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IOSCO launches consultation on suspension of CIS redemptions
March 8, 2011--The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published a consultation report, Principles on Suspensions of Redemptions in Collective Investment Schemes, which analyses how different jurisdictions’ regulatory regimes address the suspension of redemptions by open-ended collective investment schemes (CIS) and proposes principles which provide general standards for how regulatory regimes should approach and oversee suspension of redemptions.
Proposed Principles for Suspension of CIS Redemptions
The principles generally cover all types of open-ended CIS which offer a continuous redemption right, and apply irrespective of whether they are offered to institutional or retail investors. They are addressed to those entities responsible for the overall operation of the CIS and in particular its compliance with the legal/regulatory framework in the respective jurisdiction and thus for the implementation of the principles. The delegation of activities may not be used to circumvent the principles and there should be compliance with the principles, whether activities are performed directly or through a third party.
MSCI to change its methodology for the treatment of special cash dividends in the MSCI Net DTR Indices
March 7, 2011--MSCI Inc. (NYSE: MSCI), a leading provider of investment decision support tools worldwide, including indices, portfolio risk and performance analytics and corporate governance services, announced today that following the feedback received from the investment community, it will change its treatment of special cash dividends for the MSCI Net Daily Total Return (DTR) Indices, effective March 14, 2011.
As a reminder, currently, according to the MSCI Corporate Events Methodology, special cash dividends that are greater than or equal to 5% of the market price of the underlying security are reflected in the MSCI Indices through an adjustment on the ex-date. A Price Adjustment Factor (PAF) using the gross dividend amount is applied for the MSCI Price Indices, the MSCI Gross DTR Indices and the MSCI Net DTR Indices regardless of the withholding tax applied to the special cash dividend, if any.
Effective March 14, 2011, MSCI will enhance its treatment of special cash dividends in the MSCI Net DTR Indices only, by reflecting the net dividend amount instead of the gross dividend amount in the MSCI Net DTR Indices for special cash dividends subject to withholding taxes. In order to do so, MSCI will reinvest a negative amount corresponding to the withholding tax in the MSCI Net DTR Indices only. This negative reinvestment will be reflected simultaneously with the PAF on the ex-date of the special cash dividend.
New acceleration in exchange traded derivatives trading volumes in 2010
March 7, 2011--Trading in derivatives contracts on regulated exchanges worldwide surged to the highest levels in nearly a decade in 2010, according to statistics compiled by the World Federation of Exchanges (WFE).
More than 22.4 billion derivative contracts were traded on exchanges worldwide in 2010 (11.2 billion futures and 11.1 billion options) against 17.8 billion in 2009. The growth rate (+25%) is one of the highest observed since 2003. The number of futures traded increased faster (+35%) than options (+16%), according to WFE, which annually conducts a survey for the International Options Markets Association (IOMA). The full report will be available a few weeks after the annual IOMA conference, hosted by NSE of India in Mumbai from 1st to 4th May.
Opec members rush to raise oil output
March 7, 2011--Influential members of OPEC, the oil cartel, are joining Saudi Arabia in raising output to cool soaring prices and allay fears of a supply crunch in the west.
The behind-the-scenes move by Kuwait, the United Arab Emirates and Nigeria reflects growing unease among OPEC members over the threat to the global economic recovery from crude’s runaway rise amid the worsening crisis in Libya.
Additions to Market Indices and the Comovement of Stock Returns Around the World IMF Working paper
March 4, 2011--Using newly-constructed data covering the last decade, we document that, in most of forty markets, when added to the main index, firms’ returns experience an increase in comovement with the rest of the index, reflected in higher beta and greater explanatory power of the market return.
Stock turnover and analyst coverage also typically increase upon inclusion. Using various tests, we find the demand-based view of comovement (the category/habitat theories of Barberis, Shleifer and Wurgler, 2005) to provide a good explanation for many of our findings. Some results, though, suggest that information-related factors are also important in explaining the increased comovement.
Additions to Market Indices and the Comovement of Stock Returns Around the World-IMF Working paper
Fiscal Expectations Under the Stability and Growth Pact: Evidence from Survey Data IMF Working paper
March 4, 2011--The paper uses survey data to analyze whether financial market expectations on government budget deficits changed in France, Germany, Italy, and the United Kingdom during the period of the Stability and Growth Pact (SGP).
Our findings indicate that accuracy of financial expert deficit forecasts increased in France. Convergence between the European Commission's and market experts’ deficit forecasts also increased in France, Italy, and the United Kingdom, particularly during the period after SGP’s reform in 2005. Yet, convergence between markets’ forecasts and those of the French, German, and Italian national fiscal authorities seems not to have increased significantly during the SGP.
New Growth Drivers for Low-Income Countries - The Role of the BRICs
March 4, 2011--The emergence of BRICs—Brazil, Russia, India, and China—is reshaping low-income countries’ (LICs) international economic relations. While industrial countries remain LICs’ dominant development partners, LIC-BRIC ties have increased so rapidly over the past decade that BRICs have become new growth drivers for LICs.
Trade with BRICs is already close to half of the value of combined trade with the European Union and the United States, and larger than with other emerging market economies. BRIC FDI and development financing are making a significant impact in some key areas despite their relatively small volumes compared with those from advanced countries. Beyond the increased flows of goods and capital, BRICs have brought new dynamics in LICs’ economic relations with the rest of the world, complementing as well as competing with OECD partners. Nevertheless, while potential benefits from the LIC-BRIC ties are enormous, there are challenges and risks in realizing such benefits.
view report New Growth Drivers for Low-Income Countries - The Role of the BRICs
IOSCO survey results on implementation of securitization recommendations
April 4, 2011--The Technical Committee of the International Organization of Securities Commissions (IOSCO) has published the results of a survey on the implementation of its September 2009 recommendations with respect to securitisation and credit default swap markets – Task Force on Unregulated Markets and Products – Implementation Report.
The report shows that all jurisdictions surveyed by the Task Force had at least one, if not multiple initiatives in progress to implement the recommendations on: disclosure; the retention of economic interest (skin in the game); investor suitability, and international coordination; and regulatory cooperation. Most measures are expected to be implemented in 2010 and 2011.
The Technical Committee, based on the survey responses and subsequent discussions, has made two further recommendations:
TFUMP Recommendation 1 – IOSCO recommends regulators encourage improvements in disclosure standards for private or wholesale offerings of securitised products; and
TFUMP Recommendation 2 – IOSCO recommends regulators engage in international cooperation toward convergence of national regulations, where desirable, and review progress regularly.
view the Task Force on
Unregulated Financial Markets
and Products Implementation Report
Anger as exchanges raise closing auction fees
March 4, 2011--Two of Europe’s largest exchanges have raised the fees they charge for traders dealing during the end-of-day auction, provoking an outcry among banks and brokers that are their biggest customers.
The moves by NYSE Euronext, which operates bourses in Amsterdam, Paris, Brussels and Lisbon, and Nasdaq OMX, which runs exchanges in Sweden, Denmark, Finland and Iceland, come as exchanges have been forced to lower fees amid stiff competition from rival platforms such as Chi-X and BATS.
UN warns on oil as food prices spike
MArch 3, 2011-- Global food prices hit a record high in February, the United Nations said on Thursday, warning that surprise oil price spikes induced by Middle East unrest would affect already volatile cereal markets.
Rising food prices are a fast-growing global concern, partly fuelling the protests which toppled the rulers of Tunisia and Egypt in January and February, which in turn unleashed unrest in North Africa and the Middle East from Algeria to Yemen.
The UN Food and Agriculture Organisation's (FAO's) Food Price Index hit its second straight record last month, further passing peaks seen in 2008 when prices sparked riots in several countries, driven by rising grain costs and tighter supply.