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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
CFTC's Division of Market Oversight and Division of Clearing and Risk Issue Joint No-Action Relief for Swaps Between Affiliated Counterparties from Certain Swap Reporting Requirements
April 5, 2013--The Commodity Futures Trading Commission's ("Commission") Division of Market Oversight and Division of Clearing and Risk ("Divisions") today issued no-action relief for swaps entered into between affiliates of certain wholly-owned and majority-owned market participants
from the requirement to report their intra-group swaps to a registered swap data repository (“SDR”), under parts 45, 46, and regulation 50.50(b) of the Commission’s regulations, subject to several conditions.
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Source: CFTC.gov
CFTC’s Division of Market Oversight Issues No-Action Relief for End-Users from Certain Reporting and Recordkeeping Requirements of the Trade Option Exemption
April 5, 2013--The Commodity Futures Trading Commission's (CFTC) Division of Market Oversight (DMO) issued a no-action letter stating that DMO will not recommend that the CFTC commence an enforcement action against an entity that is neither a swap dealer (SD) nor a major swap participant (MSP) (collectively, non-SD/MSP), including all end-users,
for failing to report under Part 45 of the CFTC’s regulations, as applicable, commodity options otherwise qualifying for the Part 32 trade option exemption, provided that the non-SD/MSP (1) reports such transactions pursuant to Form TO and (2) notifies DMO if it transacts in excess of $1 billion notional value of trade options in any calendar year.
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Source: CFTC.gov
CBO Monthly Budget Review
April 5, 2013--The federal government ran a budget deficit of $601 billion in the first half of fiscal year 2013, CBO estimates, $178 billion less than the shortfall recorded for the same period last year.
Total Receipts Were Up by 12 Percent in the First Half of Fiscal Year 2013
Receipts in the first half of fiscal year 2013 totaled $1.2 trillion, $132 billion more than those in the same period last year. Compared with receipts in the first half of last year: Individual income and payroll (social insurance) taxes together rose by $107 billion (or 12 percent)—accounting for most of the gains so far this year.
view the CBO Monthly Budget Review
Source: Congressional Budget Office
Final rule establishing requirements for determining when a company is "predominantly engaged in financial activities"
April 3, 2013--The Federal Reserve Board on Wednesday announced approval of a final rule that establishes the requirements for determining when a company is "predominantly engaged in financial activities."
The requirements will be used by the Financial Stability Oversight Council (FSOC) when it considers the potential designation of a nonbank financial company for consolidated supervision by the Federal Reserve.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, a nonbank financial company can be designated by the FSOC for supervision by the Federal Reserve only if it is "predominantly engaged in financial activities." A company is considered to be predominantly engaged in financial activities if 85 percent or more of the company's revenues or assets are related to activities that are defined as financial in nature under the Bank Holding Company Act. Additionally, the FSOC may issue recommendations for primary financial regulatory agencies to apply new or heightened standards to a financial activity or practice conducted by companies that are predominantly engaged in financial activities.
The final rule largely adopts the approach in the proposed rule, with a few exceptions. For example, the final rule states that engaging in physically settled derivatives transactions generally will not be considered a financial activity, a change from the proposal.
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Source: FBR
