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Testimony of Chairman Gary Gensler Before the Financial Crisis Inquiry Commission
July 1, 2010--Good afternoon Chairman Angelides, Vice Chairman Thomas and members of the Commission. I thank you for inviting me to today’s hearing to discuss the history of derivatives regulation and the role that over-the-counter derivatives played in the financial crisis. I also will address the historic legislation currently being debated in Congress that for the first time will bring much-needed comprehensive regulation to the over-the-counter (OTC) derivatives market.
In 2008, the financial system failed. The financial regulatory system failed. Though there were many causes of the 2008 financial crisis, derivatives played a central role. I know that this Commission is considering many contributing factors to the crisis. For example, to what extent did macroeconomic factors and monetary policy play a role in the crisis? What impact did the housing bubble and lax mortgage origination and underwriting practices have in the lead-up to the crisis?
Though these questions are critical, today’s hearing is on unregulated over-the-counter derivatives. As Chairman of the Commodity Futures Trading Commission (CFTC), a Commission established decades ago to regulate on-exchange derivatives, I have focused my testimony on the role the over-the-counter swaps market played in the financial crisis. These products have a net notional value of approximately $300 trillion in the United States. That is roughly 20 times the size of the American economy.
Past Justifications for Leaving Derivatives out of Regulation
Over-the-counter derivatives, which started to be transacted in the 1980s, have not been regulated in Europe, Asia or North America. Until the reforms being debated this year, I am not aware of any major country that had directly regulated these markets over a nearly 30-year period. I will touch upon five reasons that some have articulated in the past for such a lack of regulation in the over-the-counter derivatives marketplace.
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Source: CFTC.gov
BNY Mellon ADR Index Monthly Performance Review is Now Available
July 1, 2010--The BNY Mellon ADR Index Monthly Performance Review isnow available.
view report
Source: BNY Mellon
The Options Industry Council Announces June Trading Volume Down Slightly As First Half Volume Rose 10%
July 1, 2010--The Options Industry Council (OIC) announced today that 309,262,866 total options contracts were traded in June, a 2.03 percent decline compared to June 2009 volume of 315,656,061 contracts. However, year-to-date volume stood at 2,000,877,118 contracts and is up 10.22 percent over the first six months of last year when 1,815,316,203 contracts were traded.
Average daily trading volume of 14,057,403 contracts for June was 2.03 percent lower than 2009’s average daily volume of 14,348,003 contracts. Trading volume for 2010 is averaging 16,136,106 contracts each day compared to the same period last year when 14,639,647 contracts were traded on average each day and represents a 10.22 percent increase.
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Source: Options Industry Council (OIC)
ISE Reports Monthly Volume for June 2010
July 1, 2010--The International Securities Exchange (ISE) today reported average daily
volume of 2.6 million contracts in June 2010.
Average daily trading volume for all options contracts decreased 32.6% to 2.6 million contracts in June as
compared to 3.9 million contracts during the same period in 2009. Total options volume for the month
decreased 32.6% to 58.0 million contracts from 86.0 million contracts in the same year-ago period.
On a year-to-date basis, average daily trading volume of all options decreased 19.7% to 3.3 million
contracts traded. Total year-to-date options volume through June 2010 decreased 19.7% to 405.6 million
contracts from 504.8 million contracts in the same period last year.
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Source: The International Securities Exchange (ISE)
Knight launches Knight Advisor Services, appoints ex Morgan Stanley team
July 1, 2010-- Knight Capital Group, Inc. (NYSE Euronext: KCG) has announced that it has established Knight Advisor Services to provide fixed income sales, trading and research to the investment advisor community.
A team of f
ive experienced traders and relationship managers joined Knight from Morgan Stanley to form Knight Advisor Services. Joshua B. Zucker, Managing Director, leads credit sales and trading for the group.
Bohn C. Vergari is a Director in Registered Investment Advisor (RIA) sales. Joseph T. Miller, Vice President, is responsible for credit sales, and Patrick J. Moore is Vice President, broker-dealer sales. John W. Browning, Assistant Vice President, leads business development.
"Investment advisors have been left to develop their own networks of trading partners and research providers. Knight Advisor Services addresses the coverage gap by serving sophisticated investment advisors who seek competitive pricing, deep inventory and service, but who are less active or execute in smaller trade sizes than the average portfolio manager," said Gary Katcher, Executive Vice President, Head of Global Institutional Fixed Income at Knight Capital Group. "We see an opportunity to better serve this client base by combining the expertise of our new team with Knight's electronic and voice access and trading, deep resources, and broad universe of products."
"Knight Advisor Services helps our clients meet the growing demand for fixed income expertise as the U.S. population ages and more investors shift from wealth generation to preservation," Mr. Zucker said. "At the same time, the credit crisis reinforced the need for our clients to differentiate the portfolios they build with fixed income allocations. More advisors are seeking to increase transparency and reduce costs by managing fixed income themselves as opposed to outsourcing to funds. We have the flexibility to meet the needs of advisors who seek greater control over their fixed income portfolios."
Source: Knight
CME Group Announces Gold Futures Open Interest Record
July 1, 2010--CME Group, the world’s leading and most diverse derivatives marketplace, set a daily open interest record in its gold futures contract yesterday.
Open interest reached 605,792 contracts, surpassing the previous record of 603,688 contracts on June 25.
As the world’s leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate.
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Source: CME Group
Invesco PowerShares Appoints RiverFront Investment Group as Index Provider
June 30, 2010- Invesco PowerShares, a leading provider of exchange-traded funds, has announced the appointment of RiverFront Investment Group, LLC as index provider for two tactical, global allocation funds.
Effective today, RiverFront will become the index provider for the PowerShares RiverFront Tactical Balanced Growth Fund (NYSE Arca: PAO) and the PowerShares RiverFront Tactical Growth & Income Fund (NYSE Arca: PCA). RiverFront uses a proprietary Price Matters(SM) optimization process to provide tactical global asset allocation portfolios.
"We have enjoyed an exceptionally strong relationship with Invesco PowerShares over the years and we are proud to be selected as an index solution for their products," said Michael Jones, RiverFront Chairman and Chief Investment Officer. "This appointment gives us another opportunity to strengthen our partnership in a tangible way. Their client-centric culture, product development expertise, and strong distribution relationships set the highest standards for our industry."
Source: Invesco PowerShares
SEC to Publish for Public Comment Proposed Rules Expanding Stock-by-Stock Circuit Breakers
June 30, 2010--The Securities and Exchange Commission today is publishing for public comment proposals by the national securities exchanges and FINRA to expand a recently adopted circuit breaker program to include all stocks in the Russell 1000 Index and certain exchange-traded funds.
The circuit breaker program was approved earlier this month in response to the market disruption of May 6 and currently applies to stocks listed in the S&P 500 Index. Trading in a security included in the program is paused for a five-minute period if the security experiences a 10 percent price change over the preceding five minutes. The pause gives the markets an opportunity to attract new trading interest in an affected stock, establish a reasonable market price, and resume trading in a fair and orderly fashion. The circuit breaker program is in effect on a pilot basis through Dec. 10, 2010.
"The proposals would expand the uniform circuit breakers to many more stocks and ETFs," said SEC Chairman Mary Schapiro. "We look forward to receiving comments from the public on the proposed addition of the Russell 1000 Index securities and the selected exchange-traded funds to the circuit breakers."
A list of the securities included in the Russell 1000 Index, which was rebalanced on June 25, is available on the Russell website. The exchange-traded funds included in the proposal will be available on the SEC's website along with the proposed rule changes under Exhibit 3 to each filing.
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Source: SEC.gov
NYSE Arca Tech 100 Index® Announces Change to Index Components
June 30, 2010-- NYSE Euronext Inc., today announced that the NYSE Arca Tech 100 Index® will replace the following constituent in the index as a result of a corporate action. The changes are effective as of market close on July 1, 2010.
Leaving the Index:
Sybase Inc. (NYSE: SY)
New constituent added to the Index:
SanDisk Corp. (NYSE: SNDK)
A link to the Index guidelines: http://www.nyse.com/pdfs/NYSEArcaTech100IndexGuidelines.pdf
Source: NYSE Euronext
Van Eck files with the SEC
June 30, 2010--Van Eck has filed a post-effective amendment, registration statement with the SEC for
Market Vectors High-Yield Municipal Index ETF (HYD)
Market Vectors Intermediate Municipal Index ETF (ITM)
Market Vectors Long Municipal Index ETF (MLN)
Market Vectors Pre-Refunded Municipal Index ETF (PRB)
Market Vectors Short Municipal Index ETF(SMB)
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Source: SEC.gov
