Global ETF News Older than One Year
IMF Working paper-Optimal Prudential Regulation of Banks and the Political Economy of Supervision
May 28, 2014--Summary: We consider a moral hazard economy in banks and production to study how incentives for risk taking are affected by the quality of supervision. We show that low interest rates may generate excessive risk taking.
Because of a pecuniary externality,the market equilibrium may not be optimal and there is a need for prudential regulation. We show that the optimal capital ratio depends on the macro-financial cycle,and that,in presence of production externalities,it should be complemented by a constraint on asset allocation. We show that the political process tends to exacerbate excessive risk taking and credit cycles.
Source: IMF
Implementation monitoring for the PFMIs: first update to Level 1 assessment report
May 28, 2014--The Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) have today published the first update to the Level 1 assessments of implementation monitoring for the Principles for financial market infrastructures (PFMIs).
Level 1 assessments are based on self-assessments by individual jurisdictions on how they have adopted the 24 Principles for FMIs and four of the five Responsibilities for authorities within the regulatory and oversight framework that applies to FMIs.
view the BIS Implementation monitoring of PFMIs: First update to Level 1 assessment report
Source: BIS
State & Trends Report Charts Global Growth of Carbon Pricing
May 28, 2014--STORY HIGHLIGHTS--Globally, 39 national and 23 sub-national jurisdictions have implemented or are scheduled to implement carbon pricing instruments, including emissions trading systems and taxes.
The world's emissions trading schemes are valued at about $30 billion, with China now housing the world's second largest carbon market, covering the equivalent of 1,115 million tons of carbon dioxide emissions.
The World Bank Group and others are encouraging countries, sub-national jurisdictions, and companies to join a growing coalition of first movers supporting carbon pricing.
The share of greenhouse gas emissions covered by domestic carbon pricing initiatives increased significantly over the past year, led by the launch of six carbon markets in China. Today, 39 national and 23 sub-national jurisdictions-responsible for almost a quarter of the global greenhouse gas emissions-have implemented or are scheduled to implement carbon pricing instruments, including emissions trading schemes and taxes, building the momentum for a bottom-up approach to climate action.
view the State and trends of carbon pricing 2014 report
Source: World Bank
DERIVATIVES: Data woes move front and center
May 27, 2014--Discrepancies in how the four main US swap trade repositories collect and store data is threatening to derail regulatory efforts to build a comprehensive view of the over-the-counter derivatives market-a key tenet of the 2009 G20 agreement on financial reforms.
CFTC Commissioner Scott O'Malia will outline a plan for reconciling the various forms of data being reported across the market at a Technology Advisory Committee meeting on June 3, but brokering a compromise is likely to be an uphill struggle.
Source: IFR
UBS sets 50% limit on ETF securities lending
May 27, 2014--UBS is formally reducing securities lending on its ETF funds to 50%, following in the footsteps of ETF giant iShares.
Securities lending is a common practice for ETFs, which sees them lending out shares of underlying holdings to a third party for a price, with the aim to cover the expenses and management charges that may be a drag on the end return to an investor.
Source: Investment Week
DB-Synthetic Equity & Index Strategy-Global-Special ETF Research-Tactical Asset Allocation (TAA) insights from ETF flows
May 27, 2014--Introducing TAARSS: a novel relative strength indicator for TAA
We have created a proprietary relative strength indicator to implement Tactical Asset Allocation strategies by considering the magnitude and path of ETF flow trends.
ETF flows: a more powerful tool for predicting asset class performance
Most recently, the emergence of Exchange Traded Funds (ETFs) along with their growing popularity among both retail and institutional investors have brought about a new dimension to fund flow analysis. Moreover, ETFs both as products and industry have several distinct features that differentiate them from traditional mutual funds.
We believe it is this set of unique features what makes ETF flows a more powerful tool for predicting investor sentiment and asset class performance compared to mutual funds.
ETF flow trend path and magnitude provide stronger read for TAA
While most fund flow analysis metrics focus on the magnitude of the trend, we focus on both the path and the magnitude of it. Our analysis has shown that an ETF flow trend with steady and consistent path combined with a large flow magnitude is more likely to develop into future price performance momentum. We believe that this behavior is grounded on the fact that a large directional and steady ETF flow trend is an indication of an investment demand shift and hence should be accompanied by the corresponding price move. This behavior can be measured and used to identify the most attractive asset classes based on ETF flow trend relative strength.
TAARSS: a versatile indicator for implementing TAA strategies
Our Tactical Asset Allocation Relative Strength Signal (TAARSS) methodology is very versatile and can be implemented in multiple ways. In general, most of the implementation ideas would seek to take advantage of the relative strength of the asset classes as indicated by the signal. Investors can build core portfolios around it or they could use it for implementing tactical trades as satellite positions. Some examples of portfolio implementations are: direct rotation strategies, layered rotation strategies, and enhanced rotation strategies using levered ETFs. Tactical trades could also be implemented based on normalized TAARSS rankings.
TAARSS says overweight Fixed Income during Q2. Prefer Europe, especially Spain and Italy, within equities; and stay away from commodities in May
Our TAARSS rotation strategies say overweight fixed income during Q2. Within fixed income favor convertible bonds and Intl DM debt during May. Also for May, within equities prefer broad EM and Europe at a market and region levels, respectively; in the US prefer Large Caps, and in the DM outside the US favor Spain and Italy. Finally, within commodities stay in the sidelines in May. Overall, Spanish and Italian equities have the strongest TAARSS rankings for May.
Source: Deutsche Bank-Synthetic Equity & Index Strategy-Global
ETF Securities-Precious Metals Weekly-Platinum and Palladium Reach New 2014 Highs on Constrained Supplies
May 27, 2014--PGMs steal the spotlight. Platinum and palladium reached new 2014 highs while gold and
silver remained within increasingly constrained ranges. Platinum and palladium added
another 1.3% and 1.5% on the week for year-to-date gains of 9.3% and 15.6% respectively
supported by ongoing strikes in South Africa and by the Ukrainian crisis.
The platinum and palladium London fix highs last week were US $1,492/oz. and $859.5/oz. South African strikes continue to constrain PGM supplies. Despite the three largest miners in South Africa using the Labour Court to mediate the wage dispute with the Association of Mineworkers and Construction Union (AMCU), Impala’s CEO conceded that the strike may not end soon. The strike now enters into its 18th week, and has taken an approximate 890k oz. of platinum and 655 oz. of palladium out of production on our estimates. Even after the pay dispute in South Africa is resolved there will be a lag before production can be ramped up to full capacity, prolonging the delay in getting supply to the market. It is clear that sources of secondary supply, like scrap, are unable to catch up with primary production losses, keeping the market very tight.
Source: ETF Securities
ERI Scientific Beta unveils multi-factor smart beta indices
May 27, 2014--ERI Scientific Beta, the smart beta indexing initiative spun out off EDHEC-Risk Institute, a Paris-headquartered financial research centre, has announced the launch of the SciBeta Multi-Beta Multi-Strategy Indices.
The indices endeavour to address two potential limitations of market capitalization-weighted indices, namely ill-suited exposures to systematic risk factors and excessive concentration in a small number of stocks.
Source: etfstrategy.co.uk
ERI Scientific Beta launches multi-beta multi-strategy indices
May 27, 2014--ERI Scientific Beta has announced the launch of its Multi-Beta Multi-Strategy (MBMS) indices, which are now available on their platform.
Scientific Beta Multi-Beta Multi-Strategy indices address the two main limitations of cap-weighted indices, namely ill-suited exposures to systematic risk factors and excessive concentration in a small number of stocks.
Source: Financial Investor
MTS spans Atlantic with ETF initiative
May 26, 2014--London Stock Exchange Group's European electronic fixed income trading platform is bringing an exchange-traded fund initiative across the Atlantic.
MTS Group has been seeking to grow its presence in the US since late last year and this month completed its acquisition of US electronic trading platform Bonds.com.
Source: Financial News
