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ISDA 2012 Margin Survey Results: Collateralization Continues to Increase in OTC Derivatives Markets
May 1, 2012--The International Swaps and Derivatives Association, Inc. (ISDA) today released results from its 2012 ISDA Margin Survey at its 27th Annual General Meeting in Chicago.
The 2012 Margin Survey reveals that market participants continue to expand their use of collateral to mitigate over-the-counter derivatives credit exposures. Among large dealers, 84 percent of all transactions are now executed with the support of a collateral agreement, up from 80 percent in 2011, with96 percent of all trades executed in the credit derivatives markets subject to collateral arrangements.
The Survey shows that 76 percent of collateral delivered by respondents for non-cleared derivatives consists of cash while the remaining 24 percent consists of government securities and other collateral.
IMF Working paper-Bank Capitalization as a Signal
May 1, 2012--Summary: The level of a bank‘s capitalization can effectively transmit information about its riskiness and therefore support market discipline, but asymmetry information may induce exaggerated or distortionary behavior: banks may vie with one another to signal confidence in their prospects by keeping capitalization low,
and banks' creditors often cannot distinguish among them-tendencies that can be seen across banks and across time. Prudential policy is warranted to help offset these tendencies.
view IMF Working paper-Bank Capitalization as a Signal
Currency Hedge ETFs Win Big at Global ETF Awards
May 1, 2012--Deutsche Bank's family of Currency Hedge ETFs won the award for the Most Innovative ETF in the Americas for 2011 at the 8th Annual Global ETF Awards. The awards are given to industry participants for outstanding achievements in the marketplace.
In Europe Deutsche Bank tied with the Nomura Voltage Mid-Term Source ETF for the top prize, while the Motilal Oswal Most Shares NASDAQ-100 ETF was named most innovative in the Asia-Pacific region.
ETFS Precious Metals Weekly: Strong USD Weighs on Gold, but Central Bank Buying Offsets Soft Physical Demand
April 30, 2012--Gold lifted by Spanish downgrade, then pressured on
consequent USD strength. The FOMC meeting last week was largely a non-event for precious metals, offering no additional hints on the possibility of another round of QE.
However, policymakers
maintained their call for ‘exceptionally low levels for the federalfunds rate at least through late 2014.’. Gold is trading a tight range,
constrained by the conflicting forces of surging global liquidity and
Eurozone sovereign troubles on one side and a strong dollar and
weak physical demand from India on the other. Spain’s credit
downgrade last week again raised gold’s safehaven appeal, but the
consequent USD strength weighed on gold demand. USD strength is
likely to continue to act as a weight on the gold price in the nearterm,
while the flood of central bank liquidity stimulus, concerns
about pipeline inflation and ultra-low interest rates should remain
structurally supportive.
Central bank gold buying continues apace, led by emerging markets. The trend of central banks diversifying foreign reserves remains strong, with emerging market central banks at the forefront of fresh gold demand in March. Following its 99 tonne buying binge in 2011, Mexico has added another 17 tonnes to its coffers, taking the proportion of gold in its total reserves to around 4% (still low by international standards). Meanwhile, Russia purchased nearly 16 tonnes in March, taking its gold holdings to around 10% of total reserves. Gold is an under-owned asset by most emerging market sovereigns compared to major developed nations like the US (77% of foreign reserves are held in gold) and Germany (74% of reserves held in gold). In China, gold only makes up around 1.7% of total FX reserves. Gold has remained largely rangebound in recent weeks, as strong central bank purchases appear to have offset soft physical demand from India due to the jewellers’ strike.
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NYSE Profit Falls 44% on Merger Charges, Trading Decline
April 30, 2012--NYSE Euronext (NYX), the biggest U.S. exchange operator, fell the most in six months after reporting a 44 percent decline in first-quarter profit, as expenses related to its failed merger with Deutsche Boerse AG (DB1) combined with a slowdown in trading.
Net income fell to $87 million from $155 million a year earlier, the New York-based company said today in a statement. Excluding some items, earnings were 47 cents a share, compared with the 48-cent average estimate of 17 analysts surveyed by Bloomberg. The shares sank 4.9 percent to $25.75, the most since Nov. 1.
IOSCO Consults on Money Market Fund Systemic Risk Analysis and Reform Options
April 27, 2012--The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a consultation report, Money Market Fund Systemic Risk Analysis and Reform Options, which provides a preliminary analysis of the possible risks that money market funds (MMFs) could pose to systemic stability and consults on an exhaustive range of policy options to address those risks.
With over US$ 4.7 trillion in assets under management as of third quarter 2011, MMFs account for over 20 percent of the assets of Collective Investment Schemes (CIS) worldwide and are a significant source of credit and liquidity. MMFs’ history of providing daily liquidity and principal preservation have played a significant role in differentiating MMFs from other CIS and have facilitated the use of MMFs as important cash management vehicles.
Their importance and interconnectedness with the rest of the financial system make their safety crucial for financial stability at large.
view the Money Market Fund Systemic Risk Analysis and Reform Options-Consultation Report
Deutsche's plan to sell subsidiaries stalls
April 27, 2012--Fresh concerns have emerged over plans by Deutsche Bank to sell parts of its asset management business to Guggenheim Partners, despite claims the pair are close to a deal.
Two weeks ago, Deutsche’s board was said to be meeting to take a decision regarding a sale, but no announcement has been made and more delays are now expected. These hold-ups are “every seller’s worst nightmare”, says Christopher Wheeler, an analyst at Italian investment bank Mediobanca.
Global Partners Confront Impacts of Climate Extremes on Development
Joint action needed to link disaster risk management, climate adaptation
April 27, 2012--On the heels of a sobering UN report on dramatic climate extremes expected to occur around the world, officials from donor and developing countries, along with international organizations have reaffirmed their commitments to making disaster resilience a priority in development planning.
The officials, meeting during the World Bank/IMF Spring Meetings, also recognized that linking disaster risk reduction and climate change adaptation, and integrating them into the development agenda, is critical to building resilience in communities and countries.
Mahmoud Mohieldin, World Bank Managing Director, said, "We have too often witnessed how disasters can roll back years of development progress. On top of that, we now need to prepare for a changing world—rapid urbanization and a changing climate are reshaping and exacerbating disaster risks. But geography need not be destiny, and the future—however uncertain and unpredictable when we factor in the impact of climate change—need not be feared if correct preventive policies are taken today.”
ESMA begins AIFMD co-operation discussions with non-EU supervisors
April 26, 2012--ESMA announces today that it will begin discussions with non-EU supervisors of entities subject to the requirements of the Alternative Investment Fund Managers Directive (AIFMD) about supervisory co-operation issues. This follows agreement by ESMA's Board of Supervisors to follow a common policy in relation to the co-operation arrangements under AIFMD, which should be in place between EU and non-EU securities supervisors by July 2013.
ESMA will lead on the negotiation of co-operation arrangements with non-EU authorities on behalf of EU supervisors. This will be done through a common Memorandum of Understanding (MoU), which will facilitate the cross-border supervision of those entities subject to AIFMD such as managers of alternative investment funds, depositaries and entities performing tasks under delegation by the manager. The MoU will be based on IOSCO’s Principles Regarding Cross-Border Supervisory Co-operation.
IOSCO consults on principles of liquidity risk management for CIS
April 26, 2012--The Technical Committee of the International Organization of Securities Commissions has published the consultation report Principles of Liquidity Risk Management for Collective Investment Schemes,
which outlines a set of principles against which both the industry and regulators can assess the quality of regulation and industry practices relating to liquidity risk management for collective investment schemes (CIS).
Since the outbreak of the global financial crisis, the issue of liquidity has been a major concern for regulators, although the discussions on regulatory reform have focused more on the importance of liquidity in the banking sector rather than in other sectors. However, the asset management sector has specificities to be kept in mind when setting policy recommendations.
Good liquidity risk management is a key feature of the correct operation of a CIS, as the right to redeem units/shares is a defining characteristic of open-ended schemes. Liquidity risk management is complex and a CIS may experience liquidity issues as, for example, when the market in which it is invested closes unexpectedly. However, asset managers have regulatory and practical tools to manage liquidity both on the asset side and on the investor side.
view the Principles on Suspensions of Redemptions in Collective Investment Schemes Final Report