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Investors pile $200m into ETF Securities' Currency platform as European debt crisis continues
May 27, 2010--ETF Securities' Currency ETC platform sees AUM increase by 530% YTD, bringing AUM to $200 million
ETFS Short AUD Long USD (SAD) receives $65m of inflows over the past month as SAD rises 14% in May
Short EUR and short GBP also popular trades in May as investors look to profit from European debt crisis
84% of investors currently short G10 currencies vs. USD, with USD strengthening 16% since the inception of Currency ETC platform in November 2009
Average monthly trading volume surges over 900% YTD as investors increase use of Currency ETCs as currency volatility rises 31% in the past month
ETF Securities (ETFS), which launched the world's largest and Europe's first platform of Exchange Traded Currencies (Currency ETCs), has seen assets in the Currency ETC platform increase by 530% this year. Total AUM reached $200m having only been launched on 12 November 2009. We believe this growth in the Currency ETCs further exemplifies investors' acceptance of ETF Securities' collateralised ETC structure as a safe, easy and efficient way to invest in the FX market. ETFS Short AUD Long USD (SAD) is currently the largest Currency ETC with $67 million in AUM, having taken $65m of inflows in the past month. SAD is up 14% thus far in May as the market has begun to consider whether there will be a pause in Australia's rate hike cycle along with the potential effects on the local economy of the new mining profits tax.
ETFS Short EUR Long USD (SEUR) with $39 million AUM, and ETFS Short GBP Long USD (SGBP) with $16 million AUM, have also been popular, having captured around $20m of AUM in the past week as concerns over the European debt crisis have continued. SEUR is up 22.6% since the start of December 2009 and up 8.8% in May while SGBP is up 15.0% since the start of December 2009 and up 6.7% in May.
As the average one-month G10 currency volatility increased 31% (as of 25th May 2010), trading volumes in Currency ETCs have surged over 900% this year. ETCs have been designed to be liquid and simple instruments. As a result, Commodity ETCs (structured in a similar way to Currency ETCs) have seen their volumes increase from around $500m per week to around $2 billion per week in the past 2 years. Last week, Currency ETCs traded around $70m.
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Source: ETF Securities
European Senior Fixed Income-Investor Survey Q210
Sovereign Refinancing Challenges Escalate
May 26, 2010--Highlights
The results of Fitch Ratings’ latest survey of fixed income investors across Europe clearly capture the rising worries about the euro zone. Conducted during April 2010, the survey preceded the EU/ECB/IMF support package announced on 10 May, which
resulted in the faltering of the 14th month long credit rally.
Intensifying investor concerns regarding developed?market sovereigns are expressed throughout the survey results. Respondents believed this bedrock asset class would
have by far the biggest difficulty refinancing debt, against a backdrop of an expected weakening in credit fundamentals due to rising budget deficits and debt. Survey participants signalled that governments will face higher funding costs amid a
rising concern over future defaults and losses.
This pessimism contrasts sharply with the more generally enthusiastic outlook for most other asset classes. Credit profiles are anticipated to strengthen further, and confidence has grown over whether the loss?taking is over. Investors perceive that commercial lending conditions will loosen further, except in the small? and medium?sized enterprise (SME) segment.
However, in a sign of the contagion risk of sovereign concerns, survey participants indicated that the broad spread?tightening observed since mid?2009 is reversing for most asset classes.
The corporate sector is expected to continue to hoard cash and repay debt, and capex is viewed as a low priority. There is greater conviction that companies will engage in merger and acquisition activity, although investors expect deals to be financed by a mix of debt and equity, protecting credit profiles.
Expectations have fallen for credit strength in financial institutions, driven partly by concerns relating to the impact of new regulation. At the same time,respondents became more bullish on the prospects of a loosening in the lending standards of commercial banks.
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Source: Fitch Ratings
New Credit Suisse Equity Index ETF Launched on Xetra
May 26, 2010--An additional exchange-listed equity index fund issued by CS ETF (IE) plc has been tradable in US dollars in Deutsche Börse’s XTF segment since Wednesday.
ETF name: CS ETF (IE) on S&P 500
Asset class: equity index ETF
ISIN: IE00B5BMR087
Total expense ratio: 0.28 percent p.a.
Distribution policy: non-distributing
Benchmark: S&P 500 Index
Trading currency: US dollar
The CS ETF (IE) on S&P 500 allows investors to track the performance of the S&P 500 Index, which is weighted according to free float market capitalization and in turn tracks the performance of the 500 largest US stock corporations.
Source: Deutsche Börse
ETF Landscape: European STOXX 600 Sector ETF Net Flows, week ending 21-May-10
May 26, 2010--Last week saw US$216.8 Mn net outflows from STOXX 600 sector ETFs. The largest sector ETF inflows last week were in Health Care with US$43.5 Mn and Automobiles & Parts with US$42.8 Mn while Basic Resources experienced net outflows of US$158.4 Mn.
Year-to-date, Media has had the largest net inflows with US$270.0 Mn net new assets, followed by Oil & Gas with US$60.9 Mn YTD. Banks sector ETFs have had the largest net outflows with US$234.2 Mn YTD. In total, STOXX 600 sector ETFs have seen US$544.7 Mn net outflows YTD.
The assets invested in the ETFs are greater than the open interest in the corresponding futures contract in all 19 sectors.
to request report
Source: Global ETF Research & Implementation Strategy Team, BlackRock
Commission sets out vision for bank resolution funds
May 26, 2010--The European Commission is today proposing that the European Union establishes an EU network of bank resolution funds to ensure that future bank failures are not at the cost of the taxpayer or destabilise the financial system. Following discussion at the forthcoming European Council, the European Commission will present these ideas at the G-20 Summit in Toronto on 26-27 June 2010. Such funds would form part of a broader framework aimed at preventing a future financial crisis and strengthening the financial system. The Commission believes that a way to achieve this is by introducing requirement for Member States to establish funds according to common rules into which banks are required to pay a levy. The funds would not be used for bailing out or rescuing banks, but only to ensure that a bank's failure is managed in an orderly way and does not destabilise the financial system. .
Internal Market and Services Commissioner Michel Barnier said: "It is not acceptable that taxpayers should continue to bear the heavy cost of rescuing the banking sector. They should not be in the front line. I believe in the 'polluter pays' principle. We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future. That is why I believe that banks should be asked to contribute to a fund designed to manage bank failure, protect financial stability and limit contagion – but which is not a bail-out fund. Europe must take a lead in developing common approaches and providing a model for cooperation which could be applied globally."
Why bank resolution funds are needed
As a result of the financial crisis, national governments have had to use massive amounts of taxpayers' money to support their financial sector, maintain financial stability and protect depositors. Efforts are now needed to ensure that such situations never happen again. The Commission is already putting in place preventive measures which should reduce the probability of bank failure, but work is also needed to ensure that should bank failures arise in the future, robust mechanisms backed by private money are in place to deal with them.
In October 2009, the Commission made clear that it supports the establishment of a new crisis management framework at the EU level. This new framework will include a harmonised set of powers and rules allowing regulators to prevent bank failures and to take measures to facilitate the orderly resolution of insolvent banks whilst minimising costs to taxpayers(IP/09/1549). The Commission is now suggesting resolution funds as a complement to this new framework. Naturally, their size and scope would depend on the efficiency of improved supervision and regulation.
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Source: European Commission
CESR publishes a report to the European Commission on the technical details of the pan-european short selling disclosure regime
May 26, 2010--This report on the technical details of a pan-European short selling disclosure regime complements the Report on a Model for a Pan-European Short Selling Disclosure Regime (the Model) (CESR/10- 088, the ‘Report’).
The two reports should be read in conjunction with each other and, collectively, contain CESR’s proposal to the European Institutions for such a regime.
view the report on the technical details of a pan-European short selling disclosure regime
The publication today is accompanied by a letter to the European Commission
Source: CESR
UK and France reject EU bank plan
May 26, 2010--Britain and France were at odds with other European Union countries on Wednesday over plans to insure against future bank failures, in another sign of the problems in trying to forge a common response to the bloc’s economic woes.
Michel Barnier, EU internal market commissioner, set out plans for member states to form national funds to help wind up or reorganise failing banks, funded by a levy on the financial sector.
London rejected the idea, arguing it would introduce “moral hazard” and encourage banks to think the levy was an insurance premium that entitled them to help if they got into trouble. French officials said Paris had similar concerns.
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Source: FT.com
Source platform in exchange traded commodities crosses €500 million milestone in first year
Now the Second Largest Provider of Collaterised ETCs in Europe
May 26, 2010--Source, the specialist provider of Exchange Traded Products (ETPs) working in
partnership with BofA Merrill Lynch, Credit Suisse, Goldman Sachs, J.P. Morgan, Morgan Stanley, Nomura,
Nyenburgh and 14 market makers, is pleased to announce that total assets in its Exchange Traded
Commodities (ETCs) platform have passed €500 million since launch in April 2009 and have doubled in size
since the start of 2010.
Source listed 27 T-ETCs (US Treasury-Bill secured ETCs) on Deutsche Börse
(Xetra) and 1 physical gold P-ETC (Physically secured ETC) on the London Stock Exchange last year,
making it the second largest provider of collateralised ETCs in Europe.
Ted Hood, CEO of Source, commented, “We are very pleased with the progress to date in delivering quality commodity products to our clients. Our simple message, focused on transparency, unparalleled collateral quality and efficient delivery of commodity exposure, is clearly resonating with the European institutional investment community.” Source’s T-ETCs are collateralised with US Treasury Bills and the swaps are diversified across multiple counterparts. This robust structure has resonated well with clients.
The near doubling of Source ETC assets since the start of 2010 has been led by the Source Physical Gold PETC (SGLD listed on the LSE). This has now reached US$370 million in total assets, capturing over US$100 million of inflows alone in the month of April as investors increased allocations to gold as a safe haven asset. Investors have noted that SGLD is the most cost efficient physical gold ETP listed in Europe. With an all-in annual management fee of 0.29%, SGLD is significantly less expensive than competing products and offers investors a secure way to access the gold market. The Source Physical Gold P-ETC is secured by gold bullion held in J.P. Morgan Chase Bank's London vaults.
Furthermore, in response to investor demand for enhanced commodity index exposure, Source launched a Crude Oil Enhanced T-ETC (SEWTI listed on Xetra) – YTD 2010 inflows have totalled over US$70 million. Over the past few years, the performance of conventional front-month future tracking oil ETPs has varied dramatically from the spot price of oil. SEWTI is designed to track the S&P GSCI Crude Oil Enhanced Total Return index, an enhanced index that adjusts its exposure to the futures curve on a monthly basis, dynamically moving between the front month and 6 month NYMEX WTI futures contract depending upon the steepness of the curve.
Deutsche Börse publishes second Corporate Responsibility Report
May 25, 2010--Deutsche Börse has published its second Corporate Responsibility Report,
presenting its initiatives for the concluded financial year 2009. The
report was prepared and examined in accordance with the internationally recognized
Global Reporting Initiative (GRI) guidelines, thus lending it transparency
and international comparability.
The company believes that the capital market and its institutions have a
responsibility to society, and it is committed to this. Deutsche Börse
Group continued its corporate responsibility activities in 2009 with the same level
of intensity as in the past – despite the persistent financial and economic
crisis. The initiatives focus on the Group’s locations around the world as
well as the active involvement of its own employees. Our long-term commitment
remains focused on four areas: community, environment, employees and
economy.
The complete CR report for 2009 is accessible online at
www.deutsche-boerse.com/cr.
Source: Deutsche Börse
Eurex to Introduce Further Options on ETFs
May 25, 2010--The international derivatives exchange Eurex announced today that it will list seven new options on Source ETFs on 1 June 2010. One new contract will be based on the STOXX Europe Mid 200 Source ETF, the further six options will be based on the STOXX Europe 600 Optimised Supersectors Source ETFs covering the sectors Banks, Basic Resources, Industrials, Oil & Gas, Telecommunications and Utilities. The launch of the new ETF options will complement the recently introduced options based on three benchmark index ETFs.
“Sector and size indices have become more important in the asset allocation of institutional investors, which is reflected in the strong asset growth in respective ETFs”, said Peter Reitz, member of the Eurex Executive Board. “With this extension of our range of ETF derivatives we will offer ETF and derivatives users innovative means to further fine-tune and manage their investments.”
“Fundamentally, options markets need highly liquid reference assets. This has historically posed a challenge to trading options on European ETFs. We were very pleased when Eurex highlighted the trading volumes in our sector ETFs and suggested to launch options. In the lead up to the launch, client feedback was very positive and we look forward to the start of trading”, commented Source’s CEO, Ted Hood.
The new ETF options will be traded in euro, physically settled (American-style) and have maturities of up to 24 months. The contract size will be 100 units.
Nomura will act as a market maker to support liquidity in the order book. “Nomura is delighted to be the first market maker for options on Source ETFs”, commented Rob Heck, co-head of flow derivatives single stock trading at Nomura. “It’s a natural extension for Nomura to offer this innovative service and underlines our commitment to be a top liquidity provider in the derivatives space.”
Source: Eurex
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