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DB Equity Research Equity Research-North America:Markets & ETFs : Low volumes: Is this all right?
April 3, 2012--What's behind this year's low trading volume?
The first quarter recorded one of the strongest Q1 equity markets in history (S&P 500, +12%); however volume remained at relatively low readings. Therefore many market participants may be wondering whether there is consistency between the bull market and volume, or not.
It’s all about volatility
To obtain a better understanding of the situation, we looked at the historical patterns for cash flows, volume, volatility, and the market, with special focus on ETPs. We found that volume is closely related to the volatility level. In general, we observed that volume soars around volatility peaks and declines on plunging volatility. Equity Cash Flows, on the other hand, present an inverse relationship with Volatility. Usually, inflows are experienced during declining volatility, while outflows are more common during rising volatility .
ETP Net Cash Flows have been strong this year
Overall ETP cash flows have been strong according to historical levels.
All ETPs, Equity ETPs, and Fixed Income ETPs recorded the highest inflows in record for a first quarter:
All ETPs: +$52.0bn (+101% YOY)
Equity ETPs: +$31.6bn (+90% YOY)
Fixed Income ETPs: +$17.1bn(+126% YOY)
ETP Short Interest has declined more than $35bn (-25%) since September ‘11
Equity ETP short interest dropped from last year’s peak of $139bn in Sep ’11 to $91bn at the end of Dec ‘11 and $94bn at the end of Jan ‘12. Short interest stood at $104bn as of Mar 15, 2012.
Current low Volume is driven by low volatility, not by lack of investors’ interest
The volume YOY change for the first quarter of the year was:
Total cash equities: -10.2%.
Tot. cash eq. (ex Equity ETPs): -10.4%
All ETPs: -13.0%.
Equity ETPs: -15.4%.
Volatility averaged 18.2% during the first quarter of 2012, which is below the daily average of 27.7% in the past 45 months.
Volume is highly correlated with the change (%) of monthly volatility peaks (e.g. Volume in Mar= f(VIX peak in Mar / VIX peak in Feb). Actually, Q1 volumes came around the projected values according to the volatility levels experienced during the same period.
For the record: Volume & Cash Flows tell different stories
Volume measures how much money is changing hands within the market, however cash flows measure how much money is coming in or going out of the market.
Volume is driven mostly by market sentiment or expectations (e.g. fear), while cash flows are driven mostly by fundamentals (e.g. positive surprises in economic or company earnings data).
to request report
Source: Deutsche Bank-Equity Research-North America
McGraw-Hill Buys Market-Data, Systematic-Trading Provider QuantHouse
April 3, 2012--McGraw-Hill Cos.'s (MHP) S&P Capital IQ unit acquired QuantHouse, a provider of market-data and systematic trading technology, as it looks to offer an integrated low-latency feed for all of its data.
Financial terms weren't disclosed.
Founded in 2005, QuantHouse provides end-to-end trading systems--including ultra-low-latency market data technologies, algo-trading development framework, proximity hosting and order routing services--to hedge funds, market makers, proprietary desks and latency sensitive sell-side firms.
read more
Source: Wall Street Journal
Horizons ETFs Launches Canada's First Inverse Volatility ETF
April 3, 2012--Horizons Exchange Traded Funds Inc. ("Horizons ETFs") and its parent Horizons ETFs Management (Canada) Inc. are pleased to announce the launch of the Horizons BetaPro S&P 500 VIX Short-Term Futures Inverse ETF ("HVI"). HVI will begin trading tomorrow on the Toronto Stock Exchange ("TSX") under the ticker symbol HVI.
HVI is designed to provide daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to the single inverse (opposite) of the daily performance of the S&P 500 VIX Short-Term Futures™ Index (the "S&P VIX S-T Index").
Any U.S. dollar gains or losses as a result of HVI's investment will be hedged back to the Canadian dollar to the best of its ability. HVI does not seek to achieve its stated investment objective over a period of time greater than one day.
read more
Source: Horizons Exchange Traded Funds Inc
Market Vectors Launches International High Yield Bond ETF
IHY focuses on high-yield debt issued by corporations located outside of the U.S.
April 3, 2012--Market Vectors ETF Trust announced today that it has launched its International High Yield Bond ETF (NYSE Arca: IHY), the first U.S. listed exchange-traded fund (ETF) designed to address a segment of the high-yield bond market that it believes, based on other funds currently available in the U.S. market, may be underrepresented in many investor portfolios.
"Our research has shown that for many investors the current allocation to corporate high-yield debt may miss as much as 35 percent of the global high-yield market,” said Edward Lopez, Market Vectors’ Marketing Director. “That underexposure may be especially important as international corporate high-yield bonds currently offer higher yields as well as historically lower default rates than similar debt instruments issued in the U.S.1"
read more
Source: Van Eck Global
BATS Global Markets to list two exchange traded funds Tuesday
April 2, 2012--Two new exchange traded funds will begin trading Tuesday through BATS Global Markets Inc., the first listings since the Lenexa-based company's own public stock offering failed last month.
BATS has launched several exchange traded fund listings successfully, but its corporate stock listing service uses a different software system.
The corporate listing system failed spectacularly on March 23 when BATS tried to launch an initial public offering of its own stock on its own stock exchange. Although the software problem was diagnosed and then quickly fixed, BATS decided not to go through with the offering.
read more
Source: Kansas City Star
.....BlackRock Announces Termination of Claymore Inverse 10 Yr Government Bond ETF
April 2, 2012--BlackRock Investments Canada Inc., an indirect, wholly-owned subsidiary of BlackRock, Inc. (NYSE: BLK - News), today announced that it will terminate the Claymore Inverse 10 Yr Government Bond ETF (TSX: CIB.TO - News) and distribute to unitholders the proceeds to be received from the liquidation of the assets, less all liabilities and all expenses to be incurred in connection with the termination and dissolution of CIB.
BlackRock, and its leading exchange traded fund (ETF) provider iShares, proposed late last year a series of regulatory reforms and recommendations for enhanced disclosure and transparency related to the ETF markets. ETFs have provided investors with a low cost and transparent way to access a wide variety of asset classes for more than two decades. When first introduced, ETFs brought investors new levels of transparency and disclosure among other benefits. However, increasingly complex ETFs and related products have sometimes failed to maintain that standard and have introduced new risks to these products.
Nadex self-certified the contracts on December 19, 2011, and on January 3, 2012, the CFTC initiated a 90-day review period of the contracts pursuant to CFTC Regulation 40.11(c). As a result of reviewing the complete record, the CFTC determined that the contracts involve gaming and are contrary to the public interest, and cannot be listed or made available for clearing or trading. By a separate letter, the CFTC also requested that Nadex withdraw its self-certification of related rule amendments that were submitted by Nadex to enable trading of the contracts. Wiley to head BlackRock Canada iShares as Seif exits
"We'd like to thank Som for his innovation and contribution to the Canadian ETF (exchange-traded fund) marketplace and for his guidance through the transition," Wiley said in a statement.
read more ISE Reports Business Activity for March 2012 On March 12, 2012, ISE announced that Tibra Trading America LLC has become a Competitive Market Maker (CMM) on ISE’s options exchange.
On March 13, 2012, ISE announced that current median latency for its Optimise™ trading system
equals 250 microseconds, a reduction of approximately 39% since the completion of the Optimise
rollout in August 2011. Detailed latency statistics are now available at www.ise.com/latencystats.
On March 13, 2012, ISE announced that it has filed for approval with the Securities and Exchange Commission (SEC) to list options on the ISE Max SPY™ Index, a new proprietary
index that represents ten times the value of the SPDR® S&P500® ETF Trust (SPY). read more 3 New Bond ETFs Debut Tuesday (IHY, EMHY, EMCB) The iShares Emerging Markets High Yield Bond Fund (bats:EMHY) will track the Morningstar Emerging Markets High Yield Bond Index. Eligible securities must have outstanding face value of at least $500 million. The index includes bonds issued by corporations, sovereignties and quasi-sovereign corporations, according to ETF Daily News. read more
April 2, 2012--The Commodity Futures Trading Commission (CFTC) today issued an order pursuant to Section 5c(c)(5)(C)(ii) of the Commodity Exchange Act and CFTC Regulation 40.11(a)(1), prohibiting the North American Derivatives Exchange (Nadex) from listing or making available for clearing or trading a set of self-certified political event derivatives contracts.
The contracts are binary option contracts that pay out based upon the results of various U.S federal elections to be held in 2012.
Source: CFTC.gov
Mary Anne Wiley named head of Canada iShares
Som Seif leaves 3 months after Claymore acquired
Seif to stay through mid-April to ease transition
April 2, 2012--BlackRock Investments Canada Inc, a unit of New-York based BlackRock Inc, named Mary Anne Wiley head of its iShares unit on Monday following the completion of BlackRock's purchase of
Claymore Investments Inc.
BlackRock said Som Seif, the former president and chief executive of Claymore, was leaving the company less than three months after it acquired Claymore from Seif, but that he would
stay at BlackRock until mid April to help with the transition.
Source: Chicago Tribune
April 2, 2012--ISE was the second largest equity options exchange in March with market share of 18.3%, excluding dividend trades.
Dividend trades made up 7.8% of industry volume in March 2012.
The International Securities Exchange (ISE) today reported average daily volume of 2.7 million contracts
in March 2012. This represents a decrease of 12.7% compared to March 2011.
Total options volume for
the month was 58.9 million contracts. ISE was the second largest U.S. equity options exchange in March
with market share of 18.3%*.
Business highlights for the month of March include:
Source: International Securities Exchange (ISE)
April 2, 2012--BlackRock's iShares unit, the world's largest ETF sponsor, will continue its torrid pace of new bond fund introductions on Tuesday when the firm rolls out two new ETFs.
And despite the recent controversy surrounding the IPO for BATS Global Markets, iShares will add to its lineup on BATS by listing the two new ETFs there.
Source: Market Watch
