pleased to complete this acquisition as it forms one of the cornerstones in our strategy to become the global leader in the commodity exchange business," said Hans-Ole Jochumsen, Executive Vice President NASDAQ OMX. "The combination of NASDAQ OMX's world class exchange technology and Nord Pool ASA's extensive experience in the Nordic financial power market will put us in a prime position for continued growth in the commodities space."
"This transaction will allow us to further improve our services, offer more efficient solutions and swiftly meet changes and new requirements in the commodities markets. The Nord Pool team will be an important part of NASDAQ OMX Commodities' global ambitions managed from our premises at Lysaker outside Oslo," says Geir Reigstad, Senior Vice President of NASDAQ OMX Commodities.
NASDAQ OMX acquired Nord Pool Clearing ASA and Nord Pool Consulting AS from Nord Pool ASA in October 2008. The new acquisition means that NASDAQ OMX now owns all shares in the previous Nord Pool ASA group.
The acquisition does not comprise the Nordic physical electricity market operated by Nord Pool Spot AS.
Source: NASDAQ OMX
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