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DB-Synthetic Equity & Index Strategy-North America-US ETF Handbook Series-Positioning for a stronger USD with ETFs
March 14, 2013--Dollar investing and Dollar-Hedging made easy
A guide to invest in the USD up-trend and hedge international equity portfolios
The Dollar is Back
In a recent note, our Head of FX research indicated that almost all currencies appeared to have peaked against the dollar, and that the more recent rise in USD/JPY suggests the broad dollar is embarking on a multi-year uptrend.
In addition, he pointed out that superior US growth, Central Bank easing activity outside the US, and China rebalancing away from an investment driven economy towards a more consumer driven one should all help to strengthen the dollar.
International equity portfolios can suffer from Dollar strength
A USD-denominated portfolio of foreign non-USD securities lags the local market returns during Dollar up-trend cycles. Investors that desire clean exposure to the underlying local market returns can hedge their FX risk with a currency overlay in an attempt to neutralize such risk.
ETPs have made currency investing and FX hedging easy
If we are indeed in the early stages of a new 6-10 year up-trend cycle for the Dollar as our FX strategist expects, investors would do well in reevaluating their portfolio allocations and repositioning themselves accordingly. ETPs can offer an easy and efficient way to implement this new trend across major currencies and non-USD denominated equity portfolios.
Dow ends up for 10th day, S&P nears record high
March 14, 2012--The Dow Jones industrial average extended its winning streak to 10 days on Thursday, a string of gains last seen in late 1996, and ended at another record high as investors were encouraged by data showing the labor market's recovery was improving.
The S&P 500 took a late-day run at its record closing high of 1,565.15, but ended just 2 points away. The 30-stock Dow Jones industrial average has been setting record highs since last week, when it rallied on March 5 to initially surpass its previous lifetime closing peak set in October 2007.
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Source: Reuters
Deutsche Bank to Temporarily Suspend New Issuances of Twenty-Six Exchange Traded Notes
March 14, 2012-- Deutsche Bank today announced that due to the postponement of the publication of its 2012 Annual Report and Form 20-F, it will temporarily suspend further issuances of twenty-six Exchange Traded Notes (the "ETNs"), effective after the close of trading on March 29, 2013.
Deutsche Bank expects to resume issuances of these ETNs following the publication of its 2012 Annual Report and Form 20-F in mid-April 2013. The ETN holders‘ option to require Deutsche Bank to repurchase the ETNs will not be affected by this suspension. However, Deutsche Bank will not be issuing new ETNs to the market and will announce to investors its resumption of new ETN issuances in due course.
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Source: Herald Online.com
CBOE wins in ISE patent suit
March 14, 2013--The Chicago Board Options Exchange (CBOE) today announced that the United States District Court for the Northern District of Illinois found that CBOE does not infringe a patent entitled "Automated Exchange for Trading Derivative Securities," held by International Securities Exchange, LLC (ISE).
In its ruling the Court held that CBOE's proprietary Hybrid® and CBOEdirect® systems do not infringe ISE's patent. As a result of the ruling, ISE's patent infringement suit against CBOE has been terminated.
"We are gratified that the Court has ruled in CBOE's favor," said CBOE Chairman and CEO William J. Brodsky. "This ruling vindicates our long-held position that CBOE's innovative systems in no way infringe ISE's patent."
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Source: CBOE
U.S. regulators investigating transparency of gold, silver price setting
The debate that never dies and is never resolved is back as the U.S. Commodity Futures Trade Commission apparently is investigating the setting of gold and silver prices in London
March 14, 2012--The U.S. Commodity Futures Trading Commission is investigating the setting of gold prices in London to determine whether prices are being manipulated, the Wall Street Journal reported Wednesday.
“The CFTC is looking at issues including whether the setting of prices for gold—and the smaller silver market—is transparent,” wrote WSJ reporters Katy Burne, Matt Day and Tatyana Shumsky. "No formal investigation has been opened...”
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Source: MineWeb
Patents tighten BNY Mellon's grip on commodities ETP market
March 13, 2013--BNY Mellon has received long-anticipated patents on its method of turning commodities into exchange traded products, cementing its position as the go-to service provider for the products.
Patents are a critical component to the fiercely competitive exchange traded fund industry. They have been used to strengthen competitive advantages that come from a company’s research and development, much to the chagrin of other providers.
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Source: FT.com
Fidelity(R) and BlackRock(R) Announce Groundbreaking ETF Strategic Alliance
Partnership Leverages Complementary Strengths to Provide Greater Value to
Investors
Fidelity Customers Will Benefit From Increased Access to Products and Enhanced
Tools and Support for iShares ETFs
March 13, 2013--Fidelity Investments^(R) and BlackRock, Inc. (NYSE: BLK) announced today a long-term strategic alliance that provides extensive collaboration across Fidelity's distribution and asset management organizations with BlackRock and its leading ETF provider, iShares, to deliver significant value to investors across a range of ETF initiatives.
This partnership will give millions of
Fidelity customers increased and improved access to a broad selection of
passive ETF solutions provided by iShares, the world’s largest and most
diverse ETF manufacturer^1.
“Through this groundbreaking alliance between two financial services leaders, we will leverage our complementary strengths to deliver leading ETF products and research that are unmatched to more than 10 million Fidelity customers,” said Kathleen A. Murphy, president of Personal Investing at Fidelity Investments.
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Source: Fidelity Investments
ISE Statement on Patent Infringement Case
March 13, 2013--In the case of International Securities Exchange, LLC (ISE) v. Chicago Board Options Exchange, Inc. (CBOE), case no. 07C623, presiding Judge Joan H. Lefkow has issued a series of pre-trial rulings in CBOE's favor, thus forcing ISE to cease pursuit of the case in the United State District Court, Northern District of Illinois, at the present time.
ISE strongly believes in the merits of its case that CBOE copied and continues to infringe ISE's patented trading technology, and ISE plans to immediately file an appeal to the Federal Circuit to reverse these rulings. ISE will have no further comment at this time.
Source: International Securities Exchange (ISE)
Morgan Stanely-ETF Tracking Error: A Modest Rise Amid Expansion
March 13, 2013--Tracking error in this report is defined as the difference in total return between an ETF’s net asset value (NAV) and its underlying
index.
In our view, the most common sources of tracking error include fees and expenses, portfolio optimization, fair value pricing of net asset value (NAV), diversification requirements, ownership
restrictions, and index turnover.
Tracking error rose to 59 bps from 52 bps, on average, in 2012. While a slight setback from last year’s historically low read, the 2012 results were below the 64 bps average from 2002-2011. In fact, ETF tracking error has been cut in half since the 2009 high of 125 bps. Notably, the average expense ratio increased to 47 bps from 46 bps year-on-year while the range of tracking error declined to 539 bps from 695 bps (and is down from 1,709 bps in 2009).
On the negative side, the magnitude of tracking error increased in 2012 as the percentage of funds with tracking error below their respective expenses fell to 39% from 53% while the percentage of ETFs with tracking error <25 bps fell to 32% from 37% and the percentage of ETFs with tracking error >100 bps rose to 14% from 10%. Additionally, of the ETFs eligible for our 2011 and 2012 studies, 58.3% exhibited an increase in tracking error versus 39.1% showing a decline and just 2.6% with no change.
We attribute the slight uptick in average tracking error to myriad factors at play in 2012. 1) Increasing complexity of underlying markets; 2) new market entrants; 3) record net inflows; 4) strong performance and declining correlations impacting optimization techniques; 5) higher expenses and the effect of compounding amid higher asset prices. ETF tracking error remains in line with expectations. Despite the rise in the number and complexity of products, ETF providers have managed to lower tracking error over time. Process improvements, better optimization techniques, smarter indexing, scale, increased access to global capital markets, and a greater focus on tracking error by providers have contributed to the improved results, in our view.
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Source: Morgan Stanley
Barclays Launches the Barclays ETN+ Select MLP Exchange Traded Note
March 13, 2013--New Barclays ETN+ Select MLP ETN (ticker: ATMP) provides investors with exposure to a select group of partnerships and companies in the MLP space
March 13, 2013--Barclays Bank PLC announced today the launch of the Barclays ETN+ Select MLP Exchange Traded Note ("ETN") on the NYSE Arca stock exchange under the ticker symbol ATMP.
The ETN is designed to provide investors with exposure to a basket of midstream US master limited partnerships (“MLPs”), limited liability companies (“LLCs”) and corporations by tracking the volume weighted average price (“VWAP”) of the Atlantic Trust Select MLP Index (the “Index”). Additionally, the Index will also provide exposure to general partners of US MLPs in Canada.
“In response to the growing demand for yield, this MLP ETN offers the potential for income along with upside appreciation via a more focused exposure to a subset of general partners and limited partners in the MLP space, developed by the Atlantic Trust team,” said Ian Merrill, Head of Barclays ETNs, Americas. “We are pleased to have been able to extend our range of Barclays ETN+ ETNs through this partnership."
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Source: Market Watch
