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Senior Supervisors Group Issues Report on Risk Management Practices
October 21, 2009--The Senior Supervisors Group (SSG) that comprises senior financial supervisors from seven countries (United States, Canada, France, Germany, Japan, Switzerland, United Kingdom) today issued a report that evaluates how weaknesses in risk management and internal controls contributed to industry distress during the financial crisis.
The report — Risk Management Lessons from the Global Banking Crisis of 2008 — reviews in detail the funding and liquidity issues central to the recent crisis and explores critical areas of risk management practice in need of improvement across the financial services industry.
The report concludes that despite firms' recent progress in improving risk management practices, underlying weaknesses in governance, incentive structures, information technology infrastructure and internal controls require substantial work to address.
The observations and conclusions in the report reflect the results of two initiatives undertaken by the SSG. These initiatives involved a series of interviews with firms about funding and liquidity challenges and a self-assessment exercise in which firms were asked to benchmark their risk management practices against a series of recommendations and observations taken from industry and supervisory studies published in 2008.
This report represents a joint effort of nine supervisory agencies, including the Securities and Exchange Commission, the Office of the Comptroller of the Currency, and the Federal Reserve in the United States. The other agencies are the Canadian Office of the Superintendent of Financial Institutions, the French Banking Commission, the German Federal Financial Supervisory Authority, the Japanese Financial Services Agency, the Swiss Financial Market Supervisory Authority, and the U.K. Financial Services Authority.
These initiatives were conducted to support the priorities of the Financial Stability Board whose mission is to address vulnerabilities affecting the financial system and to promote global financial stability.
CME Group to accept gold as collateral
October 20, 2009--CME Clearing is introducing an enhancement to the existing Performance Bond Collateral schedule. Effective October 19, 2009, firms will be able to post physical gold to CME Clearing to cover non-segregated (NSEG) Performance Bond requirements. Initially, gold will be able to be posted to JP Morgan Chase Bank in London, England. In the near future, we hope to add additional depositories.
There will be a 15% asset haircut on the market value of all gold deposits. Additionally, gold can be applied to 20% Core, 50% Reserve and 50% of concentration requirement for your particular firm. There will be a firm asset limit of $200 million. These guidelines are subject to change and will be evaluated on a regular basis. Fees for storage, insurance and handling will be assessed by the custodian and passed on to the firms monthly. The total fees that will be charged is subject to change but is currently estimated at 5bps.
CME will send pre-notifications via email to back office managers each month which will reflect the date that these monies will be debited directly from your firm's house account. Prior to posting physical gold as collateral to CME Clearing for house accounts, a clearing firm will need to execute an English law title transfer agreement in the form specified by CME Clearing, which will cover all subsequent deposits of gold.
In order to obtain the title transfer agreement, please contact CME Clearing Financial Unit by phone at (312) 207-2594 or via email at Clearinghousefinancial@cmegroup.com.
The title transfer agreement will ensure that CME Clearing has the control over the collateral that is specified in CME rules, under English law, since the gold will be physically located in London.
NYSE Euronext To Provide Transparency For Alternative Trading Systems
‘Dark Pool’ Trades ‘Printed’ On FINRA/NYSE Trade Reporting Facility Will Be Published Daily On NYSE.Com – Barclays Capital, GETCO, Goldman Sachs, Knight, UBS To Participate - Other Firms To Join
October 20, 2009--NYSE Euronext (NYX) announced that beginning next month, it will provide a means for participating broker-dealers’ alternative trading systems (ATSs) and off-exchange market centers to create transparency regarding volume and individual “dark pool” activity by allowing the firms to “print” trades on the FINRA/NYSE Trade Reporting Facility (TRF) and display the daily activity of each trading venue on NYSE.com.
“This is an example of NYSE Euronext and the industry working together to develop a positive solution to address the lack of understanding regarding the extent and nature of ‘dark pool’ trading , which has been a concern for regulators and legislators,” said Joseph Mecane, NYSE Euronext’s Executive Vice President and Chief Administrative Officer for U.S. Markets. “We believe this will bring requisite and appropriate sunlight to alternative trading systems and other sources of off-exchange liquidity, and also help standardize the way their trading volumes are reported.”
NYSE Euronext has been discussing the idea with a number of firms that operate ATSs and off-exchange trading venues, and Barclays Capital, GETCO, Goldman Sachs Execution & Clearing, L.P., Knight Equity Markets, L.P. and UBS Investment Bank have volunteered to begin reporting their respective venues’ activity to the FINRA/NYSE TRF in November 2009. Other firms have indicated an interest in NYSE Euronext’s transparency initiative and are establishing the necessary technology to begin participating in the program in the coming weeks.
"This initiative is an important step toward the standardization of trade volume reporting across ATS venues," said Frank Troise, Head of Equities Electronic Product at Barclays Capital. "Industry participants will be able to make more informed order placement decisions and thereby improve their execution quality."
"We need to maintain the right balance between vibrant public price discovery and individual execution preference," said Jon Ross head of GETCO Execution Services. "This initiative is an important first step in collecting the data critical to analyzing and preserving that balance."
“We’re looking forward to the launch of NYSE Euronext’s ATS-transparency initiative,” said Greg Tusar, Head of Electronic Trading in the Americas at Goldman Sachs. “By publishing trading volume on its website, NYSE Euronext has spearheaded an industry-driven solution which provides a public source for evaluating broker-dealer ATS volumes.”
"Knight is pleased to work with NYSE Euronext to increase transparency among off exchange liquidity providers through their FINRA/NYSE Trade Reporting Facility,” said Jamil Nazarali, Managing Director, Knight Equity Markets. "This new facility will enable market participants to better evaluate and compare competing pools of liquidity to make more informed routing decisions."
Charlie Susi, Head of Direct Execution for the Americas at UBS Investment Bank, said, “The way the industry has advertised non-displayed volumes and crossing rates has been highly inconsistent – which makes it very difficult for clients to get a clear picture of liquidity. This initiative is something we're pleased to see, because it will establish better objectivity and clarity. We encourage all of our peers to join us in participating.”
The daily trading activity volume published by the FINRA/NYSE TRF will be based on trades reported to the FINRA/NYSE TRF, which follow FINRA’s trade-reporting rules. Basing the published volume strictly on trade reports will address some of the problems associated with voluntary reporting by ATSs of their own volume, such as counting both sides of a trade, and counting trades that are routed by not executed. Trades reported to FINRA/NYSE TRF will be single-counted and matched-only. All ATS trades are currently reported to an industry TRF, which in turn drives the various “time and sales” market data feeds. This initiative attributes the volumes to the matching destination.
Each trade reporting facility provides a mechanism for the reporting of transactions effected otherwise than on an exchange. While each TRF is affiliated with a registered national securities exchange, each TRF is a FINRA facility and is subject to FINRA's registration as a national securities association.
Preqin Report:
October 19, 2009--Impact of the Financial Crisis on Investor Attitudes to
Infrastructure
The majority of investors that had
invested in 2009 did so sparingly, with 14% investing in only one
fund and just 5% committing to multiple funds.
The economic downturn has forced investors to take stock of
their existing portfolios and re-evaluate asset allocations, which
has led to a decrease in investor activity in 2009.
65% of investors told us that they had no plans to invest in infrastructure funds in 2009 because they had already fulfilled their target allocations. Due to market conditions many of these investors have not had to make new investments to maintain their allocations to the asset class. 30% of investors had postponed planned infrastructure commitments, choosing to wait until market conditions improve before making their planned investments.
The remaining 5% of investors had completely cancelled planned commitments, citing either market volatility or a change in investment strategy as the reason behind this decision.
ETF Exchange (ETFX) Reaches USD275m Assets Under Management As Resource-Equity Related ETFs Show Stellar Performance This Year
ETFX Funds now have over $275 million AUM, up 84% in the past two months.
Resource-equity related ETFs show stellar performance this year, with ETFX Russell Global Coal Mining Fund up 109% YTD.
ETFX equity ETF platform has seen strong trading growth, with turnover now reaching $100m per week.
Third generation ETFs pioneered by ETF Securities.
October 19, 2009--ETF Securities Ltd (ETFS), the global pioneers in Exchange Traded Commodities (ETCs) and independent provider of Exchange Traded Funds (ETFs), is pleased to announce that ETF Exchange, its third generation ETF platform has now reached over $275m in assets under management.
The ETFX equity ETF platform has seen strong trading volume growth since the introduction of thematic ETFs in the fourth quarter of 2008, and 2x short and 2x leveraged equity ETFs at the end of Q2 2009, with weekly turnover in early October up four-fold since June. Recent strong turnover has been associated with swings in market sentiment since the start of the October quarter, with a growing contribution from leveraged and short ETFs recently pushing trading volumes over $100 million per week in the opening weeks of Q4.
Commodity-related ETFs have all increased sharply since the start of 2009, with average growth of 42% YTD in the week ended October 9 (21 percentage points ahead of the DJ-STOXX 50 Index). Gains have been led by a 109% increase in the ETFX Russell Global Coal Mining Fund (COAL), an 85% rise in ETFX Dow Jones 600 Basic Resources Fund (BRES) and a 60% increase in ETFX Russell Global Steel Large Cap Fund (STLL) as high beta commodities have prospered in the context of a rebound in cyclical activity indicators. Basic resources has been the strongest performing STOXX 600 sector so far in 2009, outperforming all other sectors by 50 percentage points on average YTD.
The vision for third generation ETFs was pioneered by ETF Securities. The idea was inspired by investor demands for increased levels of transparency, liquidity and counterparty risk management. ETF Securities identified that the current ETF issuance model by single financial institutions could be strengthened by diversifying index replication across a consortium of the strongest financial players and concentrating liquidity within a single platform. Under the current ETF issuance model, if the sponsoring / issuing financial institution fails, it is highly likely that their respective ETFs would be greatly disrupted and potentially liquidated.
Commenting on ETF Exchange reaching $275m in AUM, Mark Weeks, CEO of ETF Exchange, said: "The ETF Exchange has seen rapid growth in terms of product breadth, trading liquidity, and returns since its inception in the December quarter of 2008. With the participation of a world-class network of banks the platform will offer investors a unique opportunity to trade an innovative range of ETFs with an unparalleled level of service, setting a new benchmark in global ETF trading."
Russia ready to abandon dollar in oil, gas trade with China
October 19, 2009--- Russia is ready to consider using the Russian and Chinese national currencies instead of the dollar in bilateral oil and gas dealings, Prime Minister Vladimir Putin said on Wednesday.
The premier, currently on a visit to Beijing, said a final decision on the issue can only be made after a thorough expert analysis.
"Yesterday, energy companies, in particular Gazprom, raised the question of using the national currency. We are ready to examine the possibility of selling energy resources for rubles, but our Chinese partners need rubles for that. We are also ready to sell for yuans," Putin said.
He stressed that "there should be a balance here."
On Tuesday, Russia and China agreed terms for Russian gas deliveries at a level of up to 70 billion cubic meters a year. China also imports oil from Russia.
The Russian prime minister said the issue would be addressed among others at a meeting of Shanghai Cooperation Organization (SCO) finance ministers, who are to convene before the end of the year in Kazakhstan.
Britain's Independent newspaper reported last Tuesday that Russian officials had held "secret meetings" with Arab states, China and France on ending the use of the U.S. dollar in international oil trade.
The countries are reportedly seeking to switch from the dollar to a basket of currencies including the euro, Japanese yen, Chinese yuan, gold, and a new unified currency of leading Arab oil producing countries.
The Independent said the meetings have been confirmed by Chinese and Arab banking sources.
Treasury Releases Semi-Annual Report to Congress
October 15, 2009--The U.S. Department of the Treasury today released the Semi-Annual Report to Congress on International Economic and Exchange Rate Policies, as required under Sections 3004 and 3005 of the Omnibus Trade and Competitiveness Act of 1988. The report covers the period from January 2009 through June 2009, but where available and appropriate, information through early October 2009 is included.
The report describes U.S. economic developments as well as international economic, financial, and exchange rate developments during the first half of 2009. In particular, it focuses on the policy actions that major U.S. trading partners – representing more than 80 percent of U.S. international trade – have taken to lay the foundation for economic recovery.
During the period under consideration, virtually every country and economic area described in the report put in place additional monetary and fiscal measures to bolster demand. These forceful actions worked, and the report shows that financial conditions in the United States and around the world have improved dramatically and signs of an economic recovery have begun to emerge. Global current account imbalances have fallen sharply during the crisis from a peak of 5.9 percent of world GDP to an IMF-estimated 3.6 percent in 2009. The U.S. current account deficit has fallen from a peak of 6.5 percent of GDP in the fourth quarter of 2005 to 2.9 percent of GDP in the second quarter of 2009.
As noted in the report, Treasury has concluded that no major trading partner of the United States met the standards identified in Section 3004 of the Act during the most recent reporting period.
View the Report to Congress on International Economic and Exchange Rate Policies
KLD Research & Analytics, Inc. and FTSE complete rebranding of KLD’s family of indexes as FTSE
October 15, 2009 - KLD Research & Analytics, Inc. and FTSE recently completed the rebranding of KLD’s family of indexes as FTSE KLD Indexes. The rebranding of the indexes marks the implementation of the strategic partnership the companies announced in October 2008.
Each month, in addition to reporting index returns for the previous month, FTSE and KLD will feature an index, providing a closer look at the strategy and constituents.
Component Changes Made To Dow Jones Islamic Market And Dow Jones Health Care Titans 30 Indexes
October 14, 2009-Dow Jones Indexes, a leading global index provider, today announced that Wyeth (United States, Health Care, WYE) will be removed from the Dow Jones Islamic Market Titans 100, its sub-index Dow Jones Islamic Market U.S. Titans 50 and Dow Jones Health Care Titans 30 indexes.
In the Dow Jones Islamic Market Titans 100 Index and sub-index Dow Jones Islamic Market U.S. Titans 50 Index, Wyeth (United States, Health Care, WYE) will be replaced by Dell Inc. (United States, Technology, DELL).
In the Dow Jones Health Care Titans 30 Index, Wyeth (United States, Health Care, WYE) will be replaced by Express Scripts Inc. (United States, Health Care, ESRX).
Wyeth is being removed due to its acquisition by Pfizer Inc. (United States, Health Care, PFE). All changes will be effective before the open of trading on Friday October 16, 2009.
Further information on the Dow Jones Islamic Market Titans 100, Dow Jones Islamic Market U.S. Titans 50 and Dow Jones Health Care Titans 30 indexes can be found at http://www.djindexes.com.
NASDAQ OMX Announces New Listing Market
BX Listing Platform to Provide Quality Regulation and Market Structure
October 14, 2009--The NASDAQ OMX Group, Inc.
(Nasdaq:NDAQ) announced today that it will establish a new listing
market called BX, pending SEC approval, for companies that do not
presently qualify for an exchange listing.
BX will be a modern venue for companies that aspire to list on, or
return to, The NASDAQ Stock Market. While BX will have basic
quantitative listing standards, the exchange will require companies to
comply with many of the qualitative requirements for listing on NASDAQ
and other securities exchanges. In addition, transactions on this
platform will be subject to a high level of real-time and post-trade
market surveillance.
"With BX we are filling a necessary need for a well-regulated listing venue for companies that otherwise would transfer to, or remain on an unregulated or lightly regulated platform," said Bob McCooey, Senior Vice President of NASDAQ OMX. "This platform will provide significant benefits and protections to companies and their shareholders alike."
Companies who qualify for BX will need to meet significant qualitative listing requirements including having at least three independent directors, a fully independent audit committee and an independent process for oversight of executive compensation decisions.
It is expected that candidates for BX are presently trading on one of the over-the-counter venues, either the OTCBB or the "Pink Sheets," or are listed on NASDAQ or another exchange and subject to being delisted.
NASDAQ OMX is using its listing license from the acquisition of The
Boston Stock Exchange in September 2008 to launch the BX market.
Currently, NASDAQ OMX operates a successful trading platform called
NASDAQ OMX BX that is also derived from its strategic acquisition of
The Boston Stock Exchange.