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SEC and UK FSA Discuss Approaches to Global Regulatory Requirements
September 16, 2009--Securities and Exchange Commission Chairman Mary Schapiro and Hector Sants, Chief Executive of the UK Financial Services Authority (FSA), today announced plans to explore common approaches to reporting and other regulatory requirements for key market participants such as hedge funds and their advisers. In particular, they agreed to identify a common, coherent set of data to collect from hedge fund advisers/managers to help the SEC and FSA identify risks to their regulatory objectives and mandates.
This announcement came out of a meeting of the SEC-FSA Strategic Dialogue, through which SEC and FSA leaders meet periodically to discuss areas of mutual interest. Other issues discussed at the meeting included over-the-counter derivatives markets and central clearing; accounting issues; regulatory reform; credit rating agency oversight; short selling; and corporate governance and compensation practices.
Chairman Schapiro said, "As the regulators of two of the world's major market centers, the SEC and the FSA have a strong interest in collaborating with respect to OTC markets and hedge funds, credit rating agencies and other market participants with cross-border operations. Only through strong cooperation can we achieve coherent oversight of global actors and limit opportunities for playing the regulatory seams. I look forward to continuing this successful dialogue between the SEC and FSA."
Chief Executive Sants said, "The global crisis has underlined how intertwined financial markets and institutions are and regulators around the world have to work together to ensure appropriate oversight. We are all working alongside the Financial Stability Board and other international regulatory committees to drive forward global financial reforms. The strategic dialogue with the SEC is a valuable component of the discussions around these reforms, particularly in areas of joint interest and in identifying potential regulatory gaps."
The SEC and FSA have worked together closely to address the recent financial crisis, both on a bilateral basis as well as in international organizations, such as the International Organization of Securities Commissions. Recently, the SEC and FSA have worked to promote the use of central counterparties (CCPs) for the clearance of credit default swaps and are actively cooperating in the oversight of CCPs
. This was the fourth meeting of the SEC-FSA Strategic Dialogue, which began in June 2006.
The purpose of the Dialogue is to engage at senior levels on current matters impacting the U.S. and UK capital markets and areas of future collaboration.
Thomson Reuters launches global range of indices
September 15, 2009--Thomson Reuters has launched a global range of indices to help monitor global markets, benchmark specific countries, regions and sectors, and develop investment vehicles.
This is the first time the company has provided indices under the Thomson Reuters brand.
Thomson Reuters Indices cover 44 countries and 18 regions, and have an overlay of global, regional and country indices by economic sector.
IOSCO publishes regulatory standards for Funds of Hedge Funds
September 14, 2009--The International Organization of Securities Commissions (IOSCO) has published Elements of International Regulatory Standards on Funds of Hedge Funds Related Issues Based on Best Market Practices containing standards aimed at addressing regulatory issues of investor protection which have arisen due to the increased involvement of retail investors in hedge funds through funds of hedge funds.
A previous report, Funds of Hedge Funds¡VFinal Report, published in June 2008 identified the particular areas of concern as:
I. The methods by which funds of hedge funds¡¦ managers deal with liquidity risk; and
II. The nature and the conditions of the due diligence process used by funds of hedge funds¡¦ managers prior to and during investment.
Therefore IOSCO has developed the following proposals in these two areas: Liquidity Risk In dealing with liquidity risk the fund of hedge funds¡¦ manager should:
make reasonable enquiries in order to be in a position to consider if the fund of hedge funds¡¦ liquidity is consistent with that of the underlying hedge funds, particularly in order to meet redemptions;
prior to investing, and during the investments¡¦ lifetime, consider the liquidity of the types of the financial instruments held by the underlying hedge funds;
if introducing limited redemption arrangements, consider whether these are consistent with the fund of hedge funds¡¦ aims and objectives. Moreover, their operation should comply with the conditions defined in the proposals; and
before and during any investment, consider whether conflicts of interest may arise between any underlying hedge fund and any other relevant parties.
Due Diligence Processes These should be carried out prior to any investment being entered into and on a continuous basis following the commitment.
They can be divided up into the following areas:
Elements requiring constant monitoring and analysis by the funds of hedge funds¡¦ managers:
establishing and implementing appropriate due diligence procedures for the purpose of investment into hedge funds, which are reviewed regularly;
assessing the specific legal and regulatory requirements applicable in the hedge fund¡¦s jurisdiction; and
carrying out appropriate due diligence on the underlying hedge fund whenever it is considered necessary.
Adequate resources, procedures and organizational structures necessary for the purpose of carrying out a proper and robust due diligence:
documented and traceable procedure for selecting hedge funds;
appropriately skilled staff and adequate technical resources to implement the due diligence procedures;
the resources, procedures and organizational structure to deal with any anomalies identified by due diligence system, to take the necessary corrective action and confirm that all procedures are traceable and have been catalogued;
„h Regularly assess if selection procedures for eligible underlying hedge funds have been properly met, or not met, and to explain any deviations; and
Outsourcing Due Diligence
If a fund of hedge funds¡¦ manager wishes to authorize the outsourcing of any aspect of its due diligence it should: - determine that any conflicts of interest are adequately addressed; and - consider the extent that outsourcing of due diligence is consistent with the IOSCO Principles on Outsourcing of Financial Services for Market Intermediaries.
These standards form part of a larger body of work that IOSCO has been engaged in with regards to addressing the regulatory issues presented by hedge funds.
An ocean apart? Comparing transatlantic responses to the financial crisis
September 11, 2009-Lorenzo Bini Smaghi, Member of the Executive Board of the ECB Panel session Taking stock: Global implications of transatlantic differences Conference organised by Banca d’Italia, Bruegel and the Peterson Institute for International Economics-Rome, 10-11 September 2009
This conference has examined in detail how policy authorities on both sides of the Atlantic have reacted to the financial crisis. I won’t consider in depth the events of the past two years. Let me just say that central banks on both sides of the Atlantic have responded swiftly and decisively, especially since September of last year, working very closely together, even to the point of coordinating some of their actions. Indeed, you doubtless remember that the first interest rate reduction in the easing cycle, on 8 October 2008, was a coordinated move by a number of major central banks.
Market interest rates are now at very similar levels. For instance, the money market interest rates at the twelve-month horizon both in the US and the euro area are currently just below 1.3%. [1]
Central banks on both sides of the Atlantic have also resorted to a number of non-standard measures to provide additional support and stimulus to their respective economies. The choice and design of those measures reflects the structural characteristics of those economies. The non-standard measures implemented by the ECB have focused primarily on banks, as banks are the main source of funding in the euro area economy. In the US, however, market-based financing plays a more important role.
Barclays Capital Takes Equity Stake In Tradeweb
September 11, 2009--Tradeweb, a leading global provider of online markets, yesterday announced that Barclays Capital, the investment banking division of Barclays Bank PLC, has taken a minority equity stake in its business. In connection with the transaction, Thomson Reuters and its dealer-owners will invest an additional $68 million in total, reinforcing their commitment to Tradeweb's electronic markets.
Tradeweb's combined business is majority-owned by Thomson Reuters, along with now 10 active dealer-owners. In total, more than 35 dealers provide liquidity to Tradeweb's online fixed income and derivatives markets.
Barclays Capital's investment reflects the continued expansion of the Tradeweb business since January 2008, when Thomson Reuters and nine banks completed a capital restructuring of the firm.
"Partnering with Tradeweb underscores the firm's commitment to delivering best-in-class service, liquidity and reliability in the electronic trading space to our clients," said Harry Harrison, Head of Rates at Barclays Capital. "Our stake in Tradeweb also complements our strategy for improving market efficiency and transparency alongside our market-leading electronic trading platform, BARX."
"This investment is not only great news for Tradeweb, but can be seen as further validation of electronic trading in general. Barclays Capital is a world-class investment bank, with a leading position in online trading established over many years, including as a liquidity provider for 14 markets on Tradeweb," said Lee Olesky, CEO of Tradeweb.
"This business is built on relationships and Barclays Capital has some of the best in the industry. One reason is that the bank has long recognized how online trading can benefit clients by providing improved price transparency, speed of execution and more streamlined post-trade processing," said Billy Hult, President of Tradeweb.
Tradeweb's active bank investor group now comprises: Bank of America/Merrill Lynch, Barclays Capital, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley, RBS, and UBS.
BlackRock to launch trading platform
September 11, 2009--BlackRock, the asset manager poised to become the world’s largest money manager with $3,000bn under management, is preparing to create its own global trading platform – a move that could challenge the business at the heart of many Wall Street groups.
BlackRock plans to develop a “new world-class global trading platform across the firm”, according to an internal memo seen by The Financial Times. It has appointed Minder Cheng, who is joining BlackRock as part of its acquisition of Barclays Global Investors, to oversee its development.
ETF Landscape Industry Preview - End of August 2009-ETF Research and Implementation Strategy Team, Barclays Global Investors
September 10, 2009--A preview from the ETF Research and Implementation Strategy Team, Barclays Global Investors monthly ETF Landscape Industry Review. The full report will be published in a few weeks.
Global ETF and ETP Industry 2009:
• Global ETF assets have hit an all time high of US$891 bn at the end of August 2009 - 3.9% above the previous all time high of US$858 bn set in July 2009.
• At the end of August 2009 the Global ETF industry had 1,773 ETFs with 3,137 listings, assets of $890.52 billion, from 95 providers on 41 exchanges around the world.
• YTD assets have risen by 25.3% which is more than the 18.0% rise in the MSCI World index in USD terms.
• YTD the number of ETFs increased by 11.4% with 248 new ETFs launched, while 71 ETFs were closed.
• In Q2 the number of ETFs listed in Europe surpassed the US with 751 ETFs listed in Europe, compared to 710 in the US .
• There are currently plans to launch 781 new ETFs.
• YTD the number of exchanges with official listings decreased by two to 42.
• YTD the average daily trading volume in USD decreased by 22.7% to US$62.3 Billion.
• Standard & Poors (S&P) ranks 1st in terms of ETF AUM tied to their benchmarks with assets of US$217.27 Bn and 225 ETFs, while MSCI ranks 2nd with US$201.53 Bn and 253 ETFs, followed by Barclays Capital in 3rd with US$73.42 Bn and 59 ETFs.
• Globally, iShares is the largest ETF provider in terms of both number of products, 391 ETFs, and assets of US$429.32 Bn, reflecting 48.2% market share; State Street Global Advisors is second with 104 products and US$139.33 Bn, 15.6% market share; followed by Vanguard with 40 products and assets of US$71.71 Bn and 8.1% market share at the end of August 2009.
• Globally, net sales of mutual funds (excluding ETFs) were US$5.3 Bn, while net sales of ETFs were US$49.0 Bn during the first six months of 2009 according to Strategic Insight.
• Additionally, there were 566 other ETPs (Exchange Traded Products)1 with assets of US$92.07 Bn from 39 providers on 19 exchanges.
• Combined, there were 2,339 products with 3,971 listings, assets of US$982.60 Bn from 121 providers on 44 exchanges around the world.
• FINRA, the Financial Industry Regulatory Authority which regulates all securities firms doing business in the US , issued a regulatory notice in June 2009 to provide guidance on leveraged and inverse ETFs. The notice states that "...inverse and leveraged ETFs that are reset daily typically are unsuitable for retail investors who plan to hold them for longer than one trading session, particularly in volatile markets...".
• The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) issued an investor alert on Tuesday 18 August 2009 entitled ‘Leveraged and Inverse ETFs: Specialized Products with Extra Risks for Buy-and-Hold Investors’: The SEC staff and FINRA are issuing this Alert because we believe individual investors may be confused about the performance objectives of leveraged and inverse exchange-traded funds (ETFs). Leveraged and inverse ETFs typically are designed to achieve their stated performance objectives on a daily basis. Some investors might invest in these ETFs with the expectation that the ETFs may meet their stated daily performance objectives over the long term as well. Investors should be aware that performance of these ETFs over a period longer than one day can differ significantly from their stated daily performance objectives.
• U.S. Commodity Futures Trading Commission (CFTC) held hearings on Energy Position Limits and Hedge Exemptions on July 28, July 29 and August 5, on whether federal position limits should be set on the energy markets. The hearings provided critical input from a wide range of industry participants and academics to the Commission’s efforts to examine different approaches to regulate energy markets. The Commodity Exchange Act states that the Commission shall impose limits on trading and positions as necessary to eliminate, diminish or prevent the undue burdens on interstate commerce that may result from excessive speculation. The CFTC’s hearings examined the role of position limits in energy markets in fulfilling the CFTC’s mission to ensure the fair, open and efficient functioning of futures markets. Goldman Sachs, JPMorgan Chase and other leading banks are exempt from most commodity-trading limits in order to manage risks as they serve as market makers. The Commodity Futures Trading Commission is looking into whether those exemptions should stand, as it considers blanket limits on a variety of commodity markets. A number of ETPs/ ETFs providing exposure to commodities have recently issued notices that they have suspended their creation process.
European ETF and ETP Industry 2009:
• European ETF assets have hit an all time high of US$192 bn at the end of August 2009 which is 5.3% above the previous all time high of US$183 bn set in July 2009 and 20.2% above the high of US$160 bn recorded in July 2008.
• At the end of August 2009 the European ETF industry had 751 ETFs with 1,889 listings, assets of $192.10 Bn, from 33 providers on 19 exchanges.
• 11 April 2009 marked the ninth anniversary of ETFs in Europe .
• YTD assets have risen by 34.7%, which is greater than the 21.6% rise in the MSCI Europe index in USD terms.
• YTD the number of ETFs increased by 18.8% with 141 new ETFs launched.
• YTD the number of exchanges with official listings decreased by two to 19.
• YTD the average daily trading volume in US dollar has decreased by 0.1% to US$2.2 Bn. Most ETF trades are not required to be reported in Europe as ETFs are not covered by the European Union directive on markets in financial instruments (MiFID).
• iShares is the largest ETF provider in terms of both number of products, 158 ETFs, and assets of US$76.32 Bn, reflecting 39.7% market share; Lyxor Asset Management is second with 100 products and US$39.71 Bn, 20.7% market share; followed by db x-trackers with 105 ETFs and assets of US$31.19 Bn and 16.2% market share at the end of August 2009.
• In Europe net sales of mutual funds (excluding ETFs) were US$60.2 Bn while net sales of ETFs domiciled in Europe were US$15.2 Bn during the first six months of 2009 according to Lipper FMI.
• Additionally, there were 148 other ETPs (Exchange Traded Products) with assets of US$14.73 Bn from 4 providers on 6 exchanges.
• Combined, there were 899 products with assets of US$206.83 Bn from 35 providers on 19 exchanges in Europe .
U.S. ETF and ETP Industry 2009:
• US ETF assets have hit an all time high of US$607 bn at the end of August 2009 which tops the previous all time high of US$582 bn set in July 2009.
• At the end of August 2009 the US ETF industry had 710 ETFs, assets of $607.00 billion, from 22 providers on 3 exchanges.
• 29 January 2009 marked the 16th anniversary of ETFs in the US .
• YTD assets have risen by 22.1%, which is more than the 13.5% rise in the MSCI US index in USD terms.
• YTD the number of ETFs increased by 1.7% with 54 new ETFs launched, while 42 ETFs were delisted.
• YTD the average daily trading volume in US dollar has decreased by 25.1% to US$57.7 Bn.
• iShares is the largest ETF provider in terms of both number of products, 179 ETFs, and assets of US$321.36 Bn, reflecting 52.9% market share; State Street Global Advisors is second with 85 products and US$129.03 Bn, a 21.3% market share; followed by Vanguard with 39 products, assets of US$71.68 Bn and 11.8% market share at the end of August 2009.
• In the US, net sales of mutual funds (excluding ETFs) were minus US$50.5 Bn, while net sales of ETFs domiciled in the US were positive US$35.2 Bn in the first six months of 2009 according to Strategic Insight.
• Additionally, there were 136 other ETPs (Exchange Traded Products) with assets of US$71.39 Bn from 18 providers on 1 exchange.
• Combined, there were 846 products with assets of US$678.39 Bn from 36 providers on 3 exchanges in the US .
Reshuffle for leading global responsible investment index series;33 additions and 15 deletions in FTSE4Good September Review
September 10, 2009--FTSE Group, the award-winning global index provider, today confirms the September results of the semi-annual FTSE4Good index series review. Globally 33 companies will be added while 15 companies will be removed from the leading responsible investment benchmark, now in its eighth year. The index series is designed to track the performance of companies meeting international corporate responsibility (CR) standards. Changes to the indices are effective from close of trading on Friday 18th September 2009.
ince the launch of the index series in 2001 over 250 companies have been deleted for failing to keep pace with the increasing stringency of the FTSE4Good environmental and social criteria. Despite raising the criteria bar most FTSE4Good reviews have seen more additions than deletions, which indicate a growing adoption of responsible business practices across global industry. At this review almost all of the deletions are from Japan and the US, although this is offset by nearly as many companies from these countries entering the index.
15 of the 33 new additions are from the UK and Europe. Companies to be added to the index series include: French and Swedish telecoms firms Alcatel-Lucent and Telisonera, German stock exchange Deutsche Borse, Hong Kong’s Cathay Pacific Airways, UK and U.S media companies Centaur Media and Time Warner Cable, Japan’s Mizuho Financial Group and UK Real Estate Company DTZ Holdings.
The FTSE4Good Index Series forms the basis for over 70 different funds and investment products. In addition it has also become an important tool for international NGOs to determine companies they are prepared to partner, and is used by companies to demonstrate strong CR practices.
The FTSE4Good inclusion criteria are enhanced regularly and demand continued improvement from companies in order for companies to maintain inclusion in the index. FTSE’s Responsible Investment Unit engages directly with affected companies and provides support and guidance in understanding the inclusion criteria, which cover environmental management, climate change, human rights, supply chain labour standards, and countering bribery criteria. New FTSE4Good inclusion criteria for Health and Safety (including HIV/Aids) are currently being developed for introduction in 2010.
A summary and explanations for additions and deletions can be found online at www.ftse.com/Indices/FTSE4Good_Index_Series/Index_Reviews.jsp.
For more information or data regarding FTSE4Good contact:
New York
Jill Mathers, Tel: + 1 212-314-1141 or email media@ftse.com
London
Sabrina Bhangoo / Mittal Dave Tel: +020 7866 1821 or email media@ftse.com
Hong Kong
Meredith Blakemore / Emily Mok, Tel: + 85 222 305 801 or email media@ftse.com
Tokyo
Stewart Ueno , Tel: +81 3 35 81 3444 or email media@ftse.com
Australia
Natalie Brooke , Tel: +61 2 92 93 2867 or email media@ftse.com
Dow Jones Islamic Market Indexes - Index Review Results: 3rd Quarter 2009
September 10, 2009--Dow Jones Indexes, a leading global index provider, today announced the results of the third regular quarterly review of the Dow Jones Islamic Market World, Regional and Country indexes as well as the results of the annual review of the Dow Jones Islamic Market China/Hong Kong 30 Index. All changes will be effective after the close of trading on Friday, September 18, 2009.
In the Dow Jones Islamic Market World Index, 111 components will be added while 84 components will be deleted. That increases the number of components in the index to 2,410 from 2,383.
With 53 additions and 38 deletions, the number of components in the Dow Jones Islamic Market Asia/Pacific Index will increase to 1,073 from 1,058. In the Dow Jones Islamic Market Europe Index, 12 components will be added, while 20 components will be deleted. That decreases the number of components in the index to 402 from 410. The number of components in the Dow Jones Islamic Market Americas Index will increase to 789 from 776, with 29 additions and 16 deletions. In the Dow Jones Islamic Market MENA Index, 21 components will be added, while 11 components will be deleted. That increases the number of components in the index to 164 from 154.
In the Dow Jones Islamic Market BRIC Equal Weighted Index, two components will be added, while seven components will be deleted. That decreases the number of components in the index to 60 from 65.
In the Dow Jones Islamic Market China Offshore Index, two components will be added, while no component will be deleted. That increases the number of components to 22. With four additions and two deletions, the number of components in the Dow Jones Islamic Market Hong Kong Index will increase to 86 from 84. In the Dow Jones Islamic Market India Index, two components will be added, while 15 components will be deleted. That decreases the number of components in the index to 186 from 199. The number of components in the Dow Jones Islamic Market Turkey Index will remain at 27, with two companies being exchanged.
In the Dow Jones Islamic Market China/Hong Kong 30 Index, five components will be exchanged.
The total free-float market capitalization of the reconstituted Dow Jones Islamic Market World Index decreased to US$11.32 trillion from US$11.37 trillion .
The total free-float market capitalization of the reconstituted Dow Jones Islamic Market Asia/Pacific Index increased to US$2.17 trillion from US$2.16 trillion, while the total free-float market capitalization of the reconstituted Dow Jones Islamic Market Europe Index decreased to US$2.45 trillion from US$2.49 trillion. As of September 8, 2009, the total free-float market capitalization of the reconstituted Dow Jones Islamic Market Americas Index increased to US$6.57 trillion from US$6.56 trillion and the total free-float market capitalization of the Dow Jones Islamic Market MENA Index increased to US$139.54 billion from US$122.77 billion.
The total free-float market capitalization of the reconstituted Dow Jones Islamic Market BRIC Index decreased to US$363.30 billion from US$445.52 billion.
The free-float market capitalization of the reconstituted Dow Jones Islamic Market China Offshore Index increased to US$40.84 billion from US$40.08 billion, while the free-float market capitalization of the reconstituted Dow Jones Islamic Market Hong Kong Index increased to US$97.48 billion from US$95.54 billion. As of September 8, 2009, the free-float market capitalization of the reconstituted Dow Jones Islamic Market India Index decreased to US$272.01 billion from US$288.51 billion, while the free-float market capitalization of the reconstituted Dow Jones Islamic Market Turkey Index increased to US$13.93 billion from US$13.78 billion.
The total free-float market capitalization of the reconstituted Dow Jones Islamic Market China/Hong Kong 30 Index decreased to US$158.56 billion from US$186.23 billion.
The Dow Jones Islamic Market Indexes were introduced in 1999 as the first indexes intended to measure the global universe of investable equities that pass screens for Shari'ah compliance. With more than 100 indexes, the series is the most comprehensive family of Islamic market measures and includes regional, country, and industry indexes, all of which are subsets of the Dow Jones Islamic Market Index.
An independent Shari'ah Supervisory Board counsels Dow Jones Indexes on matters related to the compliance of index-eligible companies. To determine their eligibility for the Dow Jones Islamic Market Indexes, stocks are screened based on their industry type and their financial ratios. Excluded are companies engaged in the following lines of business: alcohol, tobacco, pork-related products, financial services, defense/weapons and entertainment. Also excluded are companies for which the following financial ratios are 33% or more: debt divided by trailing 12-month average market capitalization; cash plus interest-bearing securities divided by trailing 12-month average market capitalization; and accounts receivables divided by trailing 12-month average market capitalization.
There are currently more than 150 licensees with more than US$7 billion in assets benchmarked to the Dow Jones Islamic Market Indexes.
More information on the Dow Jones Islamic Market Indexes is available on www.djindexes.com.