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Concern grows over dangers of ‘synthetic’ ETFs
October 4, 2011--First it was CDOs, then SPVs. Now the latest alphabet soup of financial products to come under scrutiny from regulators as potential threats to investor protection and economic stability are ETFs and ETPs – exchange-traded funds and similar products.
Securities regulators in the US and EU are worried that these increasingly complex products are being mis-sold to unwary investors who do not understand the counterparty and derivatives risks they are running.
How Long Do Housing Cycles Last? A Duration Analysis for 19 OECD Countries -IMF Working paper
October 3, 2011--Summary: This paper analyzes the duration of house price upturns and downturns in the last 40 years for 19 OECD countries. I provide two sets of results, one pertaining to the average length and the other to the length distribution. On average, upturns are longer than downturns, but the difference disappears once the last house price boom is excluded.
In terms of length distribution, upturns (but not downturns) are more likely to end as their duration increases. This duration dependence is consistent with a boom-bust view of house price dynamics, where booms represent departures from fundamentals that are increasingly difficult to sustain.
view the IMF paper-How Long Do Housing Cycles Last? A Duration Analysis for 19 OECD Countries
Share trading at NASDAQ OMX Nordic unchanged compared to September 2010, 78 % increase in ETF turnover
October 3, 2011-- NASDAQ OMX today publishes monthly trade statistics for the Nordic and Baltic markets. Below follows a summary of the highlights for September 2011:
The share trading on NASDAQ OMX Nordic matched the daily average of September 2010 of 2.4bn EUR. Compared to the previous month, August 2011, the daily average decreased by 27.3 %.
NASDAQ OMX Nordic's share of order-book trading in our listed stocks decreased to 70.8 % compared to 72.6 % in August 2011. Foreign marketplaces accounted for 27.0 % of the trading in NASDAQ OMX Nordic shares1.
Derivatives trading decreased by 3.4 % to a daily average of 577,457 contracts, compared with 597,660 contracts in September 2010.
ETF trading2 (Exchange Traded Funds) increased by 78.3 % to a daily average of 115m EUR compared to 64.5m EUR in September 2010.
Nokia was the most traded stock on NASDAQ OMX Nordic exchanges during the past month, followed by H&M.
SEB was the most active member on NASDAQ OMX Nordic during the past month, followed by Credit Suisse.
NASDAQ OMX Nordic's average time at EBBO3 (European Best Bid Offer) was:
For OMXC20 companies 85,3 %
For OMXH25 companies 78,1 %
For OMXS30 companies 83,8 %
For more information, please read the monthly statistics report published at:
http://nordic.nasdaqomxtrader.com/newsstatistics/.
Meeting of Financial Stability Board
October 3, 2011--At its meeting today, the Financial Stability Board (FSB) reviewed and approved a number of
policy proposals to be submitted to the G20 Summit in November, including on a package of measures to address the “too big to fail” problem. Members also discussed the current strains in financial markets arising from sovereign debt and the steps being taken to address them.
Key financial regulatory reforms
Addressing systemically important financial institutions (SIFIs). The FSB reviewed and approved the package of policy measures to be submitted to the G20 to address the “too big
to fail” problems posed by SIFIs, taking account of the results of the public consultation over the summer. The policy package will include:
Key Attributes of Effective Resolution Regimes for Financial Institutions, which will form a new international standard for the features all national regimes should have to enable
failing financial institutions to be resolved safely and without exposing the taxpayer to the risk of loss.
A requirement that individual globally important SIFIs (G-SIFIs) have recovery and resolution plans, informed by resolvability assessments, and that home and host authorities develop institution-specific cooperation agreements and cross-border crisis management groups.
Additional loss absorbency requirements for those banks determined to be G-SIFIs, based on the methodology developed by the Basel Committee on Banking Supervision for assessing the global systemic importance of banks.
Measures to enhance the intensity and effectiveness of supervision, in particular of SIFIs. Recommendations will include improved data systems for risk management at SIFIs and assessments of the adequacy of supervisory resources
ETFS Precious Metals Weekly: Massive clear-out of net long positions in precious metals sets base for potential future price rises
October 3, 2011--Precious metal net speculative futures positions hit their lowest level in over 2 years last week. The position clear-out in gold, silver and palladium could potentially set the stage for short-covering rallies and provide base support for any price gains ahead. Net speculative positions in silver were cut back at the fastsest
pace in almost half a decade last week.
Gold, silver prices start the week higher as financial de-leveraging slows.
More optimism surrounding the possibility for more concrete action from European monetary authorities soothed markets slightly last week as Germany moved to ratify the expansion of the European bailout fund late last week. Nonethless, the admission from Greece that it will miss previous EU budget deficit targets as part of
its latest bailout-linked austerity package highlights that the debt situation remains precarious.
Platinum trading at the largest discount to gold on record*.The abrupt retreat of market risk appetite saw the platinum price drop 15% below its 200 day moving average last week and left the platinum:gold spot price ratio lower than its post-Lehman’s crisis trough in December 2008. The price ratio is currently trading at almost half its long run (10 year) average.
Average daily turnover in Shanghai Gold Exchange (SGE) double its 1 year average as prices drop to their lowest level in two and a half months. This continues the pattern of rising turnover on price drops seen over recent months. It will be of interest to see how Asia demand holds up over the Chinese holiday season October 1-3. GFMS note that purchases of physical gold in India, the worlds largest gold consumer, have seen less pronounced seasonal ebbs than usual over recent years, suggesting that gold purchases are becoming more evenly distributed throughout the year as direct gold investors play a larger role.
Sovereign creditworthiness questions broaden within the OECD as New Zealand stripped of its AAA status. As the European debt crisis drags on, debt anxieties appear to be broadening as the turmoil tests investor appetite for sovereign debt, with New Zealand stripped of its AAA status last week by S&P and Fitch. The country’s relative dependency on overseas debt, despite its close affiliation with China-led commodities demand, was singled out as a key vulnerability.
What to watch this week. This week marks key monetary policy announcements and speeches in the US, Europe and Japan. Any hints at expanded quantitative easing by monetary authorities could prove supportive to gold prices. This week also sees a plethora of manufacturing data in the US and Europe, and key US employment data at the end of the week. Stronger data could prove supportive to more cyclically-oriented silver, platinum and palladium prices this week, especially in light of exceptionally large price drops and net long speculative futures positioning declines last week.
visit www.etfsecurities.com for more info
SGX, LSE tying up for London Metal Exchange bid
September 30 2011--LME makes up 80% of traded volume in global metal futures trades
LME's major shareholders include Goldman Sachs and JPMorgan
More than 9 suitors have shown interest in LME - CEO
SGX and LSE decline to comment
The Singapore Exchange Ltd is tying up with London's main bourse to make a joint bid for the London Metal Exchange, a source told Reuters on Friday, as the world's largest metal market seeks a suitor in a deal that could be worth 1 billion pounds ($1.57 billion).
The consortium has appointed a bank to advise it on the bid, said the source, who had direct knowledge of the deal, with the auction expected to attract rival offers.
Hedging fuels commodities and credit volatility
September 30, 2011--Investors have been preparing for the worst in recent weeks, scrambling to hedge themselves against an array of worrying risks – and in the process driving a spike in volatility in currencies, credit and commodities to match what has been seen in equities.
Equity volatility, as measured by the CBOE Volatility index, or VIX, surged by 160 per cent in the third quarter, the biggest quarterly jump in at least two decades. It has now remained above 30, about twice its historical average, for the longest period since early 2009.
Emerging markets bond funds lose $3.2 bn; banks cite EPFR data
September 30, 2011--Outflows from emerging debt funds accelerated sharply to $3.2 billion over the past week as investor flight out of riskier assets gathered pace, while US debt and money funds gained, banks said on Friday, citing data from EPFR Global.
Money market funds took in $8.8 billion in the week to September 28 while US fixed income absorbed $11.4 billion, the data released to clients late on Thursday by Boston-based EPFR showed.
First offers for AXA's unit seen next week -sources
Insurer had said was exploring sale of private equity arm
AXA denies report it will meet with French authorities
France will fight to stop sale to U.S. rival -banker
KKR and BlackRock invited to submit offers -FT (Updates with partial confirmation, denial on planned meeting)
September 30, 2011--Potential bidders for the private equity unit of French insurer AXA have been asked to submit first offers early next week,
sources close to the situation said on Friday.
Axa said on Wednesday it was exploring the possible sale of its private equity unit.
TABB releases report on OTC clearing technology
September 29, 2011--Huge demands for technology upgrades as global regulators focus on the clearing
of OTC derivatives.
TABB Group has released a report on the challenges caused by OTC derivatives
reforms which, according to TABB principal Kevin McPartland, "are causing
headaches all over Wall Street, the City and beyond".
According to the report "OTC Derivatives Clearing Technology: Bringing the Back
Office to the Forefront", regulators' focus on the clearing of OTC derivatives
has started a technology revolution. There is a need for major upgrades and
investments in clearing technology to cope with an estimated twentyfold increase
in transaction volumes and demands for lower processing latencies within
clearing. There will also be increased complexities in margin requirement
calculations, and finding offsets within portfolios to reduce margin
requirements, straining systems further.
The study looks at the impacts that new regulation will have on clearing technology for sell-side firms and clearing houses, the cost of implementing the technology for real-time clearing and intra-day margin calls, and presents a view of the new clearing workflow.
"This report captures highly relevant and urgent issues that the clearing industry faces today," comments Nils-Robert Persson, Executive Chairman of Cinnober. "Pressure from regulators and market participants has made it clear that the current post-trade infrastructure doesn't cope with many of the challenges that we're facing today, in terms of calculation complexity, speed and transaction volumes."
"We've been involved in sophisticated clearing solutions for over a decade, but increased our focus three years ago as it became evident after the Lehman crash that not having real-time control of positions and risks should be against the instinct for self-preservation of any participant in our markets," Persson continues. "The key characteristics of our offering in this area are flexibility and scalability that enable true real-time clearing and risk management over multiple asset classes. Technology is an enabler and must never become a bottleneck in the development of efficient and secure services".
"Real-time clearing of a broad range of OTC products will happen," McPartland says, "since market participants and regulators demand it and innovative technologists will guarantee it. These improvements will come in phases, paralleling regulatory rollout and growth in clearing volumes. The first phases are underway and clearinghouses and dealers understand the winners will be those who can consume and disseminate data elements critical to trading, clearing and reporting in the least amount of time. But technology is the key catalyst behind the elimination of existing inefficiencies, reduction of expensive manual resources and lowering of operational risk."
The report is based on interviews with clearinghouses, swap dealers, technology providers and buy-side clearing specialists. Authors are TABB's Kevin McPartland, director of fixed income research and senior contributing analyst Finn Christensen.
To get a copy of the released report, please e-mail
otc-clearing@cinnober.com.