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Concurrence Statement on the Order Regarding the Effective Date for Swap Regulation
Commissioner Scott D. O’Malia
July 14, 2011--I concur with the Commission’s decision to use its exemptive authority under section 4(c) of the Commodity Exchange Act (CEA) to provide temporary relief from certain provisions of the Dodd-Frank Act. This order will provide much needed legal certainty to the market, at least until December 31, 2011, while the Commission continues its efforts to adopt final rules under the Dodd-Frank Act.
Whereas I support the Commission in providing legal certainty, albeit limited, I am disappointed in the lack of harmonization between our order and the exemptive relief that the Securities and Exchange Commission (S.E.C.) provided. I am also disappointed that the final order ignored a number of comments from market participants, those that have most at stake in each of the Commission’s decisions. I hope that this order does not foreshadow the direction of final rulemakings to come.
Lack of Harmonization
In general, the S.E.C.’s order provides exemptive relief until the relevant final rulemaking is implemented. The Commission’s order provides such relief only until December 31, 2011. I proposed an amendment that would have conformed the two orders that the Commission rejected. The S.E.C. is a full partner in many of our rulemakings; it only makes sense to develop identical relief policies. The C.F.T.C.’s sunset provision is based on an arbitrary date and cuts short the very legal certainty that this order purports to provide. Moreover, participants from every aspect of our market – including investor advocates, a designated contract market and derivatives clearing organization, a potential swap execution facility, and multiple trade associations representing intermediaries – commented that the December 31, 2011, expiration date is unnecessary. In contrast, only one commenter supported the expiration date.
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Source: SEC.gov
ISE Enhances Price Improvement Mechanism to Accept Multi-Legged Options Orders
New Functionality Introduced as part of Optimise™ Rollout
July 14, 2011 – The International Securities Exchange (ISE) announced that starting tomorrow, Friday, July 15, 2011, the Price Improvement Mechanism (PIM) for options classes traded on the OptimiseTM platform will be enhanced to accept multi-legged option orders. In addition to the numerous technical benefits of the new trading system, such as lower latency and higher throughput, this feature represents one of the first value-added attributes of the new technology that will directly benefit options customers.
Through PIM, member firms will now be able to facilitate their customers’ orders of less than 50 contracts at a price that is at least one cent better than the best bid or offer available on ISE. PIM orders are exposed for further price improvement to all ISE market participants for one second. By allowing for complex orders to be entered into PIM, customers can now benefit from a price improvement auction that provides the opportunity to achieve a better net price for multi-legged orders.
“We are excited to offer this enhanced functionality to ISE’s customers as part of our introduction of Optimise,” said Boris Ilyevsky, Managing Director of ISE’s options exchange. “By leveraging the unique capabilities and flexibility of Optimise, we are now able to provide access to PIM for multi-legged orders, resulting in the very tangible benefit of price improvement to customers.”
This latest enhancement makes PIM ISE’s third crossing order type that accepts multi-legged orders in addition to ISE’s Facilitation and Solicitation mechanisms. PIM will initially be enabled to accept multi-legged orders made up only of options legs. ISE plans to enable PIM for multi-legged orders that include a stock component within the coming months.
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Source: International Securities Exchange (ISE)
Schwab Introduces New U.S. Aggregate Bond Exchange-Traded Fund (ETF)
Schwab U.S. Aggregate Bond ETF™ Provides Broad Exposure to U.S. Taxable Bond Market
July 14, 2011--Charles Schwab, a marketplace leader of ETFs, today announced the launch of Schwab U.S. Aggregate Bond ETF™ (SCHZ), the fourteenth and most recent fund to join Schwab’s line up of proprietary ETFs.
The Schwab U.S. Aggregate Bond ETF offers low-cost, single-investment exposure to four major sectors of the investment grade, taxable U.S. bond market: Treasuries, government agencies, corporate and securitized bonds.
The Schwab U.S. Aggregate Bond ETF began trading on July 14, 2011. It has the lowest operating expense ratio among ETFs in the Morningstar Intermediate Term Bond category1. Like all other Schwab ETFs™, the fund can be bought and sold commission-free** online in Schwab accounts.
“We have seen tremendous demand for a single vehicle that provides a core, diversified U.S. fixed income allocation, and the Schwab U.S. Aggregate Bond ETF seeks to do just that, at an exceptional value,” said John Sturiale, vice president of product management at Schwab. “We are pleased to offer investors exposure to the overall U.S. bond market through the lowest-cost ETF in its Morningstar asset category.”
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Source: Charles Schwab Investment Management
NYSE Euronext Notified Of Preliminary Acceptance By Deutsche Boerse Shareholders Of Proposed Combination
July 14, 2011-- NYSE Euronext (NYSE:NYX) announced today that it has been notified by Deutsche Boerse AG (XETRA DB1) that, on a preliminary basis, more than 80% of Deutsche Boerse shareholders tendered their shares by July 13th, 2011, surpassing the requisite 75% needed to approve our proposed combination.
Final results are expected to be reported tomorrow, Friday July 15. Completion of the combination is subject to approval by the relevant competition and financial, securities and other regulatory authorities in the U.S. and Europe, as well as customary closing conditions.
Source: NYSE Euronext
ProShares Launches ETF as Alternative to Hedge Funds
Aims to provide hedge fund characteristics without the challenges of hedge fund investing
July 14, 2011—ProShares, a premier provider of alternative exchange traded funds (ETFs), today announced the launch of the ProShares Hedge Replication ETF (NYSE: HDG). HDG's benchmark is based on Merrill Lynch's recognized hedge fund replication model. The ETF lists on NYSE Arca today.
HDG seeks to provide the risk/return characteristics of a broad universe of hedge funds without many of the challenges of hedge fund investing. Historically, a broad universe of hedge funds, as measured by the HFRI Fund Weighted Composite Index, has had attractive risk-adjusted returns relative to equities1 (past performance is not a guarantee of future results). However, there are many deterrents to investing in hedge funds, such as illiquidity, limited transparency and high fees.
"Many portfolios could benefit from the risk/return characteristics of hedge funds, but investors often either can't or don't invest in hedge funds because of a variety of challenges," said Michael L. Sapir, Chairman and CEO of ProShare Advisors LLC, ProShares' investment advisor. "We are pleased to offer an ETF that addresses challenges of hedge fund investing and may be, for many investors, an attractive alternative to hedge funds."
HDG is the third ETF in the Alpha ProShares category. Alpha ProShares are designed to provide advanced investment strategies in an ETF and represent ProShares' further expansion within the alternative ETF space. ProShares introduced its first Alpha ProShares, the ProShares Credit Suisse 130/30 (NYSE: CSM), in July 2009 and its second Alpha ProShares ETF, the ProShares RAFI Long/Short (NYSE: RALS), in December 2010.
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Source: ProShares
ETF 'price war' spreads to bonds with Schwab launch
July 14, 2011--The “price war” among exchange traded providers has spread into fixed income products after Charles Schwab launched a new US aggregate bond ETF which is cheaper than existing rivals.
The new ETF carries an expense ratio of just 10 basis points, undercutting competing products from Vanguard, iShares and State Street Global Advisors.
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Source: FT.com
Brazil’s flowering fields signal sugar shock
Mya 14, 2011--To the untrained eye, Brazil’s sugarcane plantations have never looked better. Rare, feather-like violet flowers have shot up from the top of the plants, filling the shimmering skyline of São Paulo’s countryside.
However, local farmers know it is an ominous sign. The flowers, which are induced when the sugarcane plant comes under acute physiological stress, are a testament to the terrible climatic conditions the crop endured last year and a warning of the poor harvest to come.
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Source: FT.com
CFTC Clarifies Effective Date for Swaps Regulation Under the Dodd-Frank Act
July 14, 2011--The Commodity Futures Trading Commission (CFTC) today issued an Order clarifying the effective date of the provisions in the swap regulatory regime established by Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) as the CFTC continues to implement rules to reduce risk and enhance transparency in the swap markets. The Order provides temporary relief from certain provisions that will become effective as of July 16, 2011, until the CFTC completes the rulemakings specified in the Order.
The CFTC’s action will avoid disruption in the markets, and will provide for the orderly implementation of the new comprehensive swap regulatory regime mandated by Congress. This order is temporary, and it will expire upon the effective date of final rules or December 31, 2011.
“In our effort to protect the American public, the CFTC is now approving final rules called for in the Dodd-Frank Act with more final rules to be considered in upcoming meetings next week, in August and throughout the fall. Today, we are granting temporary relief from certain provisions that would otherwise apply to swaps or swap dealers on July 16,” said Chairman Gensler. “This order enables the Commission to continue its progress in finalizing rules.”
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Source: CFTC.gov
Chairman Ben S. Bernanke Semiannual Monetary Policy Report to the Congress
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
July 13, 2011
Chairman Bernanke presented identical remarks before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate on July 14, 2011
Chairman Bachus, Ranking Member Frank, and other members of the Committee, I am pleased to present the Federal Reserve's semiannual Monetary Policy Report to the Congress. I will begin with a discussion of current economic conditions and the outlook and then turn to monetary policy.
The Economic Outlook
The U.S. economy has continued to recover, but the pace of the expansion so far this year has been modest. After increasing at an annual rate of 2-3/4 percent in the second half of 2010, real gross domestic product (GDP) rose at about a 2 percent rate in the first quarter of this year, and incoming data suggest that the pace of recovery remained soft in the spring. At the same time, the unemployment rate, which had appeared to be on a downward trajectory at the turn of the year, has moved back above 9 percent.
In part, the recent weaker-than-expected economic performance appears to have been the result of several factors that are likely to be temporary. Notably, the run-up in prices of energy, especially gasoline, and food has reduced consumer purchasing power. In addition, the supply chain disruptions that occurred following the earthquake in Japan caused U.S. motor vehicle producers to sharply curtail assemblies and limited the availability of some models. Looking forward, however, the apparent stabilization in the prices of oil and other commodities should ease the pressure on household budgets, and vehicle manufacturers report that they are making significant progress in overcoming the parts shortages and expect to increase production substantially this summer.
view the Overview: Monetary Policy and the Economic Outlook
Source: FRB
U.S. ETF Assets Expected to Double to $2 Trillion in 2015, Says New BNY Mellon-Strategic Insight Report
Non-traditional ETF Strategies Represent Rising Portion of Industry's Asset Growth
July 13, 2011--
Assets in Exchange-Traded Funds (ETFs) in the U.S. are expected to double to $2 trillion before the end of 2015, according to a new whitepaper from BNY Mellon and Strategic Insight.
The report, ETFs 2.0: The Next Wave of Growth and Opportunity in the U.S. ETF Market, looks at the factors driving the rapid expansion of the ETF market (including exchange-traded notes, or ETNs) and how asset managers can tap the vigorous growth of this industry with products that are passive, active, or somewhere in between.
"The next wave of growth for ETFs is being driven by new asset classes, new indexes and new ways to use ETFs as tools for portfolio construction," said Joseph Keenan, head of global exchange traded fund services at BNY Mellon Asset Servicing. "The ever increasing sophistication of these newly created ETFs can pose operational and distribution challenges for asset managers. However, with detailed planning and a focused strategy, a variety of innovative exchange-traded products can be brought to market to effectively meet investors' needs."
Traditional index-based ETFs are likely to account for a falling overall share of ETF assets as non-traditional and alternative funds grab a larger slice of the market. Since the end of 2008, non-traditional ETFs have grown from 18 percent of the market to an estimated 30 percent of U.S. ETF assets by March 31, 2011, according to Strategic Insight's Simfund database. The BNY Mellon-Strategic Insight report predicts this trend will continue as investors become less likely to simply allocate their assets among growth stocks, value stocks, large cap stocks, small cap stocks and other traditional categories.
view- ETFs 2.0: The Next Wave of Growth and Opportunity in the U.S. ETF Market
Source: BNY Mellon
