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Swaps trading rules to mirror equities
September 22, 2010--Mary Schapiro, the chairman of the Securities and Exchange Commission, said trading rules for the vast privately traded derivatives markets, which will soon be regulated under financial reform legislation, should be based on existing rules that govern equity markets.
Many derivatives market participants have argued that the relatively low turnover of derivatives such as swaps and the absence of retail investor participation in these markets should limit the amount of public disclosure of positions and trades
However, Ms Schapiro told a Securities Traders Association conference on Wednesday that derivatives rules should “reflect the virtues of the current equities market: competition, access, liquidity and transparency”.
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Source: FT.com
Remarks Before U.S. Chamber of Commerce
Remarks by Chairman Gary Gensler before the U.S. Chamber of Commerce
September 21, 2010--
Good morning. I thank the Chamber of Commerce for inviting me to speak today. The last time I was with you, the House of Representatives and the Senate Banking Committee had each passed Wall Street reform legislation. Now, six months later, we at the Commodity Futures Trading Commission (CFTC) are working to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act with regard to regulation of the swaps marketplace.
Before I discuss the details of reform, I’d like to thank my fellow Commissioners and CFTC staff for all of their hard work on the Dodd-Frank Act and on its implementation.
There are three critical reforms of the derivatives markets included in the Dodd-Frank Act. First, the bill requires swap dealers to come under comprehensive regulation. Second, the bill moves the bulk of the swaps marketplace onto transparent trading facilities – either exchanges or swap execution facilities. Third, the bill requires clearing of standardized swaps by regulated clearinghouses to lower risk in the marketplace. Each of these three reforms will lower risk and improve transparency for your members.
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Source: CFTC.gov
CFTC to Hold Open Meeting on First Series of Proposed Rules Under the Dodd-Frank Act
September 21, 2010--The Commodity Futures Trading Commission (CFTC) will hold a public meeting on Friday, October 1, 2010, to consider the issuance of the following rulemakings under the Dodd-Frank Wall Street Reform and Consumer Protection Act:
an interim final rule relating to the time frame for reporting pre-enactment unexpired swaps to a swap data repository or to the CFTC;
proposed rules that would prescribe (i) certain risk management standards for those derivatives clearing organizations designated as systemically important (“SIDCOs”) by the Financial Stability Oversight Council under Title VIII of the Dodd-Frank Act and (ii) standards requiring sixty (60) days advance notice of changes in SIDCO rules, procedures, or operations that materially affect the nature or level of risks presented by the SIDCO; and
proposed rules specifying requirements for derivatives clearing organizations, designated contract markets, and swap execution facilities on governance arrangements and mitigation of conflicts of interest.
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Source: CFTC.gov
PIMCO Launches 'Build America' and Investment Grade Bond ETFs
BABZ and CORP Broaden Firm's Lineup of ETF Solutions
September 21, 2010-- PIMCO, a leading global investment solutions provider, has launched two new exchange-traded funds (ETFs) providing investors efficient access to the firm's fixed-income expertise.
The PIMCO Build America Bond Strategy Fund (Ticker: BABZ) is an actively managed ETF offering access to taxable municipal bonds issued under the Build America Bonds (BABs) program.
The fund seeks to capture attractive yield opportunities in this sector while also avoiding securities from municipalities that PIMCO believes face deteriorating credit quality. The fund is managed by John Cummings, executive vice president and head of PIMCO's municipal bond desk.
The PIMCO Investment Grade Corporate Bond Index Fund (Ticker: CORP) is an index ETF that seeks to track its benchmark index with an optimized exposure to investment grade U.S. corporate debt issues that are primarily component securities of the benchmark. PIMCO's proprietary optimization process seeks to avoid those securities that the firm believes may be hard to trade or deemed to have the highest risk of credit loss. The fund is managed by Vineer Bhansali, managing director.
"These new funds broaden investor access to two important fixed income areas -- Build America Bonds and investment-grade corporate bonds -- using the efficient, transparent ETF format," said Tammie Arnold, managing director and head of PIMCO's global ETF business. "As with all PIMCO investment products, our ETFs benefit from PIMCO's nearly four decades of investment management experience, strong analytics and risk management expertise."
The PIMCO Build America Bond Strategy Fund provides access to the Build America Bond market with the added benefits of PIMCO's active credit and portfolio management expertise and institutional pricing capabilities. Build America Bonds are taxable municipal bonds that have increased in popularity since they were first authorized under the American Recovery and Reinvestment Act of 2009. (While the BABS program is scheduled to expire at the end of 2010, PIMCO is optimistic that the program will be extended.)
The PIMCO Investment Grade Corporate Bond Index Fund provides exposure to investment-grade corporate bonds that are primarily component securities of The BofA Merrill Lynch US Corporate Index(SM), while also seeking to closely match the index duration, curve and credit characteristics. The fund seeks to optimize trade execution, reduce transaction costs and minimize tracking error by avoiding bonds that are hard to obtain or at high risk of near term default, while emphasizing bonds that may provide liquidity and market access.
Source: PIMCO
DB Global Equity Index & ETF Research : US ETP Market Weekly Review
September 21, 2010--New Listings and Delistings
There were two new products listed over the previous week in NYSE Arca. These offerings provide new ways to invest in global economic themes such as Natural Resources and emerging-market Consumers companies.
Four Claymore funds were delisted on Sep 10th and finally liquidated on Sep 17th. The funds’ tickers are: CRO, EXB, IRO and RBO, the AUM for these funds at the time of delisting ranged from $3 million to $18 million and all of them were liquidated at an NAV above (1.7%-2.6%) their respective last-trading price.
Net Cashflows
Total ETP inflows in the US added up to $10.7 bn during the previous week. Equity, Fixed Income, Commodity and Currency ETPs had inflows of $9.3 bn, $466 mm, $512 mm and $348 mm, respectively.
Within Equity ETPs, Large Cap ETPs received the largest inflows ($8.3 bn) followed by Emerging Markets Regional ETPs, while US Sector ETPs saw the largest outflows ($2.1 bn).
The Fixed Income ETPs inflows were led by Corporates ETPs ($572 mm), while Broad Debt Market ETPs experienced the largest outflows ($159 mm).
Commodity ETPs netted out on the positive side with Gold ETPs attempting to make a comeback ($653 mm) and energy-based Crude Oil and Natural Gas products experiencing outflows.
Turnover
Overall, Avg. Daily Turnover remained flat and totaled $59 bn at the end of the week. Within the asset class level, Commodity and Currency ETPs recorded a relatively significant weekly increase of 8.2% and 7.5%, respectively.
Assets Under Management (AUM)
US ETPs AUM rose by 2.6% driven almost evenly by positive market performance (1.45% as measured by the S&P 500 Index) and inflows. The end of week AUM reached $864 bn, which represent a 10.6% increase YTD.
To request a copy of the report
Source: Deutsche Bank Global Equity Index & ETF Research
First Trust Advisors Announces Approval of Interim Advisory Agreements for Exchange-Traded Funds
September 21, 2010--First Trust Advisors L.P. (“FTA”) announced today that it will enter into interim investment management agreements with First Trust Exchange-Traded Fund, First Trust Exchange-Traded Fund II and First Trust Exchange-Traded AlphaDEX® Fund (each, a “Trust” and collectively, the “Trusts”). FTA is the investment advisor to each portfolio (each, a “Fund” and together the “Funds”) of each Trust.
On August 24, 2010, James A. Bowen, President of FTA, entered into a stock purchase agreement to purchase 100% of the general partnership interest of FTA (the “Transaction”). The Transaction is scheduled to be completed in October 2010 and is subject to normal closing conditions. The consummation of the Transaction may be deemed to be an “assignment” (as defined in the Investment Company Act of 1940, as amended) of the investment management agreement between each Trust and FTA, which would result in the automatic termination of the agreements. The Board of Trustees of each Trust has approved the interim investment management agreements, which will be entered into effective upon the closing of the Transaction and will be in effect for a maximum period of 150 days. New investment management agreements will be submitted to shareholders of each Fund for approval and would take effect upon such shareholder approval. The new agreements will be substantially similar to each Trust’s current agreement and the Transaction will not impact the day-to-day operations of any of the Funds. A special shareholder meeting of each Fund to vote on a proposal to approve the new investment management agreements is expected to be held later this year. There can be no assurance that the necessary percentage of the shareholders of the Funds will vote to approve the new investment management agreements.
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Source: First Trust Advisors L.P
CME Group Announces Fourth Quarter Launch of Crude Oil (WTI) and Gold VIX Futures Based Upon New Volatility Indexes
September 21, 2010--CME Group, the world's leading and most diverse derivatives marketplace, announced that in the fourth quarter of 2010 it will begin offering futures and options contracts based on volatility indexes that combine CME Group's options market data with the Chicago Board Options Exchange (CBOE) Volatility Index® (VIX®) methodology. These contracts will be listed with, and subject to, the rules and regulations of NYMEX and COMEX.
The CBOE/NYMEX WTI Volatility Index and the CBOE/COMEX Gold Volatility Index are the first to launch since CME Group entered a seven-year licensing agreement with CBOE, which gives CME Group worldwide rights to list futures and options on futures for volatility indexes on a variety of asset classes. In addition, futures on corn and soybean VIX indexes are expected to launch in the first quarter of 2011.
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Source: CME Group
FOMC statement
September 21, 2010--Information received since the Federal Open Market Committee met in August indicates that the pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit.
Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months. The Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term.
Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings.
The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh.
Voting against the policy was Thomas M. Hoenig, who judged that the economy continues to recover at a moderate pace. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and will lead to future imbalances that undermine stable long-run growth. In addition, given economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from its securities holdings was required to support the Committee’s policy objectives.
Source: Board of Governors of the Federal Reserve System
NASDAQ OMX Commodities and GFI Group Inc. Announce Agreement to Electronically Clear Physical U.S. Power and Natural Gas Transactions
NASDAQ OMX Commodities continues to expand its global presence in energy clearing
Positions NASDAQ OMX and GFI as market leaders in the physical and financial energy markets
Electronic trading platform and physical clearing alliance allows simultaneous transactions and clearing for both power and natural gas throughout continental U.S.
Delivers a seamless transaction and clearing experience
September 21, 2010--The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) and GFI Group Inc. (Nasdaq:GFIG) today announced a strategic agreement to offer electronic trading and clearing of continental U.S. power and natural gas. The agreement broadens the clearing options for energy traders in the U.S and expands NASDAQ OMX Commodities' global presence.
Customers who trade in physical and financial power and natural gas may as a result of this agreement conduct transactions using GFI's electronic commodities trading platform, EnergyMatch®, with NASDAQ OMX Commodities Clearing Company serving as the clearing solution. The electronic trading and clearing allows for immediate execution and automatic clearing of trades.
"As pioneers in physical clearing of power and natural gas, we have a proven track record of delivering innovative solutions to our customers," said President of NASDAQ OMX Commodities Clearing Company George Sladoje. "This agreement combines our respective strengths in electronic trading and physical clearing and delivers seamless transactions, quality and value to our customers."
NASDAQ OMX is an experienced operator in the energy and commodities space through its ownership of the world's largest power derivatives exchange, which has been in operation for 15 years. It was also the first exchange in the world to offer a market for carbon emission allowances (EUAs and CERs). Recently, the exchange group launched N2EX, a marketplace for physical UK power contracts, together with Nord Pool Spot AS.
Ron Levi, GFI Group COO, said: "We are pleased to add a gold standard in global clearing to our customers trading in North American commodity products. This development represents another meaningful step in bringing greater competition, transparency and efficiency to the OTC commodity markets."
GFI Group's hybrid business model combines state-of-the-art electronic trading platforms with highly specialized and experienced brokers that can accommodate any customer demand.
GFI operates a number of electronic trading platforms in addition to EnergyMatch®. These are: EnergyMatch® Europe -- etrading platform for numerous commodities in the European markets, CreditMatch® -- leading trading platform for fixed income and fixed income derivatives and GFI ForexMatch™ -- trading of forwards, NDFs and FX options.
Source: NASDAQ OMX
NASDAQ OMX Launches First U.S. Equity Price-Size Exchange
New NASDAQ OMX Trading Platform With Innovative Market Structure to go Live on October 8th
September 20, 2010--he NASDAQ OMX Group, Inc. (Nasdaq:NDAQ), the world's largest exchange company, today announced that on October 8th, 2010, it will launch NASDAQ OMX PSXsm (PSXsm), the first U.S. equity trading platform with a price-size priority model. The platform, which will be operated as a facility of the NASDAQ OMX PHLX exchange, has been approved by the Securities and Exchange Commission (SEC).
PSX, for the first time in U.S. market structure, will be an equity exchange model that encourages participants to display more shares at a price level. The allocation of shares is pro-rated based on a participant's size relative to the total size at that price level. More displayed volume encourages greater transparency in the public marketplace and increased depth at a price level for customers.
"In direct response to some of the market developments this year, NASDAQ OMX is excited to launch a true market structure innovation, which will provide a different trading model for customers looking for an equity exchange that rewards size and liquidity," said Eric Noll, Executive Vice President of Transaction Services at NASDAQ OMX. "We are pleased to deliver new opportunities that meet the needs of our buy-side and sell-side trading customers as well as other market participants enabling them to add liquidity to a lit marketplace," he added.
Kevin Cronin, Director of Global Equity Trading at Invesco said, "In today's markets, posted liquidity and average execution size is low and the difficulty of trading large blocks of stock has increased due to challenges that have been created by developments within the US equity market structure." Cronin added, "Institutions need a platform to encourage posting of liquidity in today's markets. The new PSX price-size model provides an innovative solution to this challenge and comes at a crucial time."
Mark Kuzminskas, Director of Equity Trading at Robeco Investment Management said, "The concept of a price-size model encourages participants to post larger orders and favors institutional traders who have a higher degree of conviction to secure greater liquidity with more efficient pricing. This is especially important in smaller cap securities."
NASDAQ OMX gives participants the ability to choose from three different market models for U.S. equities trading. PSX gives customers the ability to execute orders with price-size priority while The NASDAQ Stock Market and NASDAQ OMX BX give customers the ability to execute orders with price-time priority with different pricing and functionality. NASDAQ OMX will continue to leverage the speed and efficiency of its core INET technology across all exchanges.
NASDAQ OMX is leveraging the trading license from its 2007 acquisition of the former Philadelphia Stock Exchange, known today as NASDAQ OMX PHLX.
Source: NASDAQ OMX
