Americas ETP News
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Morgan Stanley-ETFs Exhibited Net Inflows of $53.0 billion
May 4, 2012--There were 76 new ETFs listed in the US in the first quarter of 2012. So far this year, 94 ETFs have been issued while 17 ETFs were liquidated, resulting in net new issuance of 77 ETFs. As of April 30, 2012, there were 34 issuers with 1,243 ETFs listed in the US. Net inflows into US-listed ETFs were $53.0 billion during 1Q12.
This is the highest quarterly net cash inflow since the fourth quarter
of 2009, which had net cash inflows of $54.6 billion. Additionally, it
is the highest net cash inflows for the first quarter since we began
monitoring quarterly flows in 2004.
The largest net cash inflows this past quarter went into Fixed Income ETFs. ETFs tracking fixed income indices had the highest net cash inflows this past quarter at $16.7 billion and they now account for 18% of the US-listed ETF market. Emerging Market Equity and US Large-Cap ETFs had the next highest net cash inflows this past quarter at $10.8 billion and $8.2 billion, respectively. The only segment to exhibit meaningful net cash outflows this past quarter was the Currency ETF segment, which had net cash outflows of $1.5 billion.
US ETF industry assets of $1.2 trillion are ~14% higher than their level at the end of 2011. Despite the growth of the ETF market, it remains concentrated with three providers and 20 ETFs accounting for almost 79% and 48% of industry assets, respectively.
As with any investment, ETFs have risks. These include the general risks associated with investing in securities, potential tracking error, and the possibility that particular indices may lag other market segments or active managers.
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Source: Morgan Stanely
Markets and regulator keep industry on its toes
May 4, 2012--The US mutual fund industry has no shortage of challenges, both near-term and long-term.
On the competition front, exchange-traded funds and other passively managed products have siphoned off a sizeable chunk of assets from actively managed mutual funds. The shift into beta products – as well as the steady growth of fixed income assets – has put a squeeze on expense ratios. In fact, new data released by the Investment Company Institute (ICI), the group that represents the industry’s interests in Washington, shows that equity funds’ expenses have dropped 20 per cent from the 1990 average of 99 basis points.
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Source: FT.com
CFTC.gov Commitments of Traders Reports Update
April 4, 2012--The current reports for the week of May 1, 2012 are now available.
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Source: CFTC.gov
NASDAQ OMX Plans to Launch Retail Market for U.S. Equity Options
New Trading Platform to Target Retail Customer Orders With Access to Liquidity, Reliable Technology and Innovative Functionality
April 4, 2012--The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ - News) today announced at the Options Industry Conference that it will launch NASDAQ OMX BX OptionsSM (BX OptionsSM) in June 2012, pending SEC approval.
BX OptionsSM will reward retail customers who wish to access liquidity and provide market makers with additional opportunities to provide liquidity, initially with a price/time trading system.
BX OptionsSM will complement the exchange group's established U.S. options venues with unique enhancements that include a hybrid allocation model, directed order flow for market participants and a new multi-faceted price improvement auction. Additionally, customers utilizing the new market will benefit from innovations known to both NASDAQ OMX PHLX (PHLX) and the NASDAQ Options Market (NOM) like microsecond trading speeds, bulk quoting, rapid fire risk protection and low latency protocols. In order to facilitate an inexpensive and easy connection for options trading customers, BX OptionsSM will leverage the same architecture, data center and world-class INET technology as other NASDAQ OMX platforms.
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Source: NASDAQ OMX
DB Equity Research Equity Research-US ETF Market Monthly Review : Risk-off trade? ETP flows say not there yet
May 4, 2012--US ETP assets recorded -0.4% MoM and 13.6% YTD growth in April
ETP assets in the US declined by $4.5bn to $1.19 trillion last month, accumulating an increase of 13.6% YTD after the first four months of the year.
Global ETP industry assets edged lower to $1.61 trillion, or 12.3% up YTD.
ETP Flows suggest beginning of shift from risk-on to risk-off trade
US ETP flows experienced inflows of $3.4bn during April totaling inflows of $55.1bn YTD (5.3% of last year’s AUM).
Within long-only ETPs, total flows were +$3.7bn in Apr. vs. +$11.3bn in Mar.
Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of -$0.7bn, +$5.2bn, and -$0.8bn, respectively.
Although we saw a flight to safety during April, we do not consider this to be a full-blown shift from risk-on to risk-off, but rather an intermediate step before the next major trend develops (either bullish or bearish).
According to long-only ETP flows, investors’ equity preferences in March were: (1) Region wise, bearish across the board, but more significant in the US (-$1.1bn). (2) Within the US, Small Caps (+$1.3bn) over Large Caps (-$4.1bn). (3) Among US Sectors, Cyclicals (Global +$0.9bn, Domestic +$0.6bn) over Defensives (-$0.0bn). Within global cyclicals, Materials (+$0.5bn) and Energy (+$0.4bn); and Industrials (+$0.6bn) among domestic cyclicals. (4) Dividend funds are still appealing as a less volatile and income generating investment (+$0.9bn), but not as much as before
While preferences in the fixed income space were: (1) Credit over rates, Corporates (+$2.8bn) and Sub-Sovereign (+$0.8bn) (e.g. EM Sov. Debt) over US Sovereign debt (+$0.3bn). (2) IG (+$3.2bn) over HY (+$0.8bn). (3) Short-Intermediate curve positioning, Short (+$1.0bn) and Medium (+$0.7bn).
ETFs continued to grow faster than Mutual Funds. At the end of March, ETF inflows ($49bn) contributed 5.2% to the YTD ETF AUM growth; while only 1.2% ($109bn) of the YTD Mutual Fund AUM growth was attributable to new cash.
New Launch Calendar: yield and asset allocation strategies set the tone
There were 18 new ETPs and 2 new ETNs listed during the previous month.
The new product offering was again dominated by Fixed Income ETFs. Most of them offering access to high yield segments. Another relevant trend was multi asset ETFs following asset allocation strategies. Finally, the new line-up was completed by some equity and commodity products.
Floor activity remains under pressure on higher, but still low volatility
Total monthly turnover decreased by 8.6% to $1.19 trillion vs. $1.31 trillion in the previous month.
US ETP trading made up 27.1% of all US cash equity trading in April, down from both its recent peak of 37.5% last August and its 3-year monthly moving average of 30.1%.
The largest decline was on Equity ETP turnover, which dropped by $67bn or 5.9% to $1.06 trillion, followed by Commodity ETP turnover which plunged by $30bn to $56bn, and Fixed Income product turnover which shrank by $13.6bn totaling $63bn at the end of April.
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Source: Deutsche Bank-Equity Research-North America
MSCI and Barclays Announce Partnership to Create Global ESG Fixed Income Indices
New Index Family Provides Environmental, Social & Governance Investment Strategies for Institutional Fixed Income Portfolios
May 4, 2012--MSCI Inc., a leading provider of investment decision support tools worldwide, and Barclays, publisher of leading broad market bond benchmarks, announced today an agreement to create a family of co-branded Environmental, Social & Governance (ESG) fixed income indices.
The combination of both organizations’ expertise will help institutional investors to apply ESG investment strategies to their bond portfolios.
The ESG fixed income indices will be co-branded and independently marketed by both firms. These indices will be aimed at asset owners and managers with ESG commitments, such as UN PRI (United Nations Principles for Responsible Investing) signatories, who have exposure to fixed income investments that require a benchmark which integrates ESG factors. Institutional clients will be able to use the ESG fixed income indices to create index-linked investment products, such as Exchange Traded Funds (ETFs), separately managed accounts, and structured products.
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Source: MSCI
CFTC to Hold Open Meeting to Consider a Final Rule on Core Principles and Other Requirements for Designated Contract Markets and a Proposed Order Amending the Effective Date for Swap Regulation
May 3, 2012--The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Thursday, May 10, 2012, at 9:30 a.m.,
to consider a Final Rule on Core Principles and Other Requirements for Designated Contract Markets and a Proposed Order Amending the Effective Date for Swap Regulation.
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Source: CFTC.gov
Economic Commentary-Exchange-Traded Funds-O. Emre Ergungor
May 3, 2012--ETFs are one of the most successful financial innovations of the last few decades. As a new, rapidly growing, and increasingly complex financial instrument, ETFs might raise concerns about the risk they pose to financial stability. While they do not seem to pose a threat at this time, ETFs exposed a weakness in U.S. stock markets during the Flash Crash of 2010: the fragmented nature of trading, which can leave some markets very shallow.
With the spectacular boom and bust of mortgage-backed financial products still fresh in our collective memory, any rapidly growing asset class is bound to raise eyebrows in the marketplace. The exchange-traded fund (ETF) is one such product.
ETFs are stock-market-traded entities that invest mostly in corporate and sovereign financial liabilities, often with the intention of replicating the returns of a market index, like the S&P 500. That goal may not sound glamorous, but ETFs are one of the most successful financial innovations of the last few decades. Their growth has been phenomenal, especially since 2005 (figure 1). While small relative to their older cousin, mutual funds (which control about $7.5 trillion in assets), ETFs have gone from $0 to $1 trillion in just 20 years.
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Source: Federal Reserve Bank of Cleveland
Treasury Doesn't Sound a New Note
May 3, 2012--The Treasury Department surprised bond investors by delaying a decision on whether to introduce floating-rate notes to its mix of debt securities.
Treasury officials in statements released Wednesday cited "system limitations" that would prevent any possible issuance of floating-rate notes this year. The action also came amid lack of consensus on a suitable benchmark rate for the notes among members of the private-sector panel that advises the Treasury.
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Source: Wall Street Journal
SEC Reopens Comment Period for Proposed Amendments to Its Net Capital, Customer Protection, Books and Records, and Notification Rules for Broker-Dealers
May 3, 2012--The Securities and Exchange Commission today announced that it is re-opening the public comment period for proposed amendments to its net capital, customer protection, books and records, and notification rules for broker-dealers.
The proposed rule amendments are designed to update the financial responsibility rules for broker-dealers and make certain technical amendments. The Commission issued the proposed amendments on March 9, 2007, and the public comment period on the proposal closed on June 18, 2007.
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Source: SEC.gov
