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Economic Commentary-Exchange-Traded Funds-O. Emre Ergungor
May 3, 2012--ETFs are one of the most successful financial innovations of the last few decades. As a new, rapidly growing, and increasingly complex financial instrument, ETFs might raise concerns about the risk they pose to financial stability. While they do not seem to pose a threat at this time, ETFs exposed a weakness in U.S. stock markets during the Flash Crash of 2010: the fragmented nature of trading, which can leave some markets very shallow.
With the spectacular boom and bust of mortgage-backed financial products still fresh in our collective memory, any rapidly growing asset class is bound to raise eyebrows in the marketplace. The exchange-traded fund (ETF) is one such product.
ETFs are stock-market-traded entities that invest mostly in corporate and sovereign financial liabilities, often with the intention of replicating the returns of a market index, like the S&P 500. That goal may not sound glamorous, but ETFs are one of the most successful financial innovations of the last few decades. Their growth has been phenomenal, especially since 2005 (figure 1). While small relative to their older cousin, mutual funds (which control about $7.5 trillion in assets), ETFs have gone from $0 to $1 trillion in just 20 years.
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Source: Federal Reserve Bank of Cleveland
Treasury Doesn't Sound a New Note
May 3, 2012--The Treasury Department surprised bond investors by delaying a decision on whether to introduce floating-rate notes to its mix of debt securities.
Treasury officials in statements released Wednesday cited "system limitations" that would prevent any possible issuance of floating-rate notes this year. The action also came amid lack of consensus on a suitable benchmark rate for the notes among members of the private-sector panel that advises the Treasury.
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Source: Wall Street Journal
SEC Reopens Comment Period for Proposed Amendments to Its Net Capital, Customer Protection, Books and Records, and Notification Rules for Broker-Dealers
May 3, 2012--The Securities and Exchange Commission today announced that it is re-opening the public comment period for proposed amendments to its net capital, customer protection, books and records, and notification rules for broker-dealers.
The proposed rule amendments are designed to update the financial responsibility rules for broker-dealers and make certain technical amendments. The Commission issued the proposed amendments on March 9, 2007, and the public comment period on the proposal closed on June 18, 2007.
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Source: SEC.gov
ALPS files with the SEC
May 3, 2012--ALPS has filed a post-effective amendment, registration statement with the SEC for the U.S. Equity High Volatility Put Write Index Fund-HVPW.
view filing
Source: SEC.gov
Van Eck files with the SEC
May 3, 2012--Van Eck has filed a post-effective amendment, registration statement with the SEC for the Saudi Arabia ETF.
view filing
Source: SEC.gov
ISE Introduces Implied Order Functionality
May 3, 2012--The International Securities Exchange (ISE) announced today that it has introduced Implied Order functionality*. With Implied Orders, ISE will significantly enhance the execution of multi-legged strategy orders by enabling greater interaction of the complex order book with the regular order book. The result will be an increased fill rate for multi-legged strategy orders as well as tighter spreads and increased liquidity on the regular order book.
Gary Katz, ISE’s President and CEO, said, “The launch of Implied Orders is a milestone accomplishment for ISE and will deliver measurable improvements in the execution quality of both our complex and regular order books. I am extremely proud of the technology team that designed and developed this very sophisticated functionality, which is a first in the U.S. options industry. Implied Order functionality truly provides our customers with a uniquely innovative, industry-leading platform for trading multi-legged strategy orders.”
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Source: International Securities Exchange (ISE)
"Space Between Walls" -Speech by Commissioner Bart Chilton
Finance, Credit and International Business Association International Credit Executives Conference, Chicago, IL
May 3, 2012--Introduction
Thanks to Rick Hayes for that great introduction. Aside from Russian roulette, having a fraternity brother introduce you must be one of the riskiest things that can be done. It really is wonderful to be with you this morning and be in my favorite city in the world: Chicago.
I grew up in a lakefront neighborhood. On clear nights, you could see the Chicago skyline. I did not know, nor would have cared at the time, about the tremendous revolution, innovation and economic transformation of financial markets that was taking place in Chicago back then.
There is a fascinating new book written by the "father of financial futures" Dr. Richard Sandor entitled, Good Derivatives. The book chronicles the multitude of market innovations taking place since the 1970's, and the environment in which those innovations thrived. One key point Dr. Sandor makes is that in order to flourish, market innovations need proper regulation. One might say: there needs to be suitable regulatory walls and space between those walls that balances the public interest with the ability for the private sector to successfully innovate.
Impacts on Businesses and Economies
So today, let's do some discourse on the future of these spectacular global financial markets. Just think about the complex financing and credit, the capital and other resources—both human and technological—that all work in concert to facilitate these incredibly elaborate, intricate and inter-related global markets of colossal size and scope—churning, all day.
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Source: CFTC.gov
ETF Industry Association Releases April 2012 ETF Data Reports
May 3, 2012--Some of the key highlights from the April 2012 ETF Data report include:
Assets in US listed Exchange Traded Funds (ETF) and Exchange Traded Notes (ETN) totaled approximately $1.20 trillion at April 2012 month-end, an increase of 6% over April 2011 month-end, when assets totaled $1.14 trillion.
ETF/ETN net cash inflows totaled approximately $3.0 billion for the month of April 2012, bringing year-to-date net cash inflows to $58.9 billion.
At April 2012 month-end, there were 1,458 U.S. listed products, an increase of 20% compared to the 1,216 U.S. listed products at the same time last year.
Fixed Income leads all categories year-to-date with $21.3 billion in net inflows. April marks the 16th consecutive month of net inflows to fixed income ETFs.
visit www.etf-ia.com for more info.
Source: ETFIA
RBC unit to cover nearly $3 million of investor ETF losses
May 2, 2012--Royal Bank of Canada's brokerage unit agreed to repay investors in Massachusetts up to $2.9 million to cover losses on leveraged and inverse leveraged exchange-traded funds, the latest phase of a nationwide regulatory crackdown on the sometimes volatile products.
The bank's RBC Capital Markets division was also fined $250,000 by Massachusetts' top securities regulator, William Galvin, for selling the "highly volatile, nontraditional" funds that did not fit with some clients' investment objectives, Galvin said in a statement on Wednesday.
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Source: Reuters
PIMCO Launches Active TIPS ETF
May 2, 2012--Fresh off the heels of the release of its Total Return ETF, PIMCO on Tuesday began trading its Global Advantage Inflation-Linked Bond Strategy Fund (ILB) on the NYSE.
According to the Newport Beach, Calif.-based bond behemoth, the latest ETF is designed for long-term returns above inflation by actively managing global inflation-linked bonds and currencies. The fund is managed by Mihir Worah, managing director and head of PIMCO’s real return portfolio management team.
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Source: AdvisorOne
