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S&P cuts US debt rating to double A plus
August 5, 2011--The United States lost its top-notch AAA credit rating from Standard & Poor's on Friday, in a dramatic reversal of fortune for the world's largest economy.
S&P cut the long-term U.S. credit rating by one notch to AA-plus on concerns about growing budget deficits.
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Source: Reuters
Investors pull $75.5bln from US mutual funds, ETFs
August 5, 2011--Investors pulled $75.5 billion from U.S. mutual funds and exchange-traded funds for the week ending August 3, according to a report Friday from Matt Lemieux, a research analyst for Lipper.
The decline came amid spill over from last week's debt ceiling negotiations and the downturn in global equities markets. Equity funds, including ETFs, posted outflows of about $7.5 billion - the largest weekly outflow since mid-August 2010, according to the report. Municipal debt funds saw around $860 million in outflows, offering "proof that there was little confidence in any asset class," Lemieux said.
Source: Dow Jones Newswire
Opening Statement, Inaugural Meeting of the Data Standardization Subcommittee
Commissioner Scott O’Malia, TAC Chair
August 5, 2011--Good Afternoon. I would like to welcome everyone to the inaugural meeting of the Data Standardization Subcommittee of the CFTC’s Technology Advisory Committee.
Thank you for your commitment to serving on this important subcommittee. I often say that technology is going to be the cornerstone of the new market structures mandated by the Dodd-Frank Act.
The data, execution, and reporting mandates of Dodd-Frank place us all in the center of the complex intersection of data, finance and the law, creating an unparalleled opportunity for a public/private partnership. I have asked the individuals in this room to come together with a common goal of reaching a consensus as to how we can standardize the language we use to communicate within the new regulatory landscape. I am confident that we will come up with both innovative and achievable solutions.
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Source: CFTC.gov
Can’t Get it Outta My Head”-Statement Before the CFTC Open Meeting on Dodd-Frank Rulemaking
Commissioner Bart Chilton
August 4, 2011--I’m pleased to support all three of these final rulemakings today. Perhaps the most talked about of the three is the whistleblower rule. This new provision will be an important tool in the Commissions’ enforcement arsenal.
It can give needed incentives for folks—precisely the people we want to hear from, those who have an eye “from the inside” on essential information about nefarious schemes—to come forward, with needed protections.
Frankly, this rule wasn’t too hot when we first proposed it. For example, there it didn’t provide for any kind of notification to the whistleblower if the agency actually used the information and successfully prosecuted—we fixed that. The proposal also had a very broad definition of excluded information—we fixed that. It would have incentivized internal reporting, rather than reporting to federal authorities—we fixed that. In short, the public comments we received surely gave us a lot of guidance on this one and I’m happy the process worked.
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Source: CFTC.gov
Opening Statement, Third Open Meeting to Consider Final Rules Pursuant to the Dodd-Frank Act
Commissioner Jill E. Sommers
August 4, 2011--Good Morning. Thank you Mr. Chairman and thank you to the three teams that have final rules before us today.
I want to again acknowledge the excellent staff work that has gone into getting these final documents ready for Commission consideration and let all the team members know how much we appreciate your commitment to the enormous challenge the Commission has in implementing Dodd-Frank.
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Source: CFTC.gov
EGShares Announces Successful Launch of Emerging Markets High Income/Low Beta (Ticker: HILO) Equity ETF on NYSE Arca
Portfolio Designed to be Less Volatile and Provide Higher Dividend Yield Than the MSCI Emerging Market Index
August 4, 2011-- Emerging Global Advisors, an asset management company focused exclusively on emerging markets and the sub-advisor to the EGShares family of exchange-traded funds (ETFs), announced today the successful launch of HILO, an emerging markets fund designed to be significantly less volatile than funds based on the broad-based MSCI Emerging Markets Index1. The ETF trades on NYSE Arca under the ticker symbol HILO.
HILO is designed to replicate the INDXX Emerging Market High Income Low Beta Index, which has a yield of 4.99 percent2. The 30-stock index was created from a universe of more than 2,500 companies from 21 countries that are screened for market capitalization, average daily trading value, dividend yield, consistency of dividend payments, and both beta and correlation to local benchmarks3. HILO is passively managed and doesn’t use options, swaps, or other derivatives in its portfolio. The underlying INDXX is rebalanced annually in September.
“Investors are increasingly using emerging markets to execute portfolio strategies that they also use in developed countries,” said Robert C. Holderith, EGA’s founder and president. “HILO seeks to enable dividend stock buyers who want less volatility than the broad emerging markets indices to get exposure that is more likely to fit their objectives.”
HILO has 11 country exposures. Approximately 32 percent are in diversified telecommunication services and wireless telecommunications services. The remaining companies operate in a wide spectrum of sectors, ranging from oil, gas, and consumable fuels to communications equipment and food products.
For more information on HILO, please visit www.egshares.com/hilo.
Source: Emerging Global Advisors
Rydex Launches Two New S&P Equal Weight ETF
A Leading ETF Provider Expands ETF Lineup With Indices That Provide Equal Weight Mid-Cap and Small-Cap Exposure
Rydex, a leading provider of ETF and alternative investments, today announced the launch of two new equal weight (EW) ETFs, Rydex S&P SmallCap 600® Equal Weight ETF and Rydex S&P MidCap 400® Equal Weight ETF.
The addition of the two new ETFs brings Rydex's total number of EW ETFs to 18 and total number of exchange traded products to 36, with assets over $9 billion. The ETF line-up at Rydex, with the exception of CurrencyShares®, is known in the marketplace as RydexShares®. Rydex is the leader in equal weight ETFs -- offering the widest choice of equal weight products and the most equal weight ETFs in the industry.
Rydex S&P Midcap 400® Equal Weight ETF (EWMD) and Rydex S&P SmallCap 600 Equal Weight ETF (EWSM) offer broad exposure to the companies in the S&P MidCap 400 Equal Weight Index (EWI) and the S&P SmallCap 600® (EWI), respectively. Both EW ETFs invest in the same stocks as their cap weight versions, have equal exposure to each stock and are rebalanced quarterly.
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Source: SOURCE: Rydex|SGI
DB Global Equity Research: North America-US ETF Market Weekly Review : Volatility hits markets erasing $27bn from AUM
August 4, 2011--New money follows safe haven during equity market sell-off
Risky assets around the globe experienced a widespread sell-off as fear overtook the markets following no real solution or agreement on the US debt ceiling debate during last week. Not enough, a dimmer economic outlook for the second half contributed to the bearish momentum as well. Equity markets in the US (S&P 500) plunged by 3.92%, the largest weekly drop in about 1 year.
The total US ETP flows figure was $1.9bn of outflows during last week vs $4.2bn of inflows the previous week, setting the YTD weekly flows average at +$2.3bn. US ETP AUM lost $27bn, closing at $1.09 trillion or 9.7% up YTD.
Long only equity ETPs recorded $3.2bn of outflows last week vs $3.4bn of inflows the previous week. From a geographic allocation perspective, US-focused ETPs concentrated the bulk of the outflows (-$3.3bn), followed by DM ex US ETPs with -$125m; while Global and EM ETPs experienced inflows of $188m, and $20m in the same period, respectively.
Long-only fixed Income ETPs recorded inflows of $153m last week. Sub-Sovereign ETPs received $278m in inflows, followed by Corporates funds with $120m. Commodity ETPs recorded inflows of $1.1m last week. At a sector level, Precious Metals ETPs recorded the largest inflows with $1.2bn; while Energy ETPs registered the largest outflows with $122m.While we saw significant outflows last week, long only ETPs gathered healthy inflows during July amounting to $13.2bn. The bulk of the flows was concentrated among the three main asset classes with Equity (+$6.8bn) leading the ranking, followed by Commodity (+$3.5bn) and Fixed Income (+$2.7bn). Among the main themes for July we had US-focused Equity (+$4.0bn), Gold (+$3.6bn), and Fixed Income (+$2.7bn) ETPs (Figure 1)
The dynamics of the flows were driven by Volatility which, with an increase of 52.9%, took over the markets during July. We believe that these flow patterns suggest that investors are, at the moment, confused regarding the outlook for US equities and are limiting themselves to follow the market while at the same time seeking protection.
New Launch Calendar: quiet week No new ETPs were launched during last week.
Turnover Review: Floor activity picks up on volatility comebackTotal weekly turnover increased by 13.3% to $375bn vs. $331bn in the previous week. The largest increase was on Equity ETP turnover which rose by $46bn or 16.5% to $331bn. Similarly, Fixed Income products turnover increased by 23.3% totaling $16.1bn at the end of last Friday. On the other side, Commodity ETPs turnover dropped by $5.2bn to $25.3bn last week mainly driven by Gold and Silver products.
Assets Under Management (AUM) Review: fear removes $27bn from assets
Fear took over the markets as the debt ceiling issue remained unresolved during last week. ETP AUM dropped by $27bn or 2.5% falling to $1.09 trillion as of the end of last Friday. Assets on a YTD basis have recorded a $96bn (9.7%) increase.
to request report
Source: Deutsche Bank - Equity Research
CBOE VIX Tail Hedge Index, Ticker “VXTH”, Now Live
August 4, 2011--CBOE has introduced a new benchmark index designed to cope with extreme downward movements in stock indexes -- the CBOE VIX Tail Hedge IndexSM (VXTHSM).
The VXTH Index tracks the performance of a hypothetical portfolio that -
Buys and holds a portfolio of stocks designed to replicate the performance of the S&P 500® index (the total return index, with dividends reinvested), and
Buys one-month 30-delta call options on the CBOE Volatility Index® (VIX)®. New VIX calls are purchased monthly and the weight of the VIX calls depends on the level of forward volatility. This has the effect of reducing hedging costs and monetizing VIX option profits when extreme volatility levels are reached. This monetizing of the VIX option position in turn means that overall capital can be preserved.
The design of the index is expected to provide an efficient tail risk hedge as well as a consistent benchmark for other tail hedge strategies.
Source: CBOE
Knight Capital to cut workforce by 6%
August 4, 2011--Knight Capital Group, one of the largest market-making firms in the world, has announced it will cut 6 per cent of its workforce as its restructures its business due to a broad decline in trading activity.
At the same time, Chicago Board Options Exchange, the US options market, said it was slashing expenses despite seeing a boost in trading of its volatility indices.
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Source: FT.com
