Hosted by IMN, this is a must-attend event for hedge fund managers, institutional portfolio managers, RIAs and financial planners active within the exchange-traded-fund (ETF) space.
This year’s speakers and panelists include leading sell-side trading desk professionals, market strategists and top-gun investment managers.
Click on the image above for the conference website and more information.
Courtesy of Justin Lahart, WSJ
You would think that the whole point of a stock index is to be, well, an index of the stock market’s performance.
But thanks to the popularity of exchange-traded funds, or ETFs, stock indexes have in recent years been doing double duty as investment vehicles. At the same time, there have been subtle but important changes in the way indexes are constructed.
Bottom line: The indexes aren’t measuring exactly what they used to.
It is a lot easier to manage an ETF if the stocks that underlie it are easily traded. If, instead, the stocks are illiquid, there is a risk their prices will get artificially inflated when money flows into the ETF. The opposite can happen when money flows out.
One step index providers have taken to bolster liquidity has been to move from capitalization-based indexes, where the weight of each member is determined by the value of its total shares outstanding, to float-adjusted indexes. In the latter, shares that are unavailable to the public (such as stock held by company directors) don’t count toward a company’s weighting. Britain’s FTSE Group made the move to float-adjusted indexes in 2000, followed by MSCI MSCI +0.51% in 2002 and Standard & Poor’s in 2005.
But while switching float adjustment may improve an index’s liquidity profile, argue researchers at New York money manager Horizon Kinetics, it may also cut into its ability to generate returns. That is because many of the companies that have added oomph to indexes like the S&P 500 in the past did so at a time when a great many of the shares were held by insiders.
For the complete WSJ article, please click here (subscription required)
Courtesy of Bloomberg LP reporter Nina Mehta
2013-03-22 22:29:10.364 GMT
U.S. regulators approved Nasdaq Stock Market’s request to allow the sponsors of some exchange- traded funds to offer payments to market makers. The Securities and Exchange Commission decision loosens a ban on the compensation that has been in place since 1997.
Nasdaq OMX Group Inc., which plans to begin the program as a one-year pilot, argued along with NYSE Euronext before Congress in 2011 that payments to market makers may increase liquidity and improve prices to investors in less-active securities. Approval of the program comes amid concern that stocks with lighter volume are suffering in America’s computerized equity markets because they are less attractive to automated traders.
NYSE Arca, an all-electronic venue that competes with Nasdaq, submitted a request to the SEC yesterday for its own initiative. Payments for market making in smaller companies is allowed in some European countries.
“It will incentivize market makers to collect revenue by posting bids and offers at the exchange,” Chris Hempstead, director of ETF execution at broker WallachBeth Capital LLC in New York, said in a phone interview. “Market makers will compete with one another to capture that revenue stream and drive the bid-ask spread to a tighter band.” Continue reading
Courtesy of WSJ MarketBeat Columnist Matthew Jarzemsky
March 20, 2013
Investors are getting awfully creative in the way they play the volatility surrounding Europe and its crisis.
Amid a renewed flare-up of worries, one investor placed a big bet on European stocks but with a twist; dodging the impact of swings in the euro.
The tiny Europe Hedged Equity exchange-traded fund (HEDJ) stands to multiply in size in the next few days, thanks to a single $102 million trade yesterday.
Tuesday morning, an order hit the tape for 2 million shares of the exchange-traded fund at $50.72. HEDJ tracks a basket of European stocks while using derivatives to offset changes in the price of the euro and prior to Tuesday’s trade had just $46 million in assets.
On Tuesday, an investor who wanted exposure to the strategy likely enlisted a market maker to take the other side of the trade, said Chris Hempstead, director of ETF execution services at WallachBeth Capital LLC, a New York brokerage.
In this case, the market maker would “create” new shares of HEDJ by buying the underlying shares of stock, because the 2-million-share size of the trade sharply exceeded the roughly 900,000 shares of the ETF outstanding at the time.
“Now you’ve got a blockbuster trade, which will almost certainly be followed by creation of 2 million shares,” Hempstead said. “You’ll see assets go from 900,000 shares to nearly 3 million shares in one blink.”
For the entire WSJ MarketBeat report, please click here
Courtesy of Tom Lydon and ETFTrends
The long term outlook for potable water remains uncertain, but the prospects for water becoming a valued commodity is not a matter of if, just a matter of when as the global population rises.
“The increasing need for fresh water has emerged in recent years as a potentially lucrative long-term investment theme. The investment thesis is based on the fact that demand for clean water increases along with the global population. PowerShares Water Resurces (NYSEArca: PHO) aims to provide exposure to this theme by tracking an index of firms that have business lines focused on water treatment services and infrastructure,” John Gabriel wrote for Morningstar. [Climate Change, Rising populations Put Water ETFs in Focus]
Every company involved with water stands to benefit if water ever becomes a “blue gold,” reports Brian Shaw for The Motley Fool. According to a study by the World Water Assessment Programmer Study, 70% of fresh water is used for irrigation, while 22% is used in industry and 8% is used in domestic households. [The Case for Water ETFs]
Companies that are represented in PHO include industrial firms that have operations in water treatment equipment and/or pipe and pump manufacturing. Another big chunk of the fund is composed of water utilities, which make up about 24% of assets, reports Gabriel. However, many of the water-focused firms that are currently operating earn regulated returns and many of the diversified industrial firms generate significant business from industries outside the investable water complex.
Interestingly, water has been 90% correlated to the industrial sector. FOR THE FULL ARTICLE, please click here
Courtesy of Olly Ludwig
Invesco PowerShares filed regulatory paperwork to bring to market a short-term global bond exchange-traded fund focused on high-yield credits, its second filing this month detailing a short-dated bond fund after it put one into registration two weeks ago focused on investment-grade debt.
Together the two proposed funds will serve up access to a relatively safe corner of the fixed-income world that offers protection from potentially large losses that holders of longer-dated bonds would face in the event of a downside bond-market correction.
The PowerShares Global Short Term High Yield Bond Portfolio will be based on the DB Global Short Term High Yield Bond Index, a benchmark that will select both U.S. and foreign-dollar-denominated, noninvestment-grade debt from both public and private issuers, the filing said. All holdings must also be no more than three years from maturity.
The two short-dated PowerShares bond funds come at a possibly critical juncture, as bond investors start to look for ways to protect themselves from what a rise in inflation could do to prices of existing bonds. Concentrating holdings on the short end of the yield curve looks to be one of the simplest ways of achieving this objective, even if short-term fixed-income holdings won’t entirely escape the effects of a bond market sell-off.
To read the entire IU article, please click here
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ourtesy of Tom-Steinert-Threkeld
Nasdaq OMX Group plans to re-launch its PSX exchange as a “better trading venue” for exchange-traded funds, notes and other related products, as early as next month.
The exchange will execute trades in all National Market System securities, but will give special incentives to retail and institutional investors to participate as well as special benefits to firms that register as market makers, committing to make continuous two-sided quotes on exchange-traded products.
Neither a filing with the Securities and Exchange Commission nor a Nasdaq official with its Transaction Services division describe the incentives that will be given to investors to place orders on PSX nor the benefits that will be provided market makers.
“The unique features that will make PSX compelling we can’t go into today,’’ the Transaction Services executive said Tuesday afternoon. “We are keeping that under our hats for a couple weeks.”
Nasdaq OMX PHLX, the formal name of the exchange, filed a document dated March 8, 2013, describing its plan to changeover PSX to an exchange that “in all material respects” has rules for handling buy and sell orders that mirror those at Nasdaq OMX’s other two exchanges.
These are the Nasdaq Stock Market, which handles about 16.5 percent of all equities trading in the United States, and Nasdaq BX, which has as its differentiating factor the payment of rebates to market participants who remove liquidity from its market.
The move to match rules among all three Nasdaq exchanges means that orders at PSX will be handled in what is known as price-time priority. This favors the speed at which orders arrive. Continue reading
Refreshing Market Commentary courtesy of Ron Quigley, Mgn.Dir./Head of U.S. Syndicate Desk & Primary Sales for Mischler Financial Group.
With Washington in full-out gridlock, Americans should be turning to the best national news, namely corporate profits. Corporations are driving the resurgence in equity markets posting overall fabulous earnings. The flight to under-owned equities has also helped the DOW reach what today represented a new all-time high when it screamed past the previous record high of 14,164 set back on October 9, 2007 at the open. The DOW closed today’s session at 14,253 or 89 points above its previous record. The S&P meanwhile, is closing in on its all-time high of 1,565 also set on October 9, 2007, sitting a mere 26 points away ending the session at 1,539.
Today’s pair of economic data releases conveyed a mix message about the shape of the U.S.A. On one hand, the Institute for Supply Management’s (ISM) Non-Manufacturing Business Survey painted a bright picture indicating that segment of the nation’s economic activity grew for the 38th consecutive month. It was the highest such reading since the 56.1 registered in February of 2012. Construction is showing some signs of improvement as are financial and insurance companies among others. However, in the push-me/pull-you that characterizes much of the data we see, today’s Economic Optimism Index dipped by 5.1 points versus the prior while remaining over 5 points behind its annual average. Readings above 50 point to optimism, below it – pessimism. The Index is comprised of three component parts namely, a six-month economic outlook, a personal financial outlook and confidence in federal economic policies. All three categories posted declines. This month 60% of respondents indicate they believe the economy is in a recession.
So there it is…..more contradictory information to make our day a little brighter. Heck, my barometer of optimism is if I get all my work done in one day, can start from a clean slate the next and read a bed-time story to my six year-old daughter well then, things are looking good.
On another note, Hugo Chavez is dead and you all know what that means……..you can now go ahead and buy gas at your local Citgo station. Pleasant driving people!
Here a re-cap of today’s economic data releases: Continue reading
Courtesy of Max Chen
ALPS Portfolio Solutions has launched a new exchange traded fund that provides investors with income through selling put options on the largest U.S. stocks with the highest volatility.
The U.S. Equity High Volatility Put Write Index Fund (NYSEArca: HVPW) tries to reflect the performance of the NYSE Arca U.S. Equity High Volatility Put Write Index, which tracks a portfolio of exchange-traded put options on the largest capitalized stocks that have listed options with the highest volatility, according to ALPS. HVPW has a 0.95% expense ratio.
The ETF will sell 60 day listed put options every two months on 20 stocks. HVPW will also distribute out 1.5% of the ETF’s net assets at the end of each 60 days.
Rich Investment Solutions, LLC is the subadvisor to the ETF, which was launched under the ALPS ETF platform.
Kevin Rich of Rich Investment Solutions in a telephone interview said the ETF sells puts that are 15% “out of the money.” The fund tries to earn income through the options premiums. The ETF should do well when markets are trending higher or sideways, but could underperform in strong rallies and sell-offs. “It’s definitely an income strategy,” Rich explained. Continue reading