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CFTC Proposes Clearing Determination for Certain Credit Default Swaps and Interest Rate Swaps
Commission Proposes the First Swaps to be Cleared
July 24, 2012--The Commodity Futures Trading Commission today proposed new rules to require certain credit default swaps (CDS) and interest rate swaps to be cleared by registered derivatives clearing organizations (DCOs).
The proposed rule is the first clearing determination by the Commission under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Under the proposed rules, market participants would be required to submit a swap that is identified in the rule for clearing by a DCO as soon as technologically practicable and no later than the end of the day of execution. The proposed rule will be open for public comment after the rule has been published in the Federal Register, and the comment period will be open for 30 days.
The Dodd-Frank Act amends the Commodity Exchange Act (CEA) to prevent market participants from engaging in a swap that is required to be cleared unless that person submits the swap for clearing to a DCO. The Dodd-Frank Act also requires the Commission to determine whether a swap is required to be cleared by either a Commission-initiated review or a submission from a DCO for the review of a swap, or group, category, type, or class of swap. The proposed rule does not apply to those who are eligible to elect an exception from clearing, such as non-financial entities hedging commercial risk.
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Source: CFTC.gov
New PowerShares Small-Cap Relative Strength ETF
July 23, 2012--PowerShares and Dorsey Wright have launched their fourth exchange traded fund that uses a relative-strength strategy.
PowerShares DWA SmallCap Technical Leaders Portfolio (DWAS) picks 200 stocks from a universe of the 2,000 smallest U.S. companies in a broader set of 3,000 of the largest U.S. listed stocks. Dorsey uses a proprietary method to rank stocks based on relative strength.
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Source: Investors.com
Fink blasts BlackRock stock-picking performance
July 23, 2012--His criticism came after BlackRock's equity advisory fees dropped 89% to $3m in the three months to June.
In the 12 months to June 30, 61% of ...
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Source: Fiancial News
Vanguard-Joined at the hip: ETF and index development
July 23, 2012--The tremendous growth of exchange-traded funds (ETFs) over the past decade has coincided with the increasing development of many new indexes based on narrow segments and alternative weighting schemes that often lack "live" performance history.
Among the indexes being created for use in ETFs, more than half include back-filled performance data before the date the indexes were first publically available. A new Vanguard research paper suggests that index creation activity has been transformed from providing benchmarks for different asset class segments to providing ETFs a way to market and promote new products with ready-made indexes that might jump-start the acceptance and viability of new offerings.
view report-Joined at the hip: ETF and index development
Source: Vanguard
Morgan Stanley-US ETF Weekly Update
July 23, 2012--US ETF Weekly Update
Weekly Flows: $5.5 Billion Net Inflows
ETF Assets Stand at $1.2 Trillion, up 13% YTD
Five ETF Launches Last Week
SPDR Dividend ETF's Index Undergoes Change
Van Eck to Change Benchmarks on Coal and Gaming ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $5.5 bln last week, the third consecutive week of net inflows
Last week’s net inflows were led by US Large-Cap ETFs ($3.6 bln in net inflows)
ETF assets stand at $1.2 tln, up 13% YTD; ETFs have posted net inflows 22 out of 29 weeks YTD ($84.6 bln in net inflows YTD)
13-week flows were mostly positive among asset classes; combined $37.4 bln net inflows
Fixed Income ETFs have generated net inflows 48 out of the past 49 weeks ($13.8 bln net inflows over the last 13 weeks)
Emerging Market Equity and Commodity ETFs have been laggards the past 13 weeks, posting a combined $4.2 bln in net outflows
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) generated net inflows of $1.9 bln last week, the most of any ETF
Eight out of the top 10 ETFs to post the largest net inflows and outflows last week all had a US orientation (equity and debt)
SPDR Gold Trust (GLD) posted net outflows of $768 mln last week, the most of any ETF; since the beginning of 2011, GLD has surprisingly exhibited net outflows of $343 mln despite generating a market price return of more than 10%
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 6/29/12
Industrial Select Sector SPDR (XLI) posted the largest increase in USD short interest at $447 mln
Aggregate ETF USD short interest declined $8.7 bln over the past two weeks ended 6/29/12
For the second consecutive period, SPDR S&P 500 ETF (SPY) short interest declined; SPY’s 228.1 mln shares short is its lowest level since 1/15/10
The average shares short/shares outstanding for ETFs is currently 5%
Interestingly, two ETFs out of the top 10 to exhibit the highest level of shares short as a % of shares outstanding are 3x leveraged
and 3x leveraged inverse ETFs; by shorting them, investors may be trying to take advantage of the daily compounding issues
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 7/20/12 based on daily change in share counts and daily NAVs.
$7.4 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 $1.6 bln (specifically the PIMCO Total Return ETF-BOND)
118 new ETF listings and 17 closures YTD; at this point last year, 160 ETFs had already been launched and four shuttered
Over the past year, many of the successful launches have an income/dividend orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
BlackRock sponsors four of the 10 most successful launches over the past year
Top 10 most successful launches account for 70% of market cap of ETFs launched over the past year, up from 53% at the beginning of the year (skewed by BOND)
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Source: Morgan Stanley
Nasdaq lifts Facebook payout offer
July 21, 2012--Nasdaq has offered to pay $62m to aggrieved brokers who have said they lost hundreds of millions of dollars from the glitch-ridden Facebook debut on the stock exchange in May.
The new compensation programme represents a 50 per cent increase from a plan spelt out in June by Nasdaq OMX Group, parent company of the Nasdaq Stock Market.
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Source: FT.com
US Treasury's Office of Financial Research Releases Inaugural Annual Report
July 20, 2012--The U.S. Department of the Treasury's Office of Financial Research (OFR) released its inaugural Annual Report to Congress today.
Under the Dodd-Frank Act, the OFR must report annually to Congress on threats to the financial stability of the United States;
the status of efforts to meet its mission; and key findings from its research and analysis of the financial system.
“The Office of Financial Research is essential to building a framework for analyzing and measuring threats to financial stability. This report highlights the important progress made by the OFR in addressing weaknesses exposed by the financial crisis with data and analytical capacity not available before Wall Street Reform,” said Secretary Tim Geithner.
The report identifies some of the most significant gaps in the understanding of the financial system and in metrics to quantify financial activity.
view the 2012 OFR Annual Report to Congress
Source: US Department of the Treasury
S&P Dow Jones Indices Announces Changes To The S&P/TSX Canadian Indices-A Deletion From The S&P/TSX Venture Composite And Venture Select Indices
July 20, 2012--S&P Canadian Index Services will make the following changes in the S&P/TSX Canadian Indices:
The Toronto Stock Exchange announced yesterday in the Daily Bulletin that the shares of Temple REIT (TSXVN:TR.UN) will graduate to trade on TSX at the open of trading on Monday, July 23, 2012.
The ticker symbol will remain "TR.UN" and the CUSIP number will remain 880018 10 6. The company will be removed from the S&P/TSX Venture Composite Index after the close of trading on Friday, July 20, 2012.
Temple REIT is also a constituent of the S&P/TSX Venture Select Index. The company will be removed from this index effective after the close of Friday, July 27, 2012, at which time it will be listed on TSX.
Source: Standard & Poor's
IMF-Brazil: Selected Issues Paper
July 20, 2012--I. MACROECONOMIC IMPLICATIONS OF PENSION REFORM IN BRAZIL1
The long-term pension challenges facing Brazil are well documented. Recognizing these, the authorities have over the years sought to advance reforms of the systems.
An important signal of this commitment has been sent by the recent reform of the public system. Much of
the debate over the years has focused on the fiscal implications of the outlook for and possible reforms of the pension system.
However, different reform options can have very different macroeconomic implications, including for savings, growth, and external balances.
To illustrate these differential impacts and inform the debate on the issue, this paper simulates the general equilibrium effects for Brazil of various pension reform options that have been used in countries around the world. All options examined help address the system’s long term funding gap and are conducive to raising real private savings and growth in the long run. However, we find that reforms that involve lower mandatory contributions or higher retirement ages have larger effects on output though a boost in labor supply.
Meanwhile, reforms focused on reducing benefits would promote growth mostly through a larger impact on private savings.
view the IMF Brazil: Selected Issues Paper
Source: IMF
"Drought" Options-Implied Vol Up 50% This Month for Some Ag-based ETFs
July 20, 2012--A recent Reuters news report indicated that "Grain prices pushed to record highs on Thursday as scattered rains in U.S. Midwest did little to douse fears that the worst drought in half a century will not end soon or relieve worries around the world about higher food prices.
Government forecasters did not rule out that the drought in the U.S. heartland could last past October, continuing what has been the hottest half-year on record."
What can securities investors do about the 2012 drought? Investment vehicles that investors could explore include options on agriculture-based exchange-traded products (ETPs); here is a short list of four of the many such products (CBOE is not endorsing or soliciting for these products; please read the applicable prospectus
DBA -PowerShares DB Agriculture Fund
JJG-iPath DJ-UBS Grains Subindex ETN
MOO-Market Vectors Agribusiness Fund
CORN-Teucrium Corn Fund
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Source: CBOE
