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BNY Mellon's latest Product & Policy Newsletter
December 17, 2013---BNY Mellon's latest Product & Policy Newsletter is now available.
Topics covered in this edition:
BNY Mellon's enhanced FX reporting capability
A global market & regulatory update
An exploration of BNY Mellon’s Collateral UniverseSM
A "What If" Equity Characteristic Analysis
An overview of our new Pensioner Website
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Source: BNY Mellon
Treasury International Capital Data for October
December 16, 2013--The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for October 2013. The next release, which will report on data for November 2013, is scheduled for January 16, 2014.
The sum total in October of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $194.9 billion.
Of this, net foreign private inflows were $185.1 billion, and net foreign official inflows were $9.8 billion.
Foreign residents increased their holdings of long-term U.S. securities in October; net purchases were $54.7 billion. Net purchases by private foreign investors were $59.4 billion, while net sales by foreign official institutions were $4.7 billion.
U.S. residents increased their holdings of long-term foreign securities, with net purchases of $19.2 billion.
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Source: US Department of the Treasury
DB-Synthetic Equity & Index Strategy- North America-US ETF Market Weekly Review-Markets push assets lower by $12.6bn amid $7.6bn inflows
December 16, 2013--Data in this report is as of Fri, Dec 13
Market and Net Cash Flows Review
The US (S&P 500) fell by 1.65%; while, outside the US, the MSCI EAFE (in USD) and the MSCI EM (in USD) dropped by 1.57% and 1.15%, respectively. In the meantime, performance was negative across all US sectors. Healthcare (-2.62%) and Utilities (-2.41%) were the worst performing sectors; The DB Liquid Commodity Index fell by 1.03%; Similarly, the Agriculture sector (DB Diversified Agriculture Index) and the WTI Crude Oil fell by 0.12% and 1.08%, respectively. while, Gold and Silver prices rose by 0.79% and 1.03%, respectively. Moving into other asset classes, the 10Y US Treasury Yield remained unchanged at 2.88%.
Last but not least, Volatility (VIX) rose by 14.29% during the same period.
The total US ETP flows from all products registered $7.6bn (+0.5% of AUM) of inflows during last week vs. $2.7bn (-0.2%) of outflows the previous week, setting the YTD weekly flows average at +$3.4bn (+$169.0bn YTD in total cash flows).
Equity, Fixed Income and Commodity ETPs experienced flows of +$7.4bn (+0.6%), +$0.7bn (+0.3%) and -$0.5bn (-0.9%) last week vs. -$1.4bn (-0.1%), -$0.5bn (-0.2%) and -$0.8bn (-1.3%) in the previous week, respectively.
Among US sectors, Consumer Staples (+$0.5bn, +5.2%) and Energy (+$0.4bn, +1.4%) received the top inflows, while Healthcare (-$0.3bn, -1.1%) and Materials (-$0.1bn, -1.1%) experienced the largest outflows.
Top 3 ETPs & ETNs by inflows: SPY (+$4.5bn), XLP (+$0.5bn), AGG (+$0.4bn)
Top 3 ETPs & ETNs by outflows: IWM (-$0.5bn), MDY (-$0.3bn), VWO (-$0.3bn)
New Launch Calendar: More income-producing alternatives reach the market
There were two new ETFs and one new ETN listed during the previous week. The three new products offer leveraged (2x) exposure to a diversified portfolio of 30 income-producing, closed-end funds; a covered call strategy based on the Nasdaq-100; and exposure to short-term bonds and money market instruments.
Turnover Review: Floor activity decreased by 9.4%
Total weekly turnover decreased by 9.4% to $279.0bn vs. $307.9bn from the previous week. However, last week's turnover level was 3.5% over last year's weekly average. Equity, Fixed Income and Commodity ETPs turnover decreased by $24.8bn (-9.0%), $2.6bn (-12.7%) and $1.1bn (-10.9%) during the same period, respectively.
Assets under Management (AUM) Review: assets decreased by $12.6bn
US ETP assets dropped by $12.6bn (-0.8%) totaling $1.622 trillion at the end of the week. As of last Friday, US ETPs had accumulated an asset growth of +21.6% YTD. Assets for Equity, Fixed Income and Commodity ETPs moved -$12.9bn, +$0.9bn and -$0.6bn during last week, respectively.
visit https://eqindex.db.com/etf/ for more
Source: Deutsche Bank - Synthetic Equity & Index Strategy - North America
Burn Notice: Watch out for leveraged ETFs
December 16, 2013--If you buy insurance on your home, you know that most of your losses would be covered in a catastrophe. Can you do the same with your portfolio?
There are lots of ways to buy portfolio insurance, but you have to be careful with leveraged exchange-traded funds (ETFs), which may offer protection, but carry a huge downside risk.
Leveraged ETFs have exploded in popularity in recent years as institutions and individuals are looking for ways to speculate and hedge positions after the 2008 meltdown.
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Source: Reuters
CFTC Misreporting Size of Swaps Market, Agency Says
Technical Errors in Data Resulted in Undercounting of Swaps Market
December 16, 2013--U.S. commodity regulators are stumbling at one of their primary goals: bringing transparency to the multitrillion-dollar swaps market.
The Commodity Futures Trading Commission said Wednesday that technical errors at two so-called swaps data repositories, which collect and supply regulators with transaction data, have led the CFTC to misreport the overall size of the swaps market by undercounting its size.
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Source: Wall Street Journal
Morgan Stanley Wealth Management US ETF Weekly Update
December 16, 2013--US ETF Weekly Update
Weekly Flows: $7.6 Billion Net Inflows
$166.4 Billion Net Inflows YTD
ETF Assets Stand at $1.6 Trillion, up 21% YTD
Two ETF Launches Last Week
Van Eck Makes Changes to LatAm Bond ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETF flows rebounded last week posting net inflows of $7.6 bln
Last week's net inflows were led by US Large-Cap ETFs at $5.2 bln; conversely, US Mid-Cap ETFs exhibited net outflows of $554 mln, the most of any category we measured
10 of the 15 categories we measure posted net inflows last week
ETFs have exhibited net inflows 34 out of 50 weeks YTD
ETF assets stand at $1.6 tln, up 21% YTD; $166.4 bln net inflows YTD
13-week flows remain mostly positive among asset classes; combined $60.5 bln in net inflows
International - Developed ETFs generated net inflows of $24.1 bln over the last 13 weeks, the most of any category we measured; International - Developed ETF market share has increased to 13% from 9% at this point last year
US Small- & Micro-Cap ETFs is the only US equity category that we measure to post net outflows over the last 13 weeks ($352 mln in net outflows); notably, small-cap companies have been solid performers (from a total return perspective) over this time period relative to their other size counterparts
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) posted net inflows of $4.5 bln this past week, the most of any ETF
The iShares Russell 2000 ETF (IWM) posted another week of net outflows; IWM has exhibited net outflows nine of the last 13 weeks totaling $3.0 bln
European equity ETFs continue to exhibit strong demand; the Vanguard FTSE Europe ETF (VGK) and the iShares MSCI EMU ETF (EZU) generated a combined $607 mln last week and $6.3 bln over the last 13 weeks
Notably, the iShares Core MSCI Emerging Markets ETF (IEMG) posted net inflows of $258 mln last week; IEMG has not posted a weekly net outflow this year relative to its two largest competitors (EEM and VWO), which have exhibited net outflows YTD
US-Listed ETFs: ETF Dollar Volume
ETF monthly $ volume as a % of listed trading volume dropped to 24% in November (had been essentially flat the prior four months)
ETF monthly $ volume as a % of listed trading volume is at its lowest level since May 2008
ETF $ volume declined last week to $279 bln, down $29 bln from the prior week
US Large-Cap ETFs accounted for 42% of ETF $ volume last week, but make up only 25% of ETF market share
US-Listed ETFs: Short Interest Data Updated: Based on data as of 11/29/13
The SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $2.2 bln
While SPY's shares short (280.1 mln) are at one of their highest levels in the past year and a half, the iShares Russell 2000 ETF (IWM) are at their lowest level since 4/30/09 (111.2 mln)
596 ETFs exhibited short interest increases while 566 experienced short interest declines over the last period
Aggregate ETF USD short interest decreased by $2.2 bln over the period ended 11/29/13
The average shares short/shares outstanding for ETFs is currently 4.1%, flat from last period
Six of the 10 most heavily shorted ETFs as a % of shares outstanding are industry based
The SPDR Oil & Gas Exploration & Production ETF (XOP) is the most heavily shorted ETF with a shares short as a % of shares outstanding of 240%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only eight ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
$6.4 bln in total market cap of ETFs less than 1-year old
Active and Fixed Income ETFs each account for 24% of market capitalization of ETFs launched over the past year; over the last 13 weeks, both groups generated a combined $765 mln in net inflows
137 new ETF listings and 48 closures/delistings YTD
The top 10 most successful launches make up 49% of the market cap of ETFs launched over the past year
Eight ETF sponsors and two asset classes represented in top 10 most successful launches; we note that the representation of funds with an income orientation is currently five (down from seven at the end of the second quarter)
The db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) took in another $10 mln in net new money last week and over the last four weeks has posted net inflows of $90 mln; ASHR is unique in that it provides exposure to the Chinese equity market via A-shares, which are limited to foreign investment
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Source: Morgan Stanley
Office of Financial Research Releases Second Annual Report
December 16, 2013--The OFR submitted to Congress its 2013 Annual Report, fulfilling a requirement to annually assess the state of the United States financial system and analyze threats to U.S. financial stability.
view the Office of Financial Research 2013 Annual Report
Source: US Department of the Treasury
CBOE Bets On Volatility Trading for 2014
The Chicago Board Options Exchange sees opportunity in volatility and aims to drive further growth in volatility trading in 2014 by introducing more new products and expanding extended-hour product offerings.
December 16, 2013--Leveraging the popularity of its CBOE Volatility Index (VIX), the Chicago Board Options Exchange closed 2013 with a spate of activity that has included introducing several new volatility products and expanding its trading hours to accommodate European trading.
That activity is set to continue into the coming year, beginning in the first quarter with the launch of weekly futures and options based on the exchange's new CBOE Short-Term Volatility Index (VXST).
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Source: TradersMagazine.com
BATS Exchange Welcomes New iShares ETF
December 13, 2013--BATS Global Markets (BATS), a leading operator of securities markets in the U.S. and Europe, today announced that the iShares Liquidity Income ETF (BATS: ICSH) will begin trading today on BATS Exchange.
The iShares Liquidity Income ETF seeks to provide current income consistent with preservation of capital. More information about the iShares Liquidity Income ETF is available on the iShares website.
The BATS Exchange Listings program offers ETF issuers a variety of innovative service offerings, including the BATS Competitive Liquidity Provider (CLP) program, which is a rewards-based program designed to incent market makers to increase liquidity and create tighter quoted spreads for each listing on BATS.
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Source: BATS Global Markets
Push for "non-transparent" active ETFs gains steam
December 13, 2013--Exchange-traded funds have traditionally been touted for their transparency, with their portfolio holdings disclosed daily. But the push for a new breed of ETFs that can hide their specific holdings for months at a time is gaining momentum.
Several large asset managers, including BlackRock Inc , State Street Corp, and Eaton Vance Corp have asked the U.S. Securities and Exchange Commission to let them market actively managed ETFs that would be permitted to report their portfolio holdings quarterly. That would put their reporting requirements on par with traditional mutual funds.
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Source: Reuters
