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Northern Trust Enters the Foreign Dividend ETF Market
April 17, 2013--The new FlexShares International Quality Dividend Defensive Index Fund (IQDE) hopes to bring something new to the burgeoning field of broad, international dividend exchange-traded funds.
he word "quality" in the name of this ETF refers to a qualitative scoring method related to fundamental health of the constituent holdings. The word "defensive" in the name of the fund relates to the holdings, which have betas of 0.50-1.00. (Beta is commonly a measure of volatility, and the lower the beta the lower the volatility should be.)
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Source: The Street
Bloomberg sues CFTC over cleared swaps margin rule
April 16, 2013--Data vendor Bloomberg L.P. filed a lawsuit on Tuesday against the top derivatives regulator to fight a new rule that would make the trading of swaps more expensive and hurt its business.
Bloomberg is one of a dozen or so providers that plan to launch platforms on which to trade swaps, as regulators globally crack down on the $650 trillion market to prevent a repeat of the 2008 financial crisis.
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Source: CFTC.gov
Morgan Stanley-US ETF Weekly Update
April 16, 2013--US ETF Weekly Update
Weekly Flows: $8.8 Billion Net Inflows
Seventh Consecutive Week of Net Inflows
ETF Assets Stand at $1.5 Trillion, up 9% YTD
Five ETF Launches
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $8.8 bln last week, the seventh consecutive week of net inflows
Last week’s net inflows were the second largest of 2013
US Sector & Industry ETFs led net inflows last week ($2.7 bln); we note that the nine Select Sector SPDRs each posted net
inflows combining for $1.8 bln in net inflows
Conversely, Commodity ETFs exhibited net outflows of $2.6 bln, the most of any category we measured
ETF assets stand at $1.5 tln, up 9% YTD; $63.2 bln net inflows YTD
13-week flows were mostly positive among asset classes; combined $45.0 bln in net inflows
International – Developed Equity ETFs have posted material net inflows over the last 13 weeks ($12.8 bln), 17% more net inflows
than the next highest category
Despite recent rumblings regarding a rotation from fixed income to equities, we have yet to see it in the ETF industry; Fixed
Income ETFs have generated $9.8 bln in net inflows over the last 13 weeks, trailing only two categories
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares MSCI Japan Index Fund (EWJ) generated net inflows of $1.4 bln last week, the most of any ETF
Interestingly, for the third straight week, EWJ took in more new net money than the WisdomTree Japan Hedged Equity Fund
(DXJ) despite yen exposure detracting from USD returns in EWJ over this period
Notably, the iShares Floating Rate Note Fund (FLOT) has posted net inflows of $1.1 bln over the last 13 weeks, accounting for 68%
of its current market cap
The SPDR Gold Trust (GLD) has continued to bleed money, exhibiting net outflows of $2.3 bln last week and $9.1 bln over the last
13 weeks, the most of any ETF over both time periods
US-Listed ETFs: Short Interest Data Updated: Based on data as of 3/28/13
SPDR S&P 500 ETF (SPY) had the largest increases in USD short interest at $1.9 bln
SPY’s shares short are at their highest level since 5/31/12
SPY is up more than 23% on a total return basis since 5/31/12
Aggregate ETF USD short interest decreased by $4.1 bln over the period ended 3/28/13, coming off four consecutive periods
during which ETF short interest increased
The average shares short/shares outstanding for ETFs is currently 4.2%
The SPDR Oil & Gas Exploration & Production ETF (XOP) had the most shares short as a % of shares outstanding at 219% for the
period ended 3/28/13
Retail, currency, and financial ETFs seem to consistently make the list as the most heavily shorted ETFs
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only six ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Smith Barney Research. Data estimated as of 4/12/13 based on daily change in share counts and daily NAVs.
$5.7 bln in total market cap of ETFs less than 1-year old
Newly launched Fixed Income ETFs accounted for 24% of the market cap of ETFs launched over the past year, the most of any
category, including $800 mln in net inflows over the last 13 weeks
27 new ETF listings and 27 closures/delistings YTD
The top 10 most successful launches make up 61% of the market cap of ETFs launched over the past year
Six different ETF sponsors and two asset classes represented in top 10 most successful launches
Seven out of the 10 most successful launches over the past year have an income orientation
For the second consecutive week, the Market Vectors Emerging Markets High Yield Bond ETF (HYEM) generated strong net
inflows, including $134 mln last week, the most of any recently launched ETF
Over the past year, State Street has launched the most new products (10 ETFs with $445 mln in assets); however, BlackRock’s
nine new launches have gathered the most assets ($1.8 bln)
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Source: Morgan Stanley
Treasury International Data Capital Data for February
April 15, 2013--The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for February 2013. The next release, which will report on data for March 2013, is scheduled for May 15, 2013.
The sum total in February of all net foreign acquisitions of long-term securities, short-term U.S. securities, and banking flows was a monthly net TIC inflow of $53.6 billion. Of this, net foreign private inflows were $44.4 billion, and net foreign official inflows were $9.2 billion.
Foreign residents increased their holdings of long-term U.S. securities in February – net purchases were $7.6 billion. Net purchases by private foreign investors were $9.1 billion, and net purchases by foreign official institutions were negative $1.5 billion.
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Source: US Department of the Treasury
Treasury Releases Semi-Annual Report to Congress on International Economic and Exchange Rate Policies
April 12, 2013--The U.S. Department of the Treasury today released the Semi-Annual Report to Congress on International Economic and Exchange Rate Policies that is required under Sections 3004 and 3005 of the Omnibus Trade and Competitiveness Act of 1988.
The Report covers international economic and foreign exchange developments in the second half of 2012 and, where pertinent and available, data through early April 2013.
Among major emerging market economies, many, especially in Asia, have more tightly managed exchange rates, with varying degrees of active management. The Report highlights the need for greater exchange rate flexibility and transparency in these economies, most notably in China.
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Source: US Department of the Treasury
Montreal Exchange Raises Position Limits for Equity and ETF Options
April 12, 2013--Montreal Exchange Inc. (MX), a wholly-owned subsidiary of TMX Group and Canada's derivatives exchange, announced that it will raise position limits for equity and exchange-traded fund options, effective today.
"This is a very important development in line with MX's strategy to grow the Canadian options market," said Alain Miquelon, President and CEO, Montréal Exchange. "This change makes the market more attractive to large institutional investors and encourages them to trade on Exchange, rather than over the counter."
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Source: TMX Group
ISE Introduces ISE GeminiTM, its New Options Exchange
ISE Gemini Targets Launch in Q2 2013
April 11, 2013--International Securities Exchange Holdings, Inc. (ISE) today announced ISE GeminiTM as the brand name of its new options exchange.
The SEC published ISE’s Form 1 application for a second exchange license on March 7, 2013, and ISE Gemini is targeted for launch in Q2 2013, pending SEC approval.
ISE Gemini represents a complementary options platform that will stand "side-by-side" with ISE’s existing options exchange and together will act as drivers for long-term growth and innovation at ISE. ISE Gemini will also use the exchange’s existing technology backbone and established member connectivity.
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Source: International Securities Exchange Holdings (ISE)
CFTC's Division of Market Oversight Provides No-Action Relief from Swap Data Reporting Requirements to Swap Counterparties that are not Swap Dealers or Major Swap Participants
April 9, 2013--The Division of Market Oversight (DMO) of the Commodity Futures Trading Commission (CFTC) today announced the issuance of a no-action letter providing swap counterparties that are not swap dealers or major swap participants ("non-SD/MSP counterparties"), with certain relief from the reporting requirements of the CFTC's swap data reporting rules, which are set forth at Parts 43, 45 and 46 of the CFTC's regulations.
Swap dealers and major swap participants are already required to be in compliance with their reporting obligations under the swap data reporting rules. The rules establish a compliance date of April 10, 2013, for non-SD/MSP counterparties.
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Source: CFTC.gov
Morgan Stanley-US ETF Weekly Update
April 8, 2013--US ETF Weekly Update
Weekly Flows: $505 Million Net Inflows
ETF Assets Stand at $1.4 Trillion, up 7% YTD
Three ETF Launches
BNP Paribas Commodity ETF to Delist
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $505 mln last week, the sixth consecutive week of net inflows
Over the past six weeks, ETFs have generated net inflows of $19.5 bln
Last week’s net inflows were led by US Large-Cap ETFs ($2.4 bln); conversely, International - Emerging Equity ETFs exhibited
net outflows of $1.4 bln, the most of any category we measured
ETF assets stand at $1.4 tln, up 7% YTD; $54.4 bln net inflows YTD
13-week flows were mostly positive among asset classes; combined $38.6 bln in net inflows
International-Developed Equity ETFs have posted material net inflows over the last 13 weeks ($12.1 bln), 26% more net inflows
than the next highest category
Over the past 13 weeks three categories that we measured exhibited net outflows of greater than $3.5 bln (Commodity, US Large-
Cap, and International – Emerging) and combined for net outflows of $14.9 bln
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) generated net inflows of $1.2 bln last week, the most of any ETF
Interestingly, the shorter dated iShares Barclays 1-3 Year Treasury Bond Fund (SHY) and the iShares Barclays 7-10 Year Treasury
Bond Fund (IEF) had net inflows totaling $610 mln last week while the longer-dated iShares Barclays 20+ Year Treasury Bond
Fund (TLT) posted meaningful net outflows of $374 mln
Notably, the Vanguard FTSE Emerging Markets ETF (VWO) exhibited $929 mln in net outflows last week, the most of any ETF;
VWO has posted net outflows four out of the past five weeks totaling $2.0 bln
Over the last 13 weeks the WisdomTree Japan Hedged Equity Fund (DXJ) has generated net inflows of $3.9 bln, $1.6 bln more in
net inflows than the next best fund
US-Listed ETFs: Short Interest Data Unchanged: Based on data as of 3/15/13
iShares MSCI Emerging Markets Index Fund (EEM) had the largest increases in USD short interest at $731 mln
EEM’s shares short have increased for three consecutive periods and are at their highest level since 10/14/11
EEM is up more than 11% on a total return basis since 10/14/11
Aggregate ETF USD short interest increased by $1.9 bln over the period ended 3/15/13 and has now increased $13.3 bln over the
last four periods
The average shares short/shares outstanding for ETFs is currently 4.4%
The SPDR Retail ETF (XRT) regained the top spot as shares short as a % of shares outstanding currently is 234%
Retail, currency, and financial ETFs seem to consistently make the list as the most heavily shorted ETFs
Based on multiple borrowings and the ability to continuously create new shares, shares short as a % of shares outstanding can
exceed 100% (only four ETFs exhibited shares short as a % of shares outstanding greater than 100%)
US-Listed ETFs: Most Successful Recent Launches by Assets
Source: Bloomberg, Morgan Stanley Smith Barney Research. Data estimated as of 4/5/13 based on daily change in share counts and daily NAVs.
$5.6 bln in total market cap of ETFs less than 1-year old
Newly launched Fixed Income ETFs accounted for 23% of the market cap of ETFs launched over the past year, the most of any
category, including $707 mln in net inflows over the last 13 weeks
22 new ETF listings and 26 closures YTD
The top 10 most successful launches make up 60% of the market cap of ETFs launched over the past year
Seven different ETF sponsors and two asset classes represented in top 10 most successful launches
Seven out of the 10 most successful launches over the past year have an income orientation
Despite not breaching the top 10 most successful launches over the past year, the Market Vectors Emerging Markets High Yield
Bond ETF (HYEM) generated net inflows of $54 mln last week, the most of any recently launched ETF
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Source: Morgan Stanley
The Dividend Collar: A High-Yield and Low-Risk Strategy
April 5, 2013--Is it possible with well-selected and timed options positions, to combine high-yield and low-risk? Yes, but it takes work to locate the right proximity and value.
The dividend collar is so-called because timing involves ex-dividend date. The idea is to move into a long stock position right before ex-dividend date, protect that position with options, and then exercise out right after.
The collar consists of 100 shares long, a long put, and a short call. The ideal proximity is that both strikes are slightly higher than current value, but it is difficult to get the price offset with that ideal. You are more likely to open a dividend collar with both options slightly in or slightly out of the money. Strangely enough, it doesn’t matter which you choose. The main requirement is that the net cost of the long put is offset by the premium from the short call. A second requirement is that upon exercise of either option (the short call by the buyer, and the long put by you), it ends up at zero loss or even a small profit.
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Source: Michael C. Thomsett Contributo CBOE
