Global ETF News Older than One Year
ISDA Announces Commodity Derivatives Trade Repository Selection
June 14, 2011--The International Swaps and Derivatives Association, Inc. (ISDA) announced today that the ISDA Commodities Steering Committee has chosen Depository Trust & Clearing Corporation (DTCC) Deriv/SERV and EFETnet to partner with the Committee on the next stage of development of the Commodity Derivatives Trade Repository.
This selection is the result of a public Request for Proposals (RFP), which was issued March 25, 2011. The RFP was issued with the intention to create a trade reporting repository that ultimately will record all Commodity OTC Derivatives trade types. The repository will meet all current and future regulations governing repositories and will provide a structure to rapidly report and provide timely access to information to applicable regulators. The ISDA Commodities Steering Committee, which consists of senior business representatives in the commodity derivatives market from both buy- and sell-side firms, issued the RFP and selected the provider.
Trade repositories improve transparency by providing global regulators with significant visibility into risk exposures by firm and by counterparty. ISDA has helped establish trade repositories for other asset classes, including OTC credit default, interest rate and equity derivatives.
Source: ISDA
ISDA Research Note: On The Impossibility Of Correctly Calibrating The Current Exposure Method For Large OTC Derivatives Portfolios
June 14, 2011--Executive Summary
The capital charges for counterparty credit risk form an important part of the Basel Capital Accords. The Basel Committee permits firms to use a variety of methods to calculate regulatory capital on this risk class, including a simple approach – the constant exposure method or CEM – and a more sophisticated models-based approach known as EPE (for ‘expected positive exposure’).
Counterparty credit risk capital models estimate the potential future exposure (‘PFE’) of a portfolio of derivatives with a counterparty based on whatever margining scheme applies. The CEM approximates this PFE using a constant percentage of notional, with the portfolio capital charge being the sum of the percentages which apply to each instrument. The CEM therefore recognizes no diversification benefit. In contrast, EPE approaches model the entire future of the net portfolio and thus provide much more accurate estimates for portfolios with more than a handful of instruments. The inaccuracy of the CEM is hardly surprising as it was intended only for smaller portfolios and less sophisticated firms.
More recently the Basel Committee has proposed that the CEM be used as a method for determining the adequacy of financial resources available to an OTC derivatives central counterparty (‘CCP’). Since cleared portfolios are very large and very well-hedged, it might be imagined that the CEM is not well suited to this task. This paper confirms that suspicion. In particular we show that the use of the CEM to estimate the riskiness of CCP default fund contributions leads to a significant overstatement of risk. Further, we show that the CEM cannot be simply recalibrated to provide a more risk sensitive approach. Thus an approach which provides more accurate estimates for typical CCPs is to be preferred.
Source: ISDA
Saudi Arabia, US debated oil reserve swap before OPEC
June 14, 2011--It was to be a swap felt around the world - a plan privately discussed by the world’s largest oil exporter and the globe’s biggest consumer to take the heat out of $120-plus oil prices.
In the weeks leading up to the failed June OPEC meeting, US and Saudi officials met to discuss surprising the market with an unprecedented arrangement: exchanging urgently-needed high-quality crude oil stored in the US emergency reserve for heavier, low-quality oil from Saudi Arabia, according to people familiar with the plan.
Source: Todays Zaman
BlackRock New Report ETF Landscape: Industry Highlights - May 2011
June 14, 2011--Global ETF and ETP industry:
The global ETF industry had 2,747 ETFs with 6,079 listings and assets of US$1,446.6 Bn, from 142 providers on 49 exchanges around the world. This compares to 2,218 ETFs with 4,478 listings and assets of US$1,044.1 Bn from 131 providers on 42 exchanges at the end of May 2010.
The global ETF and ETP industry combined, had 3,905 products with 7,873 listings, assets of US$1,636.8 Bn from 180 providers on 52 exchanges around the world. This compares to 3,010 products with 5,613 listings, assets of US$1,173.4 Bn from 157 providers on 44 exchanges, at the end of May 2010
United States ETF and ETP industry:
The ETF industry in the United States had 1,008 ETFs and assets of US$984.0 Bn, from 29 providers on two exchanges. This compares to 836 ETFs and assets of US$710.1 Bn, from 30 providers on two exchanges at the end of May 2010.
US$50.5 Bn of net new assets went into United States listed ETFs/ETPs in 2011 YTD. US$28.5 Bn net inflows went into equity ETFs/ETPs, of which US$18.1 Bn went into ETFs/ETPs tracking United States equity indices, while ETFs/ETPs tracking emerging market indices saw net outflows of
US$4.2 Bn. Fixed income ETFs/ETPs saw net inflows of US$14.7 Bn, of which US$3.1 Bn went into corporate bond ETFs/ETPs and US$2.9 Bn into government bond ETFs/ETPs. Commodity ETFs/ETPs experienced net inflows of US$4.0 Bn, of which ETFs/ETPs providing exposure to agricultural commodities saw net inflows of US$4.0 Bn while ETFs/ETPs providing exposure to precious metals experienced US$2.2 Bn net outflows. US$3.9 Bn net inflows went into leveraged and inverse ETFs/ETPs, of which US$3.5 Bn net inflows went into leveraged inverse ETFs/ETPs and US$0.9 Bn net inflows went into inverse ETFs/ETPs, while leveraged ETFs/ETPs experienced US$0.6 Bn net outflows.
YTD, of the US$47.5 Bn net new assets into United States listed ETFs, Vanguard gathered the largest net inflows with US$20.3 Bn, followed by iShares with US$12.2 Bn net inflows, while Bank of New York had the largest net outflows with US$2.1 Bn in 2011 YTD.
European ETF and ETP industry:
The European ETF industry had 1,154 ETFs with 3,954 listings and assets of US$318.2 Bn, from 39 providers on 23 exchanges. This compares to 946 ETFs with 2,848 listings and assets of US$220.7 Bn from 36 providers on 18 exchanges at the end of May 2010.
US$2.0 Bn of net new assets went into European listed ETFs/ETPs in May 2011. US$2.8 Bn net inflows went into equity ETFs/ETPs, of which US$1.7 Bn went into ETFs/ETPs providing European equity exposure and US$0.7 Bn net inflows went into ETFs/ETPs providing exposure to North American equity indices. Fixed income ETFs/ETPs saw net outflows of US$0.6 Bn, of which money market ETFs/ETPs experienced US$1.3 Bn net outflows while corporate bond ETFs/ETPs saw net inflows of US$0.2 Bn. Commodity ETFs/ETPs experienced US$0.4 Bn net outflows, of which ETFs/ETPs providing exposure to precious metals experienced US$0.3 Bn net outflows while US$0.1 Bn net inflows went into ETFs/ETPs providing exposure to energy. Leveraged and inverse ETFs/ETPs experienced US$0.4 Bn net inflows in May 2011, of which US$0.2 Bn net inflows went into leveraged inverse ETFs/ETPs, US$0.2 Bn net inflows went into inverse ETFs/ETPs and US$0.1 Bn net inflows went into leveraged ETFs/ETPs in May 2011.
Of the US$2.2 Bn of net new assets in European listed ETFs in May 2011, iShares gathered the largest net inflows with US$3.8 Bn, followed by Amundi ETF with US$0.4 Bn net inflows, while ETFlab Investment had the largest net outflows with US$1.5 Bn.
Asia Pacific (ex-Japan) ETF industry:
The Asia Pacific (ex-Japan) ETF industry had 259 ETFs with 371 listings and assets of US$59.0 Bn, from 65 providers on 13 exchanges. This compares to 177 ETFs with 278 listings and assets of US$47.8 Bn, from 60 providers on 13 exchanges at the end of May 2010.
Japan ETF industry:
The Japanese ETF industry had 86 ETFs with 90 listings and assets of US$29.8 Bn, from seven providers on three exchanges. This compares to 71 ETFs with 74 listings and assets of US$25.0 Bn from six providers on two exchanges at the end of May 2010. There are 184 ETFs which have filed notifications in Japan.
Latin America ETF industry:
The Latin American ETF industry had 27 ETFs, with 408 listings and assets of US$10.8 Bn, from four providers on three exchanges. This compares to 21 ETFs, with 250 listings and assets of US$8.5 Bn from three providers on three exchanges at the end of May 2010.
Canada ETF industry:
The Canadian ETF industry had 184 ETFs and assets of US$41.9 Bn, from four providers on one exchange. This compares to 142 ETFs and assets of US$30.2 Bn from four providers on one exchange at the end of May 2010.
Source: Global ETF Research & Implementation Strategy Team, BlackRock
The global order fractures as American power declines
June 14, 2011--Harold Macmillan, the prime minister who watched US power rise as the British empire crumbled, used to say that Britain would play ancient Greece to America’s Rome.
These days it looks as if Rome is declining too. The US finds it increasingly hard to drive forward its vision of international trade and economics over the objections of big emerging-market countries.
Source: FT.com
TMX Group Statement Regarding The Maple Group Offer
June 13, 2011--TMX Group Inc. acknowledges the issuance of a circular to its shareholders by Maple Group Acquisition Corporation (Maple), containing Maple's unsolicited formal offer to acquire 70% of the outstanding shares of TMX Group and soliciting proxies to vote against the proposed merger with London Stock Exchange Group plc (LSEG).
The Board of Directors of TMX Group (the Board) will fulfill its fiduciary responsibility and will review the Maple offer and circular and respond to it in a directors' circular on a timely basis. The Board will also reassess whether the Maple formal offer constitutes a superior proposal, or could reasonably be expected to result in a superior proposal. On May 20, 2011, the Board concluded that, under the terms of the merger agreement (Section 5.8) with LSEG, the Maple proposal of May 13, 2011, did not constitute a superior proposal, nor could it reasonably be expected to result in a superior proposal.
TMX Group continues to pursue efforts currently underway to secure the necessary regulatory and shareholder approvals required to complete its merger with LSEG. A vote by TMX Group shareholders has been scheduled for June 30, 2011 and the Board of Directors has unanimously recommended that shareholders vote in favour of the proposed merger.
Source: Canada NewsWire
ETFS Precious Metals Weekly: Gold holds recent gains as debt wrangles and growth concerns dominate
June 13, 2011--Gold price continues to find support near $1530/oz as the Greek sovereign debt malaise continues and central banks underline that low interest rates are set to continue. US policymakers’ remarks suggest that monetary policy will be kept accommodative in the face of uneven and fragile growth, while their
European counterparts have ruled out further support for Greece via debt purchases by the central bank.
Silver price underperforms gold over past month as industrial activity indicators disappoint. Lower-than-expected German and UK manufacturing growth added to signs from the US that near-term activity momentum in manufacturing is slowing in developed economies, and silver’s relatively high sensitivity to the global growth cycle vs. gold is weighing on the price.
Platinum group metal (PGM) prices rebounded last week as stronger than expected China import growth offset some developed economy growth concerns. Developing economy auto-catalyst demand could once again return to the forefront of market attention once Japan-related supply bottlenecks dissipate.
The gold price continues to hover just below its recent highs as central banks signify their resolve to keep interest rates low amidst what Fed governor Ben Bernanke described as a “frustratingly slow” recovery in growth. The Bank of England also elected to keep interest rates unchanged at its interest rate meeting last week, and markets pushed out rate rise expectations to H1 2012. The one exception is in Europe, where ECB president Trichet signalled a strong probability of further monetary policy tightening despite weak growth momentum in peripheral countries, as inflation and employment in core countries continues to grow. This signalling, together with his dismissal of calls for further central bank support for Greece via bond rollovers/bond purchases, has stoked concerns for the potential of Greek government debt default.
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Source: ETFS Securities
Maple goes hostile with TMX offer
June 13, 2011-- A Canadian consortium of banks and pension funds has taken its $3.8 billion (C$3.7 billion) takeover offer directly to TMX Group shareholders, touting the proposal as the best way to keep the country's exchanges out of foreign hands.
Maple Group Acquisition Corp launched the hostile bid on Monday through a takeover circular that outlines an alternative to London Stock Exchange Group's friendly $3.5 billion bid for TMX, the operator of the Toronto Stock Exchange.
Maple's formal offer is nearly identical to a preliminary proposal unveiled nearly a month ago, except Maple now will buy up to 70 percent of TMX shares, up from 60 percent originally. But the offer price of C$48 a share in cash is the same.
Source: Reuters
Global Liquidity: Availability of Funds for Safe and Risky Assets -IMF Working paper
June 10, 2011--What is global liquidity and how does it affect an economy? The paper addresses that question by looking at liquidity from two different perspectives: global liquidity as availability of funds in safe and risky asset markets. This distinction between safe and risky asset markets is important due to market segmentation, which called for unconventional monetary policy to restore a function of risky asset markets. To analyze the effect of global liquidity,
to restore a function of risky asset markets. To analyze the effect of global liquidity, I construct proxy variables and then asses how they affect an emerging economy whose interest rate is affected by a world risk-free rate and a risk premium. Using the data from four major Latin American countries, I find that these two aspects of global liquidity have similar effects on economic performance in emerging market economies except for their effect on inflation.
view IMF Working paper-Global Liquidity: Availability of Funds for Safe and Risky Assets
Source: IMF
S&P raises gold and base metals price assumptions for 2011
Standard & Poor's has raised its metals price assumptions for 2011 and beyond, citing the increased volatility of the markets but worries about sharp risk of fall in investor demand for gold.
June 10, 2011--Standard & Poor's Thursday raised its gold price assumption from $1,100 per ounce to $1,200 per ounce for the remainder of this year.
The price assumption for 2012 was raised from $1,000 to $1,100 per ounce, while the price assumption for 2013 and beyond is now $900 per ounce, versus $900 for 2012, $700 for 2014, and $600 for 2015 previously.
In their analysis, S&P Credit Analysts Andrey Nikolaev and Mark Puccia expressed concern that currently "about half of the demand for gold comes from financial investors. The key risk remains a sharp decrease in investor demand as the uncertainty in the global economy declines."
Source: Mineweb
