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Morgan Stanley-US ETF Weekly Update
October 8, 2012--US ETF Weekly Update
Weekly Flows: $4.2 Billion Net Inflows
ETF Assets Stand at $1.3 Trillion, up 26% YTD
One ETF Launch Last Week
Vanguard Announces Index Changes
Russell Closes Two ETFs Early
US-Listed ETFs: Estimated Flows by Market Segment
ETFs posted net inflows of $4.2 bln last week, the tenth consecutive week of net inflows
Longest streak of net inflows since the second half of 2010 (11 straight weeks of net inflows from 8/30/10-11/12/10)
US Large-Cap Equity and Commodity ETFs posted a combined $3.1 bln in net inflows (top two categories we measured)
ETF assets stand at $1.3 tln (up 26% YTD) and have posted net inflows 32 out of 40 weeks in 2012 ($134.0 bln YTD)
13-week flows were mostly positive among asset classes; combined $55.7 bln net inflows
Fixed Income ETFs have posted net inflows 58 out of the past 60 weeks, including $10.4 bln over the past 13 weeks
Currency ETFs were the only category to exhibit net outflows over the last 13 weeks ($288 mln in net outflows); notably,
Currency ETFs were the only category to exhibit net outflows YTD as well ($2.2 bln in net outflows)
US-Listed ETFs: Estimated Largest Flows by Individual ETF
iShares S&P 500 Index Fund (IVV) generated net inflows of $1.2 bln, the most of any ETF
Notably, three products (IVV, SPY, SSO) that track the S&P 500 Index posted large net inflows last week (combined $2.8 bln)
Over the last 13 weeks, Treasury-specific ETFs have generated some of the largest net outflows ($2.7 bln); last week was no different as the iShares Barclays TIPS Bond Fund (TIP) and iShares Barclays 20+ Year Treasury Bond Fund (TLT) posted a combined $793 mln in net outflows
US-Listed ETFs: Short Interest
Data Unchanged: Based on data as of 9/14/12
SPDR Gold Trust (GLD) had the largest increase in USD short interest at $857 mln
Despite posting net inflows for nine straight weeks and exhibiting strong market returns, GLD’s shares short climbed to their
second highest level of 2012
Aggregate ETF USD short interest increased by $3.7 bln over the past two weeks ended 9/14/12
The average shares short/shares outstanding for ETFs is currently 4.9%
Smaller ETFs by market cap may skew the results (4 of the top 10 with the highest % of shares short have market caps <$30 mln)
Both the euro and Yen ETFs are among the most heavily shorted despite exhibiting low correlations and often being used to express opposing views
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 10/5/12 based on daily change in share counts and daily NAVs.
$9.0 billion in total market cap of ETFs less than 1-year old
Newly launched Active ETFs generated the largest 13-week net inflows at $1.3 bln (PIMCO Total Return ETF-BOND had the largest net inflows in the space at $1.1 bln over the period)
131 new ETF listings and 46 closures YTD (additional 27 liquidations have been announced)
Over the past year, many of the successful launches have an income/defensive orientation
Five different ETF sponsors and two asset classes represented in top 10 most successful launches
The iShares AAA-A Rated Corporate Bond Fund (QLTA) had a surge in assets last week, generating net inflows of $275 mln (QLTA only has a market cap of $298 mln)
Top 10 most successful launches account for 73% of market cap of ETFs launched over the past year
request report
Source: Morgan Stanley
DB-Global Equity Index and ETF Research-US ETF Market Monthly Review-ETP AUM added $67bn driven by impressive inflows of $37bn
October 5, 2012--US ETP assets at all-time highs
ETP assets in the US rose by $66.9bn to $1.28 trillion last month, reaching a new all-time high and boosting AUM growth to a decent 22.7% growth on a YTD basis.
Global ETP industry assets rose to $1.75 trillion, or 22.0% up YTD.
Risk-on trade back on the table
US ETP flows experienced inflows of $37.3bn during September (+$130.7bn, 12.5% of last year’s AUM).
Within long-only ETPs, total flows were +$37.3bn in September vs. +$3.6bn in August.
Equity, Fixed Income, and Commodity long-only ETPs experienced cash flows of +$31.1bn, +$3.0bn, and +$3.0bn, respectively.
Contrary to the apparent disconnect we saw between returns and flows in August, September marked a clear comeback to risk. Risky assets experienced significant rallies, and flows were consistent with the market trends.
The risk-on trade was clearly described by the long-only ETP flows demographics. We saw very strong flows into equities, with most going into the US (+$23bn), but also spreading significantly into EM ETPs +$4.6bn). Sector allocations favored Cyclicals (+$4.8bn) over Defensives (+$0.6bn). High-beta segments such as small caps also saw significant inflows (+$3.6bn), while lower-beta categories such as Dividend ETPs saw less inflows than in recent months. Within Fixed Income, investors favored Corporates, especially HY credit, while they moved away from generally safer Sovereign debt positions. Gold had significant inflows, but this time they were driven by currency devaluation protection rather than by fear.
New Launch Calendar: adding new access and sophistication
There were five new ETFs and one ETN listed during the previous month.
Five of them were listed in the NYSE Arca, with the remaining one in the NASDAQ. The new products focus on equity allocations, but offer access to new segments and quantitative strategies.
ETP floor activity remains subdued
ETP turnover totaled $1.02 trillion last month, up 5.2% ($51.0bn) from the revious month’s figure of $0.97 trillion, and also 38% under last year’s monthly average of $1.65 trillion.
ETP trading made up 25.4% of all US cash equity trading in September, down from last year’s peak of 37.5% in August and still below its three year monthly average of 29.0%.
Equity and Commodity ETPs turnover rose by $36.3bn or 4.3% and $14.6bn (24.9%), respectively; meanwhile Fixed Income ETPs turnover fell 4.7% (-$3.3bn) during last month.
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http://pull.db-gmresearch.com/p/381-45BD/42457673/US_ETF_Market_Monthly_Review.pdf
Source: Deutsche Bank - Global Equity Index and ETF Research - North America
CFTC.gov Commitments of Traders Reports Update
October 5, 2012--The current reports for the week of October 2, 2012 are now available.
view more
Source: CFTC.gov
Statement on Dodd-Frank Implementation and Compliance-Commissioner Chilton
October 5, 2012--These are busy times in our industry. In fact, we've never had more on our plates. Implementation of the Congressional mandates of Dodd-Frank is a massive effort.
I’m pleased we are, finally, seeing the end in sight. That said, it’s time to consider some options while we move forward on final implementation phases of these critically important—and necessary—financial market regulatory reforms.
We’ve approved 39 final rules, and given this mammoth undertaking it’s not unexpected that these new regulations would raise questions and concerns regarding compliance and implementation. Right now, we’ve got a couple hundred requests for clarification and/or regulatory relief in some fashion on approximately three dozen discrete issues. These requests—each one of them—deserve our careful, deliberate, thoughtful consideration and resolution. Every single request deserves a response.
view more
Source: CFTC.gov
SSgA files with the SEC
October 5, 2012--SSgA Funds Management has filed an application for exemptive relief with the SEC.
view filing
Source: SEC.gov
ISE Weekly Listings October 5, 2012
October 5, 2012--The International Securities Exchange listed new options classes during the week beginning October 1, 2012 as described below.
Effective Monday, October 1, 2012, the ISE will list options on the following product along with its related symbol:
Bin 8-Citadel Securities LLC
Equity
The ADT Corporation (Symbol: ADT, Trading Symbol(s): ADT) will trade on a January expiration cycle with exercise and position limits of 25000.
Effective Tuesday, October 2, 2012, the ISE will list options on the following product along with its related symbol:
read more
Source: International Securities Exchange (ISE)
The Federal Budget Deficit Totaled $1.1 Trillion in 201,, CBO Estimates
October 5, 2012--The federal government's fiscal year 2012 has come to a close, and CBO estimates-in its latest Monthly Budget Review-that the federal budget deficit for the year was about $1.1 trillion, or 7.0 percent of gross domestic product (GDP).
Although the deficit is approximately $200 billion lower than the shortfall recorded in 2011, fiscal year 2012 marks the fourth year in a row with a deficit of more than $1 trillion. As a share of economic output, the deficit has fallen in recent years—from 10.1 percent of GDP in 2009 to 9.0 percent in 2010 and 8.7 percent in 2011.
The decline in the deficit stems largely from an increase in revenues. Revenues were about 6 percent higher in fiscal year 2012, driven in part by a significant influx of corporate income tax receipts. Outlays were about 2 percent lower than they were last year.
view the Monthly Budget Review
Source: CBO
Morgan Stanley-Vanguard Announces Index Changes
October 5, 2012--On October 2, 2012, Vanguard announced it is changing the benchmarks on 18 of its exchange-traded funds (ETFs). Both
domestic and international Vanguard equity funds are being affected as the ETFs move from tracking MSCI indices to FTSE and University of Chicago's CRSP indices.
The change not only impacts
Vanguard ETFs, but also affects select Vanguard index mutual funds
and fund of funds. In addition to index changes, seven Vanguard
ETFs will undergo name changes. In this report, we are only highlighting the ETF changes.
Vanguard is one of the lowest cost ETF providers. Based on available information and our conversations with the fund company, we believe Vanguard is making the changes in order to reduce current and future fund expenses. Index licensing fees can make up a significant amount of an ETF’s expense ratio and Vanguard notes that in switching index providers it has locked in favorable longterm agreements with both FTSE and CRSP, which should result in cost savings. Due to Vanguard’s unique structure, these savings should eventually flow to investors in the form of lower expense ratios.
We do not have a clear timeline on the transition period.
Vanguard anticipates the changes to be staggered and does not expect them to begin for several months. We believe this will minimize front running, spread out the impact from the changes, and allow investors to decide whether or not they want to maintain their Vanguard holdings.
request report
Source: Morgan Stanley
SEC officials urge comprehensive review of U.S. marketplace
October 4, 2012--A comprehensive review of the U.S. stock market is in order because an enormous increase in new rules has exacerbated the risk of an outdated regulatory framework, a commissioner with the Securities and Exchange Commission said on Thursday.
Today's stock market bears little resemblance to almost two decades ago, when the SEC last undertook a thorough evaluation that resulted in the Market 2000 report, said SEC Commissioner Daniel Gallagher.
read more
Source: Reuters
SEC officials urge comprehensive review of U.S. marketplace
October 4, 2012-- A comprehensive review of the U.S. stock market is in order because an enormous increase in new rules has exacerbated the risk of an outdated regulatory framework, a commissioner with the Securities and Exchange Commission said on Thursday.
Today's stock market bears little resemblance to almost two decades ago, when the SEC last undertook a thorough evaluation that resulted in the Market 2000 report, said SEC Commissioner Daniel Gallagher.
read more
Source: Reuters
