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Morgan Stanley-US ETF Weekly Update
September 10, 2012-Weekly Flows: $5.0 Billion Net Inflows
ETF Assets Stand at $1.3 Trillion, up 19% YTD
No ETF Launches Last Week
Global X Makes Changes to Canada ETF
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $5.0 bln last week, the sixth consecutive week of net inflows
US Small- & Micro-Cap ETFs generated net inflows of $1.1 bln last week, the most of any category (net inflows were driven by
the iShares Russell 2000 Index Fund (IWM))
ETF assets stand at $1.3 tln (up 19% YTD) and have posted net inflows 28 out of 36 weeks YTD ($97.5 bln in net inflows)
13-week flows were mostly positive among asset classes; combined $36.8 bln net inflows
All but one category exhibited net inflows over the past 13 weeks (Currency ETFs had net outflows of a mere $194 mln)
Despite posting net outflows last week, Fixed Income ETFs have generated net inflows of $8.4 bln the past 13 weeks and have posted net inflows 54 out of the past 56 weeks
US-Listed ETFs: Estimated Largest Flows by Individual ETF
ETFs Tracking the S&P 500 Index Accounted for Largest In/Outflows Last Week
The SPDR S&P 500 ETF (SPY) posted net inflows of $1.2 bln while the iShares S&P 500 Index Fund (IVV) exhibited net outflows of
$1.0 bln last week
Five out of the 10 ETFs to post the largest net outflows were either US-Treasury based or have significant US Treasury exposure;
the five ETFs (IEI, UST, TIP, SHY, AGG) posted a combined $2.2 bln in net outflows
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 8/15/12
SPDR S&P 500 ETF (SPY) had the largest increase in USD short interest at $1.6 bln
SPY’s short interest increased for the first time since 5/31/12; however, its 213 mln shares short is well below its 52-week average
of 335 mln shares short
Aggregate ETF USD short interest increased $104 mln over the past two weeks ended 8/15/12
The average shares short/shares outstanding for ETFs is currently 5.2%
Out of the 10 ETFs with the highest % of shares short, five of them have market caps less than $20 mln, and in our view, are skewing the impact of the exhibit
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 9/7/12 based on daily change in share counts and daily NAVs.
$9.3 billion in total market cap of ETFs less than 1-year old
Over the past 13 weeks, newly launched Active ETFs generated most net inflows at $1.3 bln (specifically the PIMCO Total Return ETF-BOND)
125 new ETF listings and 44 closures YTD (additional 25 liquidations have been announced)
Over the past year, many of the successful launches have an income/volatility orientation
Five different ETF sponsors and two asset classes represented in top 10 most successful launches
Notably, the iShares MSCI Global Select Metals & Mining Producers Fund (PICK) posted net inflows of $88.7 mln last week,
the most of any recently launched ETF; despite the big week, PICK did not crack the top 10 largest funds
Top 10 most successful launches account for 69% of market cap of ETFs launched over the past year
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Source: Morgan Stanley
CFTC Staff Responds to Questions on Timing of Swap Dealer Registration Rules
September 10, 2012--Today, Commodity Futures Trading Commission (CFTC) staff is responding to questions from market participants and other interested parties on the timing of when entities will be required to register as swap dealers.
The CFTC is issuing a Frequently Asked Questions document to help market participants better understand the rules, what is required and by when.
In sum, the swap dealer registration regulations go into effect on October 12, and entities that have more than the de minimis level of dealing (swaps entered into after Oct 12) must register by no later than two months after the end of the month in which they surpass the de minimis level. By way of example, if an entity reaches $8 billion in swap dealing the day after October 12, then the entity would have to register within two months after the end of October, or by December 31.
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Source: CFTC.gov
DB Equity Derivatives and Quantitative Strategy Research-North America-US ETF Market Monthly Review : Risk on sentiment keeps ETP assets around all-time highs
September 10, 2012--ETP assets in the US rose by $24.5bn to $1.22 trillion last month, reaching a new all-time high and boosting AUM growth to a decent 16.4% growth on a YTD basis.
Global ETP industry assets rose to $1.66 trillion, or 15.6% up YTD.
It’s still risk-on below the surface
US ETP flows experienced inflows of $4.9bn during August (+$93.4bn, 8.9% of last year’s AUM).
Within long-only ETPs, total flows were +$3.6bn in August vs. +$15.7bn in July.
Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of -$3.8bn, +$5.0bn, and +$2.3bn, respectively.
Asset class returns for the month of August clearly point to a comeback to risk, however the ETP flows read may look inconsistent at first glance.
A second look, however, provides further understanding. Most of the outflows from equities (about $5.7bn) came from two ETPs (SPY and IWM) which are commonly used for hedging purposes and hence can experience large cash flow fluctuations which may not be consistent with the underlying investment trend. Excluding these outflows, equity flows would have been positive (about $2.0bn), with inflows to broad EM and DM ex US equities, and flat flows for US equities. Furthermore, investors turned to cyclical sectors while exiting defensive ones. In the fixed income ETP space, investors favored Credit by focusing on Corporates. And in the commodity space, gold was the highlight of the month following the newly reported positions of large hedge fund managers and the likelihood of additional easing. Overall the long-only ETP flows still suggest that the underlying investor sentiment is leaned towards risk on.
Some of the relevant flow trends of the month were: (1) US equity (-$5.9bn), (2) Investment Grade debt (+$3.4bn), and (3) gold (+$2.3bn).
New Launch Calendar: expanding the ETF branches
There were 6 new ETFs listed during the previous month. Four of them were listed in the NYSE Arca, while the other two in the NASDAQ. The new products cover multiple asset classes such as equity, multi asset, and alternative.
The new additions to the ETF offering give access to emerging markets, income-driven investments, and quantitative strategies.
ETP floor activity keep trending lower
ETP turnover totaled $0.97 trillion last month, down by 9.0% from the previous month figure of $1.07 trillion, and also 41% under last year’s monthly average of $1.65 trillion).
ETP trading made up 25.0% of all US cash equity trading in August, down from last year’s peak of 37.5% in August, and still below its 3-year monthly average of 29.0%.
Equity ETPs turnover fell by $106bn or 11.3% to $0.8 trillion during August, meanwhile Fixed Income and Commodity ETPs turnover rose by $2.9bn (totaling $69.8bn) and $8.7bn (totaling $58.5bn) during last month, respectively.
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Source: Deutsche Bank - Equity Derivatives and Quantitative Strategy Research - North America
Virtus Wealth Masters Fund Launches Based on ISE Index
Virtus Wealth Masters Fund Tracks the Horizon Kinetics ISE Wealth Index
September 10, 2012--The International Securities Exchange (ISE) today announced that the Virtus Wealth Masters Fund (Tickers: VWMAX, VWMCX, VWMIX), which tracks the Horizon Kinetics ISE Wealth Index (Ticker: RCH), was launched by Virtus Investment Partners, Inc. (NASDAQ: VRTS).
It is the first mutual fund based on an index jointly developed by ISE and Horizon Kinetics LLC.
The Horizon Kinetics ISE Wealth Index includes companies whose senior managements have demonstrated track records of skill and specific industry knowledge that have translated into long-term shareholder value creation. These individuals have also used their respective companies as the primary means of accumulating substantial personal wealth, such as with index components Berkshire Hathaway (Ticker: BRK/B) led by Chairman Warren Buffet and Liberty Media Corporation (Ticker: LMCA) headed by Chairman John Malone. The fund began trading on September 6, 2012.
“We are very excited to expand the product portfolio of our index development group to include the Virtus Wealth Masters Fund, the first mutual fund tracking a Horizon Kinetics-ISE index to debut,” said Kris Monaco, Head of New Product Development at ISE. “Working with our partners at Horizon Kinetics, this index offers a unique view into the role that insider wealth can have on the performance of publicly traded companies, and the introduction of the Virtus Wealth Masters Fund provides investors with an opportunity to gain exposure to these high-performance businesses and their seasoned management teams.”
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Source: International Securities Exchange (ISE)
Institutional investors accounted for largest share of ETF trading on BM&FBOVESPA in August
September 10, 2012--Institutional investors accounted for 35.8% of the total volume of exchange-traded funds traded on BM&FBOVESPA in August. Financial investors ranked second with 24.5%, followed by foreign investors with 23.9%, individual investors with 12.8% and private- or public-sector corporations with 3.1%.
iShares Ibovespa Fundo de Índice ( BOVA11 ) was the most traded ETF on BM&FBOVESPA in August, accounting for 89.8% of the total trading volume in all the ETFs available on the Exchange.
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Source: BM&FBOVESPA
AlphaClone Hedge Fund Long/Short Index shows move away from financial sector
September 7, 2012--Hedge fund managers tracked by the AlphaClone Hedge Fund Long/Short Index distanced themselves from financial sector investments in the second quarter, representing a steep reversal from the previous quarter in which financials were the index's most overweight sector relative to the S&P 500.
“The bearish stance may illustrate conviction among hedge funds that financials are fully valued at these levels, especially in light of various high profile scandals that affected the sector negatively,” says Mazin Jadallah (pictured), chief executive of AlphaClone.
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Source: HedgeWeek
CFTC.gov Commitments of Traders Reports Update
September 7, 2012--The current reports for the week of Setpember 4, 2012 are now available.
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Source: CFTC.gov
ISE Introduces 50 cent strike price intervals in weekly options
September 7, 2012--The International Securities Exchange (ISE) today announced that it has received SEC approval to introduce $0.50 strike price intervals in weekly options. The exchange began listing weekly options in the more granular $0.50 strikes yesterday, offering an expanded range of strike prices and potentially a lower cost of entry to investors who are using weekly options to effect their trading and hedging strategies.
This new program extends to weekly options classes that currently trade in one dollar increments, and all other contract terms remain unchanged.
“The weekly options program has become one of the most popular product offerings and strongest growth areas since its industry-wide expansion two years ago,” said Boris Ilyevsky, Managing Director of ISE’s options exchange. “The introduction of $0.50 strike price intervals will attract further interest from investors who are seeking greater trading opportunities and the ability to more closely tailor their investment and risk management strategies.”
The new program will apply to the ninety-three underlyings with weekly options classes that trade in dollar strike price intervals. Weekly options currently represent approximately 11.7 percent* of industry-wide options volume.
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Source: International Securities Exchange (ISE)
RBS PLC Launches The RBS US Large Cap Alternator Exchange Traded Notes
September 7, 2012--RBS Securities Inc. (RBSSI) today announced the launch of the eighth exchange traded product in its growing suite of Exchange Traded Notes (ETNs). The RBS US Large Cap Alternator Exchange Traded NotesTM will be issued by The Royal Bank of Scotland plc (RBS) and will be listed on NYSE Arca, Inc. under the ticker "ALTL."
The RBS US Large Cap Alternator Exchange Traded Notes (NYSEArca:ALTL) are designed for investors who seek exposure to the RBS US Large Cap Alternator Index (USD) (the “Index”), an index that utilizes a relative strength strategy to provide exposure to either the SP 500® Total Return Index, the SP 500® Low Volatility Total Return Index or the SP 500® Equal Weight Total Return Index, depending on the relative performance of the three underlying indices based on their average historical returns.
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Source: RBS Markets International Banking (MIB)
SEC Reschedules Date of Market Technology Roundtable
September 6, 2012--The Securities and Exchange Commission today announced that its market technology roundtable, which was scheduled for Sept. 14, will be held on Oct. 2.
The change was made to accommodate scheduling conflicts and to better respond to strong interest from individuals and groups wishing to participate in the roundtable discussion.
The roundtable at the SEC’s Washington, D.C. headquarters is open to the public and will be webcast. As previously announced, the event will begin with a discussion on preventing errors, focusing on current best practices and practical constraints for creating, deploying, and operating mission-critical systems, including those used to automatically generate and route orders, match trades, confirm transactions, and disseminate data. The afternoon session will focus on error response, with experts discussing how the market might employ independent filters, objective tests, and other real-time processes or crisis-management procedures to detect, limit, and possibly terminate erroneous market activities when they occur, thereby limiting the impact of such errors.
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Source: SEC.gov
