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Morningstar Issues Comprehensive Research Reports on ETF Managed Portfolio Strategies and ETF Tax Efficiency
January 23, 2012--Morningstar, Inc., a leading provider of independent investment research today issued two research reports—the "ETF Managed Portfolios Landscape Report" that explores current trends, asset growth, and the industry outlook for ETF managed portfolios, and another, "ETFs Under the Microscope: Tax Efficiency Survey" that tests the claims of the tax efficiency of ETFs.
ETF managed portfolios are investment strategies that typically have more than half of their portfolio assets invested in exchange-traded funds. They are primarily available as separate accounts, and they represent one of the fastest-growing segments of the investment industry. In September 2011, Morningstar announced plans to research and rank ETF managed portfolios. The company is now tracking nearly 370 strategies from 95 firms through its separate account database with collective assets under advisement of approximately $27 billion. As part of this effort, Morningstar has developed a proprietary portfolio attribute classification system based on its analysis of the ETF managed portfolio's investment strategy as well as a historical review of disclosed holdings. Morningstar's new system evaluates four main attributes: Universe (which looks at the starting scope of a strategy's investment process on a global basis), Asset Breadth, Portfolio Implementation, and Primary ETF Exposure Type. The information is now available in Morningstar Direct(SM), the company's web-based global investment analysis platform for institutional investors.
view the ETF Managed Portfolios Landscape Report
view the ETFs Under the Microscope: Tax Efficiency Survey
Source: Morningstar
Statement of Dissent to the CFTC-SEC Report on International Swap Regulation Pursuant to Section 719(c) of the Dodd-Frank Act (the "Report")
January 23, 2012--The staff of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) must be commended on their outreach with other international regulatory bodies to harmonize the new rules and regulations over the swaps markets. I am confident that this level of coordination and cooperation has never been achieved previously.
I respectfully dissent in the issuance of this Report. First, it fails to properly capture the entirety of the regulatory landscape. Second, it should acknowledge in greater detail the challenges in harmonizing our rules. This Report provides a general, but incomplete, picture of the international rulemaking process. While it is accurate to say that there is international coordination on general policy considerations, significant questions remain regarding the extraterritorial application of the specific rulemakings currently underway at the Commissions. Further, significant questions remain regarding the pace of rulemakings among the various regulatory bodies going forward.
As of the date of this Report, neither the CFTC nor the SEC has disclosed the extraterritorial application of our proposed or final rules. Under both the proposed and final rules it appears that U.S. rulemakings would apply to entities and activities in foreign jurisdictions. For example, the application of the proposed rule regarding the CFTC’s entity definitions would make U.S. financial and non-financial entities subject to mandatory clearing and capital requirements, even if they operate outside the U.S., while foreign competitors may not be so constrained. Until the Commissions specifically define the extraterritorial application of these rules we exacerbate the significant regulatory uncertainty for global market participants. We also delay progress towards mutual recognition or mutual accommodation, which are essential to avoiding duplicate or contradictory regulatory obligations for such market participants.
Finally, the CFTC has been made aware of a significant problem by our colleagues in both Europe and Asia of a statutory requirement to indemnify the swap data repositories and the Commission as mandated under Section 728(d) of the Dodd-Frank Act. Many jurisdictions are not able to comply with this requirement and have demanded that change be made or they will not cooperate with the U.S. swaps data collection efforts. The staff has correctly pointed out in this Report that a statutory change may be necessary to ensure that the U.S. is able to fully cooperate with international regulators to share critical information regarding global risk exposure and trade data.
In closing, I commend the staff for their hard work to deliver unprecedented international coordination on broad policy questions. However, our effort to harmonize our rules and to enable mutual recognition or accommodation remains incomplete in both words and actions.
Source: CFTC.gov
Banks’ dual role in ETFs in jeopardy
January 22, 2012--Banks running exchange traded funds in Europe face potential challenges to the profitability and even viability of their businesses if regulators adopt proposals for limiting conflicts of interest.
Deborah Fuhr, an independent ETF strategist, said banks could be barred from acting as providers of synthetic ETFs and as derivative counterparties to those ETFs, if recommendations made by the Securities and Markets Stakeholder Group were adopted by regulators.
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Source: FT.com
Fund Companies To Expand ETF Presence In ’12
January 20, 2012--The stage is set for more exchange-traded fund launches from traditional fund companies this year. Last month, Fidelity investments moved to significantly expand its role in the ETF market by filing an application for exemptive relief with the Securities and Exchange Commission to roll out a suite of ETFs.
The filing envisions the launch of index-based domestic and international stock and bond funds including 130/30 and other long/short funds.
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Source: FA-Mag.com
Richard Jaycobs Named as Successor to Neal Wolkoff as CEO of ELX
January 20, 2012--ELX Futures, L.P. (ELX), a leading electronic futures exchange, announced today that veteran futures industry executive Richard Jaycobs will succeed Neal Wolkoff as Chief Executive Officer of ELX.
Mr. Jaycobs, a 25-year veteran of the futures and derivatives industry, has served as President of the Cantor Exchange, a CFTC-regulated exchange committed to providing the market with innovative products in entertainment, weather, and news events. Earlier, he served as CEO of the Chicago-based Clearing Corporation (formerly the Board of Trade Clearing Corporation), CEO of onExchange, and Managing Director at the New York Cotton Exchange.
ELX launched in July 2009 to establish a faster, more efficient, competitive alternative for global market participants trading future contracts. ELX’s founding firms include leading financial institutions, dealers, trading firms and a major electronic and voice broker and technology provider: Bank of America Merrill Lynch, BGC Partners, Barclays Capital, Breakwater/Peak6, Deutsche Bank, Citi, Morgan Stanley, Goldman Sachs, Credit Suisse, RBS, J.P. Morgan, and Getco.
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Source: ELX Futures
Fee Rate Advisory #5 for Fiscal Year 2012
January 20, 2012 — The Securities and Exchange Commission today announced that on February 21, 2012 the fees rates applicable to most securities transactions will decrease from $19.20 per million dollars to $18.00 per million dollars. The assessment on security futures transactions will remain unchanged at $0.0042 for each round turn transaction.
The Commission determined these new rates in accordance with Section 31 of the Securities Exchange Act of 1934 (“Exchange Act”). Accordingly, the Commission consulted with both the Congressional Budget Office and the Office of Management and Budget regarding the annual adjustment. These adjustments do not affect the amount of funding available to the Commission.
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Source: SEC.gov
Wolkoff Announces Plans to Depart ELX Effective April 30
January 20, 2012--Neal L. Wolkoff, Chief Executive Officer of ELX Futures, L.P. (ELX), today notified the ELX board of his resignation, effective April 30.
ELX, a leading electronic futures exchange offering market competition in U.S. Treasury and Eurodollar futures contracts, launched on July 10, 2009 to establish a faster, more efficient competitive alternative for global market participants trading futures..
Wolkoff, who has been CEO of ELX since launch, previously served as chairman and CEO of the American Stock Exchange and was the Chief Operating Officer in a 20-year career at the New York Mercantile Exchange.
Wolkoff said, “ELX presented an exciting opportunity for me to guide strategy, tactics, and operations of a financial institution from before its launch and I am very proud of the inroads we have been able to achieve in providing a competitive market. At this point, I am ready for new challenges and opportunities.”
Source: ELX Futures
U.S. Federal Reserve Releases Templates For Reporting FOMC Participants' Projections Of The Appropriate Target Federal Funds Rate
January 20, 2012--The Federal Reserve on Friday released blank templates showing the format of the two charts it will use on January 25 to report Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate. It also released a draft of an explanatory note that will accompany the projections.
The first chart, which will have shaded bars when released on January 25, will show FOMC participants’ projections for the timing of the initial increase in the target federal funds rate.
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Source: FBR
Expense ratio changes for 27 Vanguard ETFs®
January 20, 2012--In December 2011, Vanguard filed annual prospectus updates for 27 ETFs that had changes in their stated expense ratios. Eight of the ETFs had expense ratios that increased, while the remaining 19 ETFs had a decrease. Ten sector, six bond, and three mega-cap ETFs experienced reductions. Increases occurred in eight of our Russell and S&P domestic equity ETFs.
In the cases where there were expense ratio reductions, they were primarily a result of the way we operate our funds. When funds and their corresponding ETF share class experience greater efficiencies (either through asset growth, operating cost reductions, or a combination of both) the savings are passed on to the fund owners in the form of lower expenses.
For those ETFs where expense ratios increased, it was due to "acquired fund fees and expenses" (AFFE) that result from ownership of business development companies (BDCs).
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Source: Vanguard
CFTC.gov Commitments of Traders Reports Update
January 20, 2012--The current reports for the week of January 17, 2012 are now available.
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Source: CFTC.gov
