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Global Regulatory Overhaul is Pushing for Greater Transparency in OTC Instruments, Says TABB Group
New Research Report Examines the Changing OTC Valuations Industry; OTC Valuation Spending Projected to Grow at an 11% CAGR through 2013
October 20, 2010-- The recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act includes provisions addressing the lack of transparency in the OTC derivatives market that will provide a significant boost to the prospects of independent valuation service providers.
According to TABB Group in a just published research report, “OTC Valuation Services: How You Know if the Price is Right” regulators want more openness in the markets on many different levels. “Dodd-Frank speaks to central clearing, swap execution facilities (SEFs), a central trade repository and the Office of Financial Research to provide a framework for lowering systemic risk,” says Andy Nybo, a TABB principal, the advisory and research firm’s head of derivatives and co-author of the report with Finn Christensen, a senior contributing analyst. “As OTC instruments begin to trade on SEFs and are centrally cleared, they will provide a wealth of benchmark data that will feed more standardized OTC valuation models. This will force a change in business models current valuation service providers use to stay competitive.”
Nybo says OTC derivatives trading volume has returned to 2007 levels. “Although the challenges and opportunities faced by valuations services are varied, TABB believes better times are ahead for those firms able to successfully navigate changes brought about by regulatory reform. Spending on OTC valuations remains an increasingly important area of focus across the industry, with spending totaling an estimated $249 million in 2010.” He adds that by 2013, spending will increase by 18.1%, to $294 million. Over the 2002 to 2013 period, spending for OTC derivative valuation activities will grow at an estimated CAGR of 11%.
The Impact of the Great Recession on Emerging Markets-IMF Working paper
October 20, 2010--This paper examines the impact of the recent global crisis on emerging market economies (EMs). Our cross-country analysis shows that the impact of the crisis was more pronounced in those EMs that had initial weaker fundamentals and greater financial and trade linkages. This effect is observed along a number of dimensions, such as growth, stock market performance, sovereign spreads, and credit growth.
This paper also shows that during this crisis, pre-crisis reserve holdings helped to mitigate the initial growth collapse. This finding contrasts with other studies that fail to find a significant relationship between reserves and the growth decline. This paper argues that our preferred measure of impact is a more accurate reflection of the true impact of the crisis on EMs.
China defends policy on rare earths
October 20, 2010--China has denied that it is violating World Trade Organisation rules in its strongest statement since the US announced an investigation last week into Beijing’s rare earths and green technology policies.
China reins in rare earth exports - Oct-19.Japan seeks to cut dependence on China - Oct-06.‘Rare earths’ fears spur US review - Sep-26..“China will continue controlling measures on exploiting rare earth, its production and exports and these measures are not in conflict with WTO regulations,” the ministry of commerce said on Wednesday. “China will continue to supply the world with rare earths.”
However Japanese officials said exports of rare earths – 17 elements vital to technological products as diverse as wind turbines, car batteries and sophisticated radar systems – have still not returned to normal after they were halted during a diplomatic dispute last month. The New York Times reported on Wednesday that China had halted rare earths shipments to Europe and the US.
International Capital Flows and Development: Financial Openness Matters-Working paper
October 19, 2010--Summary: Does capital flow from rich to poor countries? We revisit the Lucas paradox and explore the role of capital account restrictions in shaping capital flows at various stages of economic development. We find that, when accounting for the degree of capital account openness, the prediction of the neoclassical theory is confirmed: less developed countries tend to experience net capital inflows and more developed countries tend to experience net capital outflows, conditional of various countries’ characteristics.
The findings are driven by foreign direct investment, portfolio equity investment, and to some extent by loans to the private sector.
view the working paper-International Capital Flows and Development: Financial Openness Matters
BlackRock ETF Landscape: Global Handbook, Q3 2010
October 19, 2010--This is a comprehensive directory of all 3,182 ETFs and ETPs with 6,361 listings, assets of US$1,196.9 Bn from 159 providers on 46 exchanges around the world.
At the beginning of September 2010 the global ETF industry had 2,308 ETFs with 4,922 listings, assets of US$1,061.9 Bn, from 129 providers on 43 exchanges around the world.
Additionally, there were 874 other Exchange Traded Products (ETPs) with 1,439 listings and assets of US$135.0 Bn from 48 providers on 20 exchanges. Combined, there were 3,182 products with 6,361 listings, assets of US$1,196.9 Bn from 159 providers on 46 exchanges around the world.
The growth in ETF listings can be explained, in large part, by strong investor demand for these types of products. The proliferation of new offerings has also made it more challenging in terms of decision-making.
Shell to review Dow Jones Sustainability Index as bonus metric after being dumped from benchmark
Response to “subjective” decision by Dow Jones/SAM
October 18, 2010--Oil giant Shell is reviewing whether to continue using the Dow Jones Sustainability Indexes as a metric to gauge senior management bonuses after it was deleted from the index.
Performance against the index currently accounts for half of the sustainable development part – or 10% of variable pay – of a scorecard Shell uses to judge executive committee members
Dow Jones and its partner SAM, the sustainable investing arm of Robeco, dropped Shell from the index in September after having removed BP in June following the Gulf of Mexico oil spill.
view the Shell Sustainability Report
Global Aging Preparedness Index
October 17, 2010--The world is being overtaken by a stunning demographic transformation known as global aging. Over the next few decades, global aging promises to affect everything from business psychology and workforce productivity to the shape of the family and the direction of global capital flows. Perhaps most fatefully, it could throw into question the ability of societies to provide a decent standard of living for the old without imposing a crushing burden on the young.
Which countries are most prepared to meet the challenge? And which countries are least prepared? The Global Aging Preparedness Index (or GAP Index) provides the first comprehensive quantitative assessment of the progress that countries worldwide are making in preparing for global aging, and particularly the old-age dependency dimension of the challenge. The GAP Index consists of two separate subindices—the fiscal sustainability index and the income adequacy index. It covers twenty countries, including both developed economies and emerging markets. To learn more about the GAP Index, please visit its website at gapindex.csis.org.
view Global Aging Preparedness Index Full Report
IOSCO publishes recommendations for market interventions and securitisation in Emerging Markets
October 15, 2010--The Emerging Markets Committee (EMC) of the International Organization of Securities Commissions (IOSCO) meeting in Istanbul this week has approved two reports containing recommendations for regulators in emerging markets jurisdictions aimed at assisting them in relation to market interventions and the securitisation market.
Effectiveness of Market Interventions in Emerging Markets-Final Report
Securitization and Securitized Debt Instruments in Emerging Markets-Final report
US Treasury delays ruling on renminbi
October 15, 2010--The US Treasury has announced it will push back a decision about whether to brand China a currency manipulator, underlining a difficult trade-off between placating an angry domestic constituency and stopping international tensions over currency escalating.
For the second time this year, Barack Obama’s administration on Friday delayed the twice-yearly currency report, which assesses the exchange rate policies of trading partners. It has not formally named any country as a manipulator since 1994 despite rising demands from Congress.
BlackRock ETF Landscape Industry Highlights, End Q3 2010
October 14, 2010--Below are the ETF Landscape industry highlights as at end Q3 2010.
Global ETF and ETP Industry end Q3 2010:
The global ETF industry had 2,379 ETFs with 5,204 listings, assets of US$1,181.3 Bn, from 129 providers on 45 exchanges around the world.
The global ETF and ETP industry combined had 3,257 products with 6,649 listings, assets of US$1,328.2 Bn from 158 providers on 48 exchanges around
the world.
European ETF and ETP Industry end Q3 2010:
The European ETF industry had 1,030 ETFs with 3,396 listings, assets of US$256.2 Bn, from 37 providers on 21 exchanges.
In September 2010, net new assets into European domiciled ETFs/ETPs totalled US$5.0 Bn. Equity ETFs/ETPs gathered US$3.9 Bn net inflows, of which US$1.8 Bn went into emerging markets equity ETFs/ETPs and US$1.1 Bn into European equity ETFs/ETPs. Fixed income ETFs/ETPs saw net inflows of US$0.4 Bn, of which US$0.8 Bn went into government bond ETFs/ETPs while money market ETFs/ETPs saw net outflows of US$0.7 Bn. Commodity ETFs/ETPs saw net inflows of US$0.7 Bn, of which US$0.6 Bn went into precious metals ETFs/ETPs while agriculture ETFs/ETPs saw net outflows of US$0.2 Bn.
In September 2010, net new assets into European domiciled ETFs totalled US$4.8 Bn. db x-trackers has received the largest net inflows with US$2.2 Bn, followed by iShares with US$1.0 Bn net inflows, while Lyxor Asset Management had the largest net outflows with US$0.1 Bn.
United States ETF and ETP Industry end Q3 2010:
The United States ETF industry had 890 ETFs, assets of US$797.2 Bn, from 29 providers on two exchanges.
In September 2010 US domiciled ETFs/ETPs experienced net inflows totalling US$28.0 Bn. Equity ETFs/ETPs saw US$24.7 Bn net inflows, of which US$18.8 Bn went into North American equity ETFs/ETPs and US$5.6 Bn into emerging markets equity ETFs/ETPs. Fixed income ETFs/ETPs saw net inflows of US$1.5 Bn, of which US$0.9 Bn went into high yield ETFs/ETPs and US$0.7 Bn into corporate bond ETFs/ETPs. Commodity ETFs/ETPs experienced US$1.1 Bn net inflows, of which US$1.2 Bn went into precious metals ETFs/ETPs, while broad commodity exposure ETFs/ETPs saw net outflows of US$0.2 Bn in September 2010.
In September 2010, United States domiciled ETFs experienced net inflows totalling US$26.5 Bn. State Street Global Advisors gathered the largest net inflows with US$12.3 Bn, followed by PowerShares with US$4.8 Bn net inflows, while ProShares saw US$0.3 Bn net outflows in September 2010.
Canada ETF and ETP Industry end Q3 2010:
The Canadian ETF industry had 152 ETFs, assets of US$34.0 Bn, from four providers on one exchange.
Asia Pacific (ex-Japan) ETF and ETP Industry end Q3 2010:
The Asia Pacific (ex-Japan) ETF industry had 185 ETFs with 289 listings, and assets of US$51.3 Bn from 56 providers on 13 exchanges.
Japan ETF and ETP Industry end Q3 2010:
The Japanese ETF industry had 74 ETFs with 77 listings, and assets of US$30.7 Bn from six providers on two exchanges.
Latin America ETF and ETP Industry end Q3 2010:
The Latin American ETF industry had 21 ETFs with 347 listings, and assets of US$10.0 Bn from three providers on three exchanges.
