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Morgan Stanley-US ETF Weekly Update
August 7, 2012--US ETF Weekly Update
Weekly Flows: $4.9 Billion Net Inflows
ETF Assets Stand at $1.2 Trillion, up 14% YTD
No ETF Launches Last Week
Direxion Announced the Planned Liquidation of 9 ETFs
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $4.9 bln last week, rebounding from the prior week’s net outflows of $3.0 bln
Last week’s net inflows were primarily driven by US Large-Cap and Fixed Income ETFs ($2.4 bln and $2.0 bln, respectively)
ETF assets stand at $1.2 tln, up 14% YTD; ETFs have posted net inflows 23 out of 31 weeks YTD ($86.5 bln in net inflows)
13-week flows were mostly positive among asset classes; combined $33.8 bln net inflows
Fixed Income ETFs have generated net inflows 50 out of the past 51 weeks ($12.1 bln net inflows over the last 13 weeks)
Emerging Market Equity ETFs have had net outflows of $1.1 bln over the past 13 weeks with 62 ETFs exhibiting net cash outflows, 39 exhibiting no net flows, and just 29 exhibiting net cash inflows
US-Listed ETFs: Estimated Largest Flows by Individual ETF
SPDR S&P 500 ETF (SPY) generated net inflows of $913 mln last week, the most of any ETF
We estimate that SPY has posted net inflows 11 out of 31 weeks YTD ($1.3 bln in aggregate net inflows)
The iShares Dow Jones US Real Estate Index Fund (IYR) had net cash outflows of $431 million last week, nearly erasing its net
cash inflows for the year (YTD net inflows now $45 mln)
The ProShares Ultra 7-10 Year Treasury (UST) had net cash inflows of $481 mln last week accounting for 96% of its market cap;
Conversely, the ProShares Ultra Russell2000 (UWM) lost ~75% of its market cap last week with net cash outflows of $352 mln
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 7/13/12
iShares MSCI EM Index Fund (EEM) had the largest increase in USD short interest at $577 mln
Aggregate ETF USD short interest declined $2.8 bln over the past two weeks ended 7/13/12
For the third consecutive period, SPDR S&P 500 ETF (SPY) short interest declined; SPY’s 205.7 mln shares short is its lowest level since 12/31/09
The average shares short/shares outstanding for ETFs is currently 4.6%
Retail ETFs have consistently been some of 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 8/3/12 based on daily change in share counts and daily NAVs.
$8.0 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs generated the largest 13-week net inflows at $1.7 bln (PIMCO Total Return ETF-BOND had the largest flows at $1.6 bln; next highest was the First Trust North American Energy Infrastructure Fund-EMLP at $33.5 mln)
119 new ETF listings and 17 closures YTD
Over the past year, many of the successful launches have an income/dividend orientation
Five different ETF sponsors and three asset classes represented in top 10 most successful launches
The iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV) had net cash inflows of $88 mln last week, which is almost two times more than its second largest weekly of net inflows of $45 mln (from 2/27/12 – 3/2/12)
Top 10 most successful launches account for 71% of market cap of ETFs launched over the past year (skewed by BOND)
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Source: Morgan Stanley
S&P 500 climbs above 1,400
August 7, 2012--Wall Street's benchmark S&P 500 climbed above 1,400 for the first time since early May as US stocks looked set for a third consecutive session of gains with luxury retailers leading the way.
Shares in Fossil surged 31.5 per cent to $91.77 in New York after the retailer of high-end watches, wallets and other accessories reported second-quarter results that were better than expected.
read more
Source: FT.com
Standard Chartered Says It's The Victim In $250 Billion Hidden Transactions Case
August 7, 2012--"In recent weeks, issues have surfaced around governance and behaviour in banking. At Standard Chartered, we believe it is not just about what we do, but how we do it. Our culture and values continue to be a source of strength and a competitive advantage. Strong corporate governance and an obsession with the basics of banking remain key areas of focus for our board."
So read a statement issued by John Pease, chairman of Standard Chartered bank, last week, reports the Guardian. One would assume that the bank has to sing a different tune as of yesterday, when the New York State Department of Financial Services accused the bank of hiding $250 billion worth of transactions with Iran.
view more
Source: CompliancEX
Russell, Scottrade retreat from US ETF market
August 7, 2012--Two recent entrants to the US exchange traded funds market are pulling back, reflecting the intense competitive pressure from the industry's biggest players.
Russell Investments has put its direct US ETF business under review and is "scaling back" its US ETF team. Meanwhile, Scottrade’s FocusShares unit has announced it is liquidating its ETF family at the end of the month.
read mmore
Source: FT.com
Knight Is Said to Have Spurned $500 Million Citadel Loan
August 7, 2012--Knight Capital Group Inc. (KCG) rejected a last-minute, $500 million rescue-loan offer from Citadel LLC on Aug. 5 as it worked on a competing plan from a group of investors, said two people with knowledge of the matter.
The loan terms would have given Citadel a minority stake in Jersey City, New Jersey-based Knight’s stock and an interest in the market maker’s HotSpot foreign-exchange subsidiary, said the people, who spoke on condition of anonymity because the talks were private. Citadel, the $12.5 billion hedge fund run by billionaire Ken Griffin, competes with Knight’s market-making and electronic-trading business.
read more BofA Merrill Lynch Increases Benefit Plan Assets to $20B The growth the business has seen so far comes as it has boosted its number of plans to about 3,700, up 200 from the same time last year, including 401(k), defined benefit, equity and non-qualified deferred compensation.
read more After Knight, Unfair Knocks Knight Capital Group Notice Regarding Capital Infusion Transaction And Reliance On Exemption To NYSE's Shareholder Approval Policy view more BM&FBOVESPA-Institutional investors lead participation in volume of index funds (ETFs) traded on the Exchange in July view the Click here to access the July Bulletin on ETF activities. Previous months are also available NYSE Euronext Temporarily Re-assigns Knight Capital DMM Responsibilities to GETCO DMM for Certain Securities
Exchange rules permit the temporary reallocation of any security whenever the Exchange believes such reallocation would be in the public interest. Upon Knight Capital Group, Inc.'s completion and approval of a recapitalization plan, all temporarily reassigned NYSE and NYSE MKT securities as well as DMM staff, operations and systems oversight will be returned to Knight Capital Americas in a timely manner.
"We believe this interim transition is in the best interests of investors, our listed issuers, market stability and efficiency, as well as Knight, as the firm finalizes its equity financing transaction," said Larry Leibowitz, Chief Operating Officer, NYSE Euronext. read more
Source: Bloomberg
August 7, 2012-- Bank of America Merrill Lynch has grown its new financial benefit plan assets to a record $20 billion this year as it leverages stronger ties between its bank and brokerage forces.
The $20 billion total the firm reached through new and existing company customers as of the end of June surpasses the $19 billion total new assets for that business in 2011 and $17 billion in 2010.
Source: On Wall Street
August 7, 2012--ETF liquidity, electronic trading and rogue algorithms all came under renewed scrutiny in the wake of the Knight Capital debacle. But the pundits got it wrong: The ETF market is liquid and sound.
The recent event at Knight Capital, which was in reality nothing more than a technology glitch, once again gave various media outlets and talking heads an excuse to theorize about issues of liquidity in ETFs and the effects of electronic trading in our market place.
Source: Wealth Management.com
August 6, 2012--Knight Capital Group, Inc. (NYSE Euronext: KCG) today announced that it has issued shares of convertible preferred stock convertible into approximately 267 million shares of common stock pursuant to a Securities Purchase Agreement entered into by Knight with several purchasers on August 6, 2012 in exchange for an aggregate of $400 million.
This capital infusion was undertaken in response to the extraordinary trading loss experienced by Knight on August 1, 2012, which significantly depleted Knight's capital base and in turn precipitated a loss of customer and counterparty confidence and liquidity crisis that, if not immediately addressed, would have threatened Knight's ability to continue to operate. Today's capital infusion provides the liquidity and capital necessary to restore confidence to customers and the market and enables Knight to continue as an active participant in the capital markets. Because the shares issued represent, on an as-converted basis, approximately 73% of the outstanding common stock of Knight on a post-issuance basis, the issuance of convertible preferred stock would normally have required approval of Knight's stockholders according to the Shareholder Approval Policy of the New York Stock Exchange (the "Exchange").
Source: Knight Capital Group
August 6, 2012--Institutional investors led with a 35.5% participation of the total volume of index funds (ETFs) traded on the Exchange in July, followed by foreign investors (24.2%), financial institutions (22.6%), individuals (14.5%) and public and private companies (3.2%).
In July, shares of the iShares Ibovespa Index Fund were the most traded on BM&FBOVESPA. The BOVA11 ticker accounted for 89.6% of total volume of ETFs traded on the Exchange.
Source: BM&FBOVESPA
NYSE Euronext Temporarily Re-assigns Knight Capital DMM Responsibilities to GETCO DMM for Certain Securities
Working in cooperation with both firms, interim transfer ensures orderly markets while Knight Capital completes anticipated recapitalization plan
August 6, 2012--In accordance with applicable rules, the New York Stock Exchange (NYSE) and NYSE MKT have temporarily assigned custodial responsibility for approximately 524 New York Stock Exchange (NYSE) and 156 NYSE MKT listed securities from the Designated Market Maker (DMM) unit of Knight Capital Americas LLC to the DMM of GETCO LLC,
which currently serves some 896 NYSE- and NYSE MKT-assigned securities, effective Monday, Aug. 6, 2012.
Source: NYSE Euronext
