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Joint Press Statement of Leaders on Operating Principles and Areas of Exploration in the Regulation of the Cross-border OTC Derivatives Market
December 4, 2012--Leaders of authorities with responsibility for the regulation of the over-the-counter (OTC) derivatives markets in Australia, Brazil, the European Union, Hong Kong, Japan, Ontario, Quebec, Singapore, Switzerland and the United States,1 met on November 28, 2012 to discuss reform of the OTC derivatives market as agreed by the leaders at the G-20 Pittsburgh Summit in September 2009.
We recognize that the OTC derivatives market is a global market and firmly support the adoption and enforcement of robust and consistent standards in and across jurisdictions. This will help further the G-20 regulatory reform agenda for OTC derivatives markets to mitigate risk, improve transparency and protect against market abuse, and to prevent regulatory gaps, reduce the potential for arbitrage opportunities, and foster a level playing field for market participants, intermediaries and infrastructures. We further recognize the need to reduce regulatory uncertainty and provide market participants, intermediaries and infrastructures with sufficient clarity on laws and regulations by avoiding, to the extent possible, the application of conflicting rules to the same entities and transactions. We also acknowledge the need to take into account, among other factors, minimizing the application of inconsistent and duplicative rules.
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Source: CFTC.gov
CME Group Volume Averaged 11.0 Million Contracts per Day in November 2012
December 4, 2012-- CME Group, the world's leading and most diverse derivatives marketplace, today announced that November 2012 volume averaged 11.0 million contracts per day, down 16 percent from November 2011
but up 12 percent from October 2012. Total volume for November 2012 was more than 231 million contracts, of which a record 88 percent was traded electronically.
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Source: CME Group
DTCC Receives CFTC Approval to add Commodities to its U.S. Swap Data Repository
December 4, 2012--The Depository Trust & Clearing Corporation (DTCC) announced today that the Commodity Futures Trading Commission (CFTC) has approved a request by DTCC Data Repository (U.S.) LLC (DDR) to amend its multi-asset class swap data repository (SDR) in the U.S. to include commodity derivatives.
The CFTC granted provisional registration to DDR to operate a U.S. SDR for over-the-counter (OTC) credit, equity, interest rate and foreign exchange derivatives in September.
Vanguard sees bigger days ahead in Canada despite slow start
December 4, 2012--Vanguard Group Inc. remains a bit player in Canada's growing exchange-traded fund industry on the eve of its one-year anniversary doing business in the country.
But the U.S. ETF giant believes its low-cost approach is starting to gain traction with investors north of the border and fully expects to become a mainstay of the Canadian market over the next few years.
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Source: Financial Post
High Frequency Trading Arms Race Has Plenty of Drawbacks.
December 3, 2012--A new paper co-written by the chief economist of the Commodity Futures Trading Commission calls into question the turbocharged arms race behind the controversial practice of high-frequency trading.
In the past few years, the race for speed on Wall Street has accelerated as high-frequency firms compete to get in front of one another—and of more traditional investors—at speeds measured in the millionth of a second. While the race has in some ways made the market more efficient, it is also having less beneficial effects on the market, the paper says.
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Source: Wall Street Journal
ISE Reports Business Activity for November 2012
December 3, 2012--ISE was the second largest equity options exchange in November with market share of 18.2%,
excluding dividend trades.
Dividend trades made up 4.8% of industry volume in November 2012.
The International Securities Exchange (ISE) today reported average daily volume of 2.5 million contracts
in November 2012. This represents a decrease of 11.1% compared to November 2011.
Total options volume for the month was 53.2 million contracts. ISE was the second largest U.S. equity options exchange in November with market share of 18.2%*.
Business highlights for the month of November include:
On November 16, 2012, ISE announced that Marcus Thompson was elected by the Board of Directors for a two-year term. Mr. Thompson, who is a Managing Director within the CFO division of Deutsche Börse AG, will serve as a non-industry director. In his role at Deutsche Börse Group, Mr. Thompson currently is responsible for Financial Accounting & Controlling.
On November 26, 2012, ISE announced that it became the first exchange to confirm a launch date of March 18, 2013 to commence trading in Mini Options. ISE will initially list Mini Options on the following securities: AAPL, AMZN, GLD, GOOG, and SPY.
For the month of November, Implied Order functionality accounted for 6.8% of all non-crossing, multi-legged contract volume executed on ISE.
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Source: ISE (International Securities Exchange)
CME completes Kansas City Board of Trade deal
December 3, 2012--CME Group has completed its acquisition of the Kansas City Board of Trade, the options and futures exchange operator said Monday.
The company said in October that it would be buying the Kansas City Board of Trade for $126 million in cash.
CME said the deal will provide customers of both companies with new trading opportunities and additional products to manage their global wheat price risk. The Kansas City Board of Trade is the leading futures market for hard red winter wheat. CME Group Inc. runs several exchanges, including a key wheat futures and options market.
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Source: Bloomberg BusinessWeek
CFE To Launch S&P 500 Variance Futures On December 10
New Contract Mirrors Quoting
Conventions and Economic Performance of Over-the-Counter S&P 500 Variance Swaps
December 3, 2012--CBOE Futures Exchange, LLC (CFE) announced today that it plans to launch trading in S&P 500 Variance futures on Monday, December 10.
The S&P 500 Variance futures contract, like over-the-counter (OTC) variance swaps, allows users to trade the difference between the implied and realized variance of the S&P 500 Index. CFE's variance futures contract will offer the same quoting conventions and economic performance of OTC variance swaps and will provide the advantages of exchange-traded contracts -- transparency, price discovery and counterparty clearing guarantees.
The new S&P 500 Variance futures contract is designed to offer benefits to both existing OTC users and to customers who have not traditionally participated in the OTC variance swap market.
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Source: CBOE
Morgan Stanley-US ETF Weekly Update
December 3, 2012--Weekly Flows: $18.0 Billion Net Inflows
ETF Assets Stand at $1.3 Trillion, up 24% YTD
Three ETF Launches Last Week
Invesco PowerShares Lowers Fees on Six ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $18.0 bln last week, highest level since we began tracking weekly flows in 2010
Net inflows were led by US cap-focused ETFs (combined $13.4 bln in net inflows); specifically US Large-Cap ETFs posted net inflows of $8.5 bln last week
The 4th quarter of each year is generally when we see ETF inflows at their strongest (over last 8 years, 4Q flows accounted for 43% of annual net inflows, on average)
ETF assets stand at $1.3 tln (up 24% YTD) and have posted net inflows 37 out of 48 weeks in 2012 ($152.9 bln YTD)
13-week flows were mostly positive among asset classes; combined $60.4 bln net inflows
Fixed Income ETFs have posted net inflows 65 out of the past 68 weeks, including $11.8 bln over the past 13 weeks
International Equity ETFs (EM and Developed Markets) have exhibited a combined $18.7 bln in net inflows over the last 13 weeks
US-Listed ETFs: Estimated Largest Flows by Individual ETF
For the 2nd consecutive week, the SPDR S&P 500 ETF (SPY) posted the largest net inflows
Over the past two weeks, SPY has generated net inflows of $7.8 bln, the most of any ETF
Nine of the 10 ETFs to post the largest net inflows last week were US equity-based (Vanguard captured six of the spots)
Five of the 10 ETFs to exhibit the largest net outflows last week were US fixed-income based (three focused on short maturities)
US-Listed ETFs: Short Interest
Data Updated: Based on data as of 11/15/12
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $2.1 bln
SPY’s shares short climbed for the second period in a row and currently reside at their highest level since 6/29/12
Aggregate ETF USD short interest increased by $6.0 bln over the past two weeks ended 11/15/12
The average shares short/shares outstanding for ETFs is currently 4.9%, up from 4.4% in the prior period
Smaller ETFs by market cap may skew results (four of the top 10 with the highest % of shares short have market caps <$25 mln)
Retail ETFs continue to be some of the most heavily shorted ETFs; SPDR Retail ETF (XRT) and Market Vectors Retail ETF (RTH) each have shares short as a % of shares outstanding over 200%
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Smith Barney Research.
Data estimated as of 11/30/12 based on daily change in share counts and daily NAVs.
$7.9 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs account for 53% of the market cap of ETFs launched over the past year; PIMCO Total Return ETF (BOND) is the largest actively managed ETF with a market cap of $3.8 bln
145 new ETF listings and 76 closures YTD (three WisdomTree ETFs will liquidate this week)
The top 10 most successful launches make up 72% of the market cap of ETFs launched over the past year
Five different ETF sponsors and two asset classes represented in top 10 most successful launches
Notably, the iShares Barclays US Treasury Bond Fund (GOVT) posted net outflows of $96 mln last; over the past 13 weeks,
GOVT has exhibited net outflows of $340 mln, by far the most of any recently launched ETF
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Source: Morgan Stanley
Invesco PowerShares to List S&P 500(R)Downside Hedged ETF
December 3, 2012--Invesco PowerShares Capital Management LLC, a leading global provider of exchange-traded funds (ETFs), announced today the anticipated listing of the PowerShares S&P 500(R) Downside Hedged Portfolio (PHDG) for December 6, 2012 on the NYSE Arca.
The new ETF will be a liquid alternative solution providing investors broad US equity market exposure with a downside hedge by dynamically allocating to VIX futures and cash depending on market volatility trends. PHDG will have an expense ratio of 0.39%.
“Today, advisors and their clients are just as interested in protecting their assets as they are in generating positive returns,” said Ben Fulton, Invesco PowerShares managing director of global ETFs. “The PowerShares S&P 500® Downside Hedged Portfolio (PHDG) will expand our range of liquid alternative strategies, and underscores our commitment to provide groundbreaking ETFs that advisors and investors can utilize to reduce correlation, lower volatility, and serve as a downside hedge in falling markets.”
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Source: Invesco PowerShares
