Global ETF News Older than One Year
EDHEC-Risk Institute Warns against "Speculative' Regulatory Proposals for Commodities Markets in Europe
June 19, 2012--In a robust critique of a recent paper by the public interest group Finance Watch ("Investing Not Betting: Making Financial Markets Serve Society," April 2012), EDHEC-Risk Institute has taken issue with a number of positions that this paper deems to be self-evident,
e.g. that speculators must have a minority role in futures markets; that excessive speculation undermines the commodity price formation mechanism; and that there should be a linear relationship between a commodity’s supply-and-demand data and its price.
Drawing on the theoretical and empirical evidence in the academic literature, the EDHEC-Risk Institute position paper, entitled “Who Sank the Boat?” (in reference to the difficulty in apportioning causality for commodity price spikes), shows that the above assertions are simply wrong.
According to the author of the EDHEC-Risk paper, Hilary Till, “modern commodity futures markets are the result of 160 years of trial-and-error efforts. One result has been the creation of an effective price discovery process, which in turn assists in the coordination of individual efforts globally in dynamically matching current production decisions with future consumption needs in commodities.
a href="http://www.edhec-risk.com/edhec_publications/all_publications" TARGET="_top">read more
view the Who Sank the Boat?" Response to the Finance Watch paper "Investing Not Betting"
Source: EDHEC
Monitoring Systemic Risk Based on Dynamic Thresholds
June 18, 2012--Summary: Successful implementation of macroprudential policy is contingent on the ability to identify and estimate systemic risk in real time.
In this paper, systemic risk is defined as the conditional probability of a systemic banking crisis and this conditional probability is modeled in a fixed effect binary response model framework. The model structure is dynamic and is designed for monitoring as the systemic risk forecasts only depend on data that are available in real time. Several risk factors are identified and it is hereby shown that the level of systemic risk contains a predictable component which varies through time. Furthermore, it is shown how the systemic risk forecasts map into crisis signals and how policy thresholds are derived in this framework. Finally, in an out-of-sample exercise, it is shown that the systemic risk estimates provided reliable early warning signals ahead of the recent financial crisis for several economies.
view the IMF working paper-Monitoring Systemic Risk Based on Dynamic Thresholds
Source: IMF
Deutsche Boerse Asks EU Court to Cancel NYSE Merger Ban
June 18, 2012--Deutsche Boerse AG (DB1) asked a European Union court to overturn a ban on its planned merger with NYSE Euronext, saying regulators made errors when reviewing the deal that would have created the world's biggest exchange.
Regulators “failed to properly assess” offers made by the companies to eliminate antitrust concerns and wrongly ruled that the two exchanges’ rivalry limits fees for customers, Deutsche Boerse argued in a filing at the EU’s General Court in Luxembourg published in the EU’s Official Journal on June 16. NYSE isn’t a party to the appeal and said in March that it was focused on its strategy as a standalone company.
Source: Bloomberg Business
Investment Perspective-European Bank Leverage-Winthrop Capital
This is a summary of a recent conference call with Oliver Sarkozy, Head of Global Financial Services for the Carlyle
Group.
June 18, 2012--The U.S. Financial Crisis
The United States capital markets during the periods of 2008 and 2009, which represented the height of the
Financial Crisis, were characterized by serious and volatile dislocations.
The equity, sub-prime loan, corporate bond and high yield markets experienced severe price swings which proved to be a symptom of a bigger problem. The turning point was the Lehman/AIG weekend in which the U.S. government allowed Lehman to fail and quickly purchased a majority stake in AIG. The Troubled Asset Relief Program (TARP) allowed the US Treasury to invest directly in the US banks through the purchase of preferred stock.
The real issue was the lack of liquidity and low capital levels in the US banking system. The US banking system is roughly $13 trillion in size and is funded largely though retail deposits of $9 trillion. Sarkozy points out that this represents roughly 90% of the GDP of the country. This has no analytic point except to illustrate the relative size of the banking system relative to the economy.
Socialism and the European Banking System Sarkozy made an interesting point about the difference between the US banks and the European banks. Whereas the US banks exist to serve the consumer and the shareholder, the European banks exist to serve the government. In our Investment Perspective - A Context for Understanding the Global Debt Crisis, we discuss the link between democracy and capitalism and the roots of socialism and monarchy in Europe. The growth in the European banking system was a result of demand for the governments to issue more debt to fund their social programs. Thus, the government issues debt, the banks buy the debt and fund the purchase through a large wholesale funding base which is commercial paper and institutional certificates of deposit.
visit www.winthropcm.com for more info.
Source: Winthrop Capital Management
ETFS Precious Metals Weekly: Greece Steps Back from the Abyss, but Spain Remains Vulnerable
June 18, 2012--Greece avoids immediate worst case scenario, but Spain is now the epicentre of the crisis. Spain voted in the pro-reform New Democracy
party by a decent margin on Sunday, reducing the risk of an imminent
break-up of the Euro.
Spain, however, is now contending with 10 year government bond yields near 7%, a level that threatens to drive the country into a self-perpetuating debt confidence crisis. The situation in Spain is of particular concern as it follows a Euro 100bn bank bailout loan package only two weeks ago, indicating that only extreme measures have a chance of pulling Spain bank from the brink that Greece has temporarily stepped back from. If the European authorities and the ECB do not step in forcefully, the crisis risks spiralling out of control. At the same time, weaker US growth and inflation prints are opening up room for the Fed to consider implementing another round of quantitative easing. Both of these scenarios are likely to be bullish gold and this has been reflected in rising physical gold ETP purchases and increasing net long positions in gold futures.
Platinum and palladium prices hit 5-week highs as labour unrest adds to South African production problems. Last week, reports of violent clashed at South African mines raised the spectre of strikes, likely resulting in production stoppages, and lifting platinum and palladium prices to 5-week highs. The platinum price jumped 5%, while palladium rallied 3% last week. Additionally, Aquarius Platinum, the world’s fourth largest producer of platinum, announced its intention to cease production at its Marikana mine. The shutdown, just weeks after Eastern Platinum cut investment at another South African mine, highlights the ongoing cost pressures affecting the miners. Citing poor economic conditions, Aquarius has shut down the mine until, ‘an improved economic climate merits their extraction in the future’. The combintion of mine closures and strikes at operating mines continues to add support to the palladium, and partularly the platinum price.
visit www.etfsecurities.com for more info
Source: ETF Securities
Advisers keen for model ETF portfolios
One-stop strategies are freeing up time for client service
June 17, 2012--The growing popularity of exchange-traded funds has led to a boom among money managers who specialize in using low-cost passive investments to build go-anywhere portfolios.
These model ETF portfolios typically use ETFs to invest globally across all asset classes, such as equities, fixed income and commodities, to shoot for a real return.
Financial advisers increasingly are outsourcing some of their client assets to these managers so that they can spend more time on clients and less time managing portfolios.
Source: Investment News
IOSCO Publishes A Report On The Credit Default Swap Market
June 16, 2012--The International Organization of Securities Commissions has published today a report on the Credit Default Swap Market, which seeks to inform the ongoing regulatory debate on CDS and highlight some of the key policy issues involving these financial swap agreements.
The report was mandated by the Group of 20 leading industrialized and emerging nations at the Cannes Summit in November 2011, where IOSCO was called on “to assess the functioning of credit default swap (CDS) markets and the role of those markets in price formation of underlying assets” by the next G20 Summit that begins on Monday in Los Cabos, Mexico.
view the Credit Default Swap Market report
Source: IOSCO
FSB publishes its third progress report on implementation of OTC derivatives market reforms and press release.
June 15, 2012--The Financial Stability Board (FSB) published today its third six-monthly progress report on the implementation of over-the-counter (OTC) derivatives market reforms.
The report reviews progress made by international standard-setting bodies, national and regional authorities and market participants towards meeting the commitments made by G20 Leaders at the Pittsburgh 2009 Summit that, by end-2012, all standardised OTC derivative contracts be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties (CCPs); that OTC derivative contracts be reported to trade repositories; and that non-centrally cleared contracts be subject to higher capital requirements. The report notes that, since the previous FSB progress report in October 2011, encouraging progress has been made in setting international standards, the advancement of national legislation and regulation by a number of jurisdictions; and practical implementation of reforms to market infrastructures and activities. But much remains to be completed by the end-2012 deadline.
view the OTC Derivatives Market Reforms-Third Progress Report on Implementation
Source: FSB
Economic Outlook June 2012 - Uncertainty weighing heavily on the economy
June 15, 2012--ECONOMIC SITUATION
The increase in political and financial uncertainty associated with the euro and, in particular,
the banking system has damaged business confidence. BUSINESSEUROPE expects GDP
growth to be 0.1% this year and 1.4% in 2013 in the EU 27.
Net exports will be the only main demand component contributing positively to GDP growth this year as businesses take advantage of growth in the global economy.
Unemployment is expected to reach its highest level in almost 20 years. While both labour market and overall economic performance differ widely among Member States, average EU unemployment levels will reach 10.5% this year, and 10.8% in 2013.
Investment is being constrained by both weak demand and access to finance. BUSINESSEUROPE expect the cost and difficulty of access to finance to increase even more over the next 6 months, placing further pressure on business survival and expansion.
Source: European Business
IMF Working paper-Government Bonds and Their Investors: What Are the Facts and Do They Matter?
June 15, 2012--Summary: This paper introduces a new dataset on the composition of the investor base for government securities in the G20 advanced economies and the euro area. During the last decades, investors from abroad have increased their presence in government bond markets.
The financial crisis broke this trend. Domestic financial institutions allocated a larger share of government securities in their portfolios, as Japan has done since its crisis in the 1990s. Increases in the share held by institutional investors or non-residents by 10 percentage points are associated with a reduction in yields by about 25 or 40 basis points, respectively. The data show a varied lead-lag relationship between bond yields and investor holdings. Portfolio balance estimates suggest that a change in statutory or regulatory holdings of government securities to the tune of 10 percent of the outstanding stock causes expected returns to decline by 7 to 25 basis points.
Source: IMF
