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"Does the Commission Always Know Best?" Opening Statement by Commissioner Scott D. O’Malia:
Open Meeting on Position Limits for Futures and Swaps; Derivatives Clearing Organizations; Effective Date for Swap Regulation
October 18, 2011-Today, the Commission is voting on final rulemakings on position limits and the operation of derivatives clearing organizations (“DCOs”). Further, the Commission is voting on a proposed order that would extend needed exemptive relief to market participants during the pendency of Commission rulemaking.
Before we begin, I would like to join my colleagues in thanking the three teams responsible for the final rulemakings and the proposed order. Their hard work has resulted in comprehensive documents totaling nearly 800 pages. Their perseverance over the one-and-a-half-year rulemaking process has been truly inspiring.
The position limits rulemaking will form the foundation for Commission surveillance of the physical commodity markets, whereas the DCO rulemaking will form the foundation for Commission oversight of the financial integrity of market transactions. That is why I am particularly disappointed with both rulemakings. Both rulemakings rely on one fundamentally flawed assumption – namely, that the Commission, in nearly all circumstances, knows best and can substitute its judgment for that of exchanges and DCOs, despite the complexities of the futures - and now swaps - markets. As I will further explain, such assumption leads to regulations with substantial costs and little corresponding benefits. Such assumption is also difficult to justify from an evidentiary and statutory perspective.
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Source: CFTC.gov
Opening Statement, Fifth Open Meeting to Consider Final Rules Pursuant to the Dodd-Frank Act-Commissioner Jill E. Sommers
October 18, 2011--Good morning. Thank you Mr. Chairman and thank you to the teams that have worked so hard on the final rules before us today and on the amendments to the Commission’s July 14, 2011 Order relating to the Effective Date for Swap Regulation. The current Order expires on December 31, 2011, and I am glad we are addressing the necessary amendments to that Order now instead of waiting until the last minute to provide certainty to market participants.
Today we will first be voting on final rules for DCO’s. In my opinion, these rules are needlessly prescriptive and go beyond what is required by the statute. Our registered DCOs have a fantastic track record of protecting their own financial safety and soundness and have proven themselves, even during the financial crisis, to be excellent at managing margin and risk. We should allow them to continue to do so without imposing unnecessary and inflexible rules, regulations, and restrictions upon them.
It appears that these rules, and many others we have proposed and finalized, are largely colored by the perception that swaps are inherently riskier than futures and options and as a result require a more prescriptive regulatory oversight regime.
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Source: CFTC.gov
Standard & Poor's Announces Changes In The S&P/TSX SmallCap And Global Mining Indices
October 18, 2011--Standard & Poor's will make the following changes in the S&P/TSX SmallCap and Global Mining Indices:
Shareholders of Western Copper Corporation (TSX:WRN) approved on October 3, 2011, the Plan of Arrangement whereby the company will spin out certain copper interests to shareholders.
For every 2 shares of Western Copper held, shareholders will receive 1 share of a new company named Copper North Mining Corp. and 1 share of a new company named NorthIsle Copper and Gold Inc. Copper North and NorthIsle Copper will trade on TSX Venture Exchange for the first time (the ex-date of the spin-off) on October 20, 2011, under the ticker symbols "COL" and "NCX" respectively. The spun out shares of Copper North and NorthIsle Copper will be added at zero price to the S&P/TSX SmallCap and Equity SmallCap, the S&P/TSX Global Mining and Global Base Metals and the S&P/TSX Equal Weight Global Base Metals Indices after the close of trading on Wednesday, October 19, 2011.
Effective after the close of Thursday, October 20, 2011, the shares of Copper North and NorthIsle Copper will be removed from the same five indices
Also effective after the close of Wednesday, October 19, 2011, Western Copper will trade under the new name Western Copper and Gold Corporation. There will be no change to the ticker symbol "WRN".
Company additions to and deletions from an S&P equity index do not in any way reflect an opinion on the investment merits of the company.
Source: Standard & Poor's
Federal Reserve Board releases the minutes of its discount rate meetings from August 22 through September 19, 2011
October 18, 2011--The Federal Reserve Board on Tuesday released the minutes of its discount rate meetings from August 22 through September 19, 2011.
view the minutes August 22 through September 19, 2011
Source: Federal Reserve Board (FBR)
CFTC Votes 3-2 to Approve Limits on Commodity Speculation
October 18, 2011--The top U.S. derivatives regulators voted 3 to 2 today to curb trading in oil, wheat, gold and other commodities after a boom in raw-materials speculation, record- high prices and years of debate and delay.
The rule has been among the most controversial provisions of the Dodd-Frank financial overhaul, enacted last year, which gave the Commodity Futures Trading Commission the authority to limit trading in over-the-counter commodity swaps as well as exchange-traded futures. The rule will limit the number of contracts a single firm can hold.
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Source: Bloomberg BusinessWeek
First Trust files with the SEC
October 17, 2011--First Trust has filed an amended registration statement with the SEC for the First Trust CBOE VIX Tail Hedge Index Fund.
view filing
Source: SEC.gov
Morgan Stanley-US ETF Weekly Update
October 17, 2011--- Weekly Flows: $6.6 Billion Net Inflows
ETF Assets Stand at $1 Trillion, up 3% YTD
Launches: 1 New ETF
No News Updates
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $6.6 bln last week, rebounding from the prior week’s net outflows
Net inflows last week were primarily driven by US Equity ETFs ($3.9 bln net inflows)
Fixed Income ETFs have exhibited net inflows for 9 straight weeks ($13.5 bln net inflows over the 9 weeks)
ETF assets stand at $1.0 tln, up 3% YTD (due to net inflows)
13-week flows were mixed among asset classes; combined $15.3 bln net inflows
US Dividend ETFs have posted net inflows of $4.0 bln the past 13 weeks, which equates to 16% of the
category’s market cap
We estimate ETFs have generated net inflows 25 out of 41 weeks in 2011; net inflows of $81.9 bln YTD
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) posted net inflows of $1.8 bln last week, the most of any ETF
Amid a surge in equities, only 20% of all ETFs had net outflows last week
Over the past 13 weeks, despite European turmoil, iShares MSCI EAFE Index Fund (EFA) has exhibited $3.1
bln net inflows, the most of any ETF; EFA is ≈ 60% allocated to Europe
US-Listed ETFs: Change in Short Interest
Data Updated: Based on data as of 9/30/11
EEM exhibited the largest increase in USD short interest since last updated
$842 million in additional short interest
Highest level of shares short for EEM since 2/15/11
SPY exhibited the largest decline in USD short interest since last updated
$11.1 billion in reduced short interest
SPY was coming off its highest level of shares short of all time
For the fourth period in a row, shares short declined for GLD
request report
Source: Morgan Stanley
VelocityShares Launches Suite of Eight First‐to‐Market Precious Metals‐Related ETNs including 3x Leveraged Long and Inverse Gold and Silver and 2X Leveraged Long and Inverse Platinum and Palladium ETNs
October 17, 2011--VelocityShares LLC, creator of exchange traded products for professional traders, announces the launch of eight first‐to‐market leveraged and inverse precious metals‐related Exchange Traded Notes (ETNs) on the NYSE Arca stock exchange. The new VelocityShares ETNs represent the first suite of 3x and 2x leveraged long and inverse precious metals exchange traded
instruments to be listed in the US. The new ETNs are in a response to demand for instruments to manage risk and express tactical views in the precious metals market. The ETNs provide institutional traders a means of managing their precious metals exposures and expressing market views.
“Precious metals trading volumes have been on the rise, and institutional traders are looking for alternative ways to implement their positions.” said Nick Cherney, Co‐founder and Chief Investment Officer of VelocityShares. “This launch further emphasizes our commitment to developing the sophisticated exchange traded products needed by professional trading community.”
Credit Suisse AG is the issuer of the ETNs and VLS Securities LLC, a wholly owned subsidiary of VelocityShares LLC, is marketing the ETNs.
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Source: VelocityShares
Spotlight falls on exchange-traded fund securities lending
October 17, 2011--Exchange-traded funds came in for further criticism last week as investors raised fresh concerns about ETF providers lending out underlying securities of the physical product.
Many providers lend securities to those who want to short stocks, but rarely disclose information about how many shares are on loan or what collateral they hold as security.
Some market participants have said the practice of securities lending, which carries the risk that the borrower of the securities could default and that the collateral transferred will not be sufficient to repurchase the securities, remains opaque.
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Source: Financial News
ETFS US Precious Metals Weekly: Gold Demand Surges as Gold Price Decline Attracts Investors
October 17, 2011--Physical gold buying, including Krugerrand coins, rises sharply as lower price attracts investors. The chairman of the South African Gold Coin Exchange announced that Krugerrand gold coin demand had hit an all time high over the past
few weeks as the Standard Bank Gold Physical Flow Index saw its highest reading since its inception in 2009. The Shanghai Gold Exchange saw its highest daily turnover on record at the start of last week.
Thomson Reuters GFMS increases Central bank gold demand estimate for
2011 49% last week to 500 tons on strong central bank buying. The near
double digit drop in prices over the past month may have been a key factor
attracting an acceleration in central bank buying, led by emerging markets including Thailand and Russia. These countries tend to have a relatively low proportion of reserves as gold, suggesting possible long term strategic diversification. Central banks have emerged as a key new source of demand after being a net supplier over
much of the past decade. GFMS forecast 2011 central bank demand is equivalent to 12% of total global demand last year.
Gold price rises for 2nd consecutive week, platinum group metals prices stabilize. Precious metals prices found their feet last week as markets took comfort from Fed hints that expanded quantitative easing could not be ruled out if US activity indicators deteriorate further. Acute concerns surrounding global growth have pushed the gold:platinum spot price ratio to its highest level on record over recent week in a market characterized by a broad based de-leveraging.
South African gold production falls the most in 19 months as labour disputes continue to weigh on African precious metal mine production. Gold production fell almost 20% yoy in August, partially reflecting a mine strike. Meanwhile Northam Platinum, the world’s 8th largest platinum producer, announced that it is in a formal dispute with the National Union of Mineworkers after the union pressed for wage increases of up to 20%. No.2 platinum producer Impala Platinum announced wage growth of 8-10% over the next two years in the week prior. Labour costs accounted for one-quarter of the 16% rise in platinum cash costs last year, after allowing for exchange rate fluctuations according to Thomson Reuters GFMS. Recent wage negotiations suggest that this trend higher in costs should continue to provide medium term support for precious metals prices.
Event risk surrounding European debt discussions looms as the major market focus this week in the run-up to the G20 summit on November 3-4. German officials have been talking down the prospect of an all-encompassing deal to mend market worries over European sovereign debt, rejecting G20 calls that a comprehensive package be reached by next weekend’s European leaders meeting. ETFS research suggests that if the 2008 credit crisis is a guide, gold prices could see the fastest return to growth when current high uncertainty and volatility eventually subside. The recent gold price correction brings gold prices back to their 10 year growth trend, with little evidence to date that prices have witnessed the exponential gains associated with recent financial market ‘bubbles’.
visit www.etfsecurities.com for more info
Source: ETF Securities
