All posts by MarketsMuse Staff Reporter

ProShares’ Burger King Idea: “Ex-Sector” ETF Menu

Hold the pickles, and hold the lettuce…Just when MarketsMuse curators and an assortment of ETF market enthusiasts thought there might already be enough themes, toppings and twists to the growing number of exchange-traded funds, ProShares is taking a page straight out of Burger King’s 1970’s branding campaign via a newly-launched menu of “ex-sector ETFs.”  The new, S&P-centric menu enables investors to have it their way and to express bets in the S&P 500, but “ex” specific sub sectors. Confused as to why? According to a report by CNBC’s Alex Rosenberg, so are select industry professionals who view this innovation as convoluted. Below is an excerpt from Rosenberg’s juicy bytes..

proshares bk have it your wayA new set of exchange-traded funds offered by ProShares allows investors to get exposure to the entire S&P 500, save for one or another given sector. Specifically, the company now offers ETFs tracking the S&P 500 ex-energy (trading under the ticker symbol SPXE), ex-financials (SPXN), ex-health care (SPXV) and ex-technology (SPXT).

In a Thursday interview with CNBC’s “Trading Nation,” ProShares’ head of investment strategy, Simeon Hyman, highlighted two anticipated uses for the ETFs: diversification and tactical decision-making.

Hyman provides the example of an investor who already has high exposure to a given sector—such as an executive compensated in a company’s stock, or an inheritor who has received a large number of shares—and does not want to take on excess exposure.

“Previously you’d have to maybe call up a trust company or find someone to run a custom strategy for you to avoid that sector, and here it’s just very straightforward: Buy an ETF. The sector’s out, it’s redistributed across the other names on a market-cap-weighted basis, you don’t have to worry about it,” Hyman said.

Second, the ETFs are designed for those who believe a given sector, such as energy, is set to underperform the rest of the market. “If you have that conviction, this is a very straightforward and easy way to effect that view,” he said.

Yet given that retail investors are often considered to be best served by buying into the overall market and avoiding tactical calls, some say these ETFs might be an inferior play compared to, say, SPDR’s popular S&P 500 ETF (SPY).

“As a core holding, you are far less diversified,” Eric Mustin, vice president of ETF trading solutions at WallachBeth Capital, wrote to CNBC. “You are implicitly overweight the other sectors versus the S&P 500 weightings.” The expense ratio, at 0.27 percent, also irks Mustin.

“You are paying nearly 200 percent to 300 percent the management fees” compared to a product like the (SPY), he pointed out. “I think it’s a product that may find some success among a retail audience, but sophisticated investors probably won’t have an appetite for it.”

When there is a “pronounced discrepancy in attractiveness,” such as the clear unattractiveness of energy at the beginning of the year given dismal earnings expectations and high valuations, “it would seem logical to exclude that sector,” S&P Capital IQ’s equity chief investment officer, Erin Gibbs, wrote to CNBC.

“However, these clear-cut unattractive sector events do not happen that often, and therefore these products could have limited appeal,” she added. Here’s what Hyman has to say:

And, as a special treat to MarketsMuse readers who are “of age”, here’s a dandy clip that adds flavor to this story:

Watch Out Wall Street-The Big Short is Coming

For Wall Street bankers and brokers who have been in the business since at least the early 2000’s and are still working on the Street, and who think you’ve already been pilloried plenty for the work you do, watch out, former Lehman broker-turned best-selling author Michael Lewis (“Liar’s Poker“, “Money Ball“, “Flash Boys“) isn’t finished with you just yet.

The film adaption of Lewis’s 2010 best selling book, “The Big Short: Inside the Doomsday Machine,” a story that seeks to encapsulate the Wall Street culture and practices that some (not all) believe were responsible for the 2008 financial crisis, is coming to a theater near you.

Starring Christian Bale, Steve Carell, Ryan Gosling and Brad Pitt,  MarketsMuse movie critic has eyes on the December 2015 Netflix schedule, only because we thinketh this movie might be a prime candidate for dual-listing in order to hedge against lots of competition during the movie industry’s peak selling season.

Robo Adviser Beat:Betterment Claims Better ETF Construct for 401ks

MarketsMuse curators note that “there is always a better way, until its not better. ..”But that isn’t stopping Betterment LLC, the startup robo-adviser that claims to offer a solution for investors who seek an automated approach to stuff ETFs into their401k portfolios.

Betterment, a leading robo-adviser, announced last week that it will launch a 401(k) platform for employers starting early next year. Portfolios will be made up of exchange-traded funds.

Jon Stein, Bettterment CEO
Jon Stein, Bettterment CEO

According to Betterment CEO Jon Stein.. “Current 401(k) offerings—and we have examined them all—have poor user experiences, high costs, and a clear lack of advice. Not anymore. Betterment for Business will bring our smarter technology to the workplace and the millions of Americans who badly need it to meet their retirement needs. “It’s time that all Americans have low-cost, unconflicted advice and smarter technology for retirement planning.”

Betterment says it currently has 100,000 retail customers and $2.6 billion in assets under management in its diversified mix of exchange-traded funds.

Fast-growing ETFs remain a tiny part of the 401(k) market. Anne Tergesen at The Wall Street Journal notes that two key benefits of owning ETFs — intraday trading and tax-efficiency — are sound much less exciting in reference to 401(k)s:

“A couple of ETFs’ biggest selling points don’t give them an edge in the 401(k) market. ETFs trade all day long like stocks, but that typically isn’t a feature that employers want to offer in retirement plans. Employers want employees “to take a long-term perspective—not to be day trading,” Ms. Lucas said.  “ETFs are also tax-efficient, but that doesn’t matter in tax-sheltered retirement plans,” said Brooks Herman, head of data and research at BrightScope.”

In offering an ETF-only menu for its 401(k), Betterment joins Charles Schwab Corp. , which last year launched an all-ETF version of its Index Advantage 401(k) platform. Other companies that offer ETFs within 401(k) plans include Vanguard Group and Capital One Financial Corp.’s ShareBuilder 401(k).

For the full story from the WSJ, please click here

Rupert Murdoch Takes On Bloomberg-Symphony Sings

BrokerDealer-Banked Chat Service Symphony Signs Pact to Sing News from Dow Jones and WSJ

MarketsMuse Fintech editors are observing Rosh Hashana today, and we thank our friends at blog for the following story..which could set the tone for a slug fest between Rupert Murdoch of News Corp. and Michael Bloomberg, the iconic founder of Bloomberg LP and 3-time major of New York City.

With merely a few days in advance of its launch, Symphony Communications, the instant-message platform backed by a consortium of Wall Street’s biggest brokerdealers and whose strategy is to undercut the seemingly irreplaceable Bloomberg-powered IM, announced that it has inked a deal with Dow Jones & Co to feed streaming News Corp.-owned Dow Jones News and Wall Street Journal content into the Bloomberg-killer service. is the host to the financial industry’s most comprehensive database of broker-dealers and provides information on brokerdealers across more than 30 countries worldwide.

According to the latest WSJ coverage, Symphony has won backing on Wall Street because it has been viewed as a potential lower cost alternative to a popular messaging service on Bloomberg LP’s terminals. The company has also made its encryption technology a key selling point for financial firms wary about sensitive data falling into the wrong hands.

The Palo Alto, Calif., company has secured $66 million in financing from 14 firms including Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co. and BlackRock Inc.

ETF Sec Lending: Red Flags Being Raised

Sec Lending is a big business for Wall Street and through the big banks, institutional investors are lending out more bonds and accepting increasing amounts of non-cash securities — including exchange traded funds — as collateral, according to a recent report spotlighted by MarketsMuse editors courtesy of a.m. story from But the practice is raising concerns among some investors some of whom are particularly concerned about the practice of ETFs accepting other ETFs as collateral.

The trends for more bond lending and less cash collateral were picked up in the latest report from the International Securities Lending Association (ISLA), published on August 27. It said the €1.8tn securities lending industry had continued to move towards sovereign debt, with 39 per cent of securities on loan being made up of government debt, up from 35 per cent a year earlier. Of the €718bn worth of government bonds on loan, 72 per cent is taken in return for non-cash collateral, up from 61 per cent 12 months before.

Among those institutions feeding the increased desire to borrow securities is iShares, the world’s largest ETF provider in terms of assets under management, which is owned by BlackRock. It recently scrapped the 50 per cent limit on securities lending for ETFs domiciled in Europe that it had imposed in 2012.

In a statement published in July, iShares said it had decided to scrap the limit to “ensure clients can benefit from additional securities lending returns in funds where there is more borrowing demand”.

But scrutiny of just one US Treasuries ETF reveals some decisions — over collateral — that investors might find surprising. In the 12 months to the end of June 2015, the $1.8bn iShares $ Treasury Bond 7-10yr Ucits ETF (IBTM), had lent out on average 47.48 per cent of its assets under management, generating a 12 month return of 0.09 per cent.

iShares’ online information about this fund states that acceptable collateral includes “selected ETF units”, which last week included 10 iShares ETFs, including ones tracking US property and Chinese and Australian equities.

Andrew Jamieson, global head of broker dealer relationships for iShares, insists the policy of using ETFs as collateral is “nothing new” and that ETFs “are a viable and liquid collateral type as part of a broad range of assets that you can use”.

Ben Seager-Scott, director, investment strategy at Tilney Bestinvest, says he is “deeply concerned” by the securities lending programme at iShares and accused the provider of poor communication.

There’s no conflict of interest and there’s no cannibalisation

And Peter Sleep, senior portfolio manager at Seven Investment Management, questions iShares’ use of a Chinese equity ETF as collateral in a government bond fund. “What happens if you have a China ETF? Maybe it’s liquid, maybe it isn’t. What happens if China suspends trading on its stock market again?”

For the full story from, please click here

Investment Grade Credit Spreads Are Saying…MarketsMuse

Most sophisticated investors, whether Tier 1 institutional investment managers, ‘top minds’ across the sell-side, or the truly savvy, self-directed types should all agree that fixed income market signals, and investment grade credit spreads in particular are a prelude to what equities market can expect to happen.

Whether the ‘lag time’ is 3 months, 6 months or 9 months, history has proven that interest rate markets and investment credit spreads are a reliable indicator. Reading those ‘tea leaves’ is complex, and a task often relegated to “senior research analysts.”  That said, MarketsMuse followers  (primarily investment industry professionals who hail from both sides of the aisle) know that when it comes to truly superior research within the financial market ecosystem, finding diamonds in the rough is not easy, particularly when the landscape is a minefield of jibber jabber produced by ‘experts’ at top banks–folks whose interests are more often aligned with their own wallets as opposed to being aligned with their clients’ best interests.

Worse still, having access to understandable, plain-speak analysis from objective and un-conflicted (aka INDEPENDENT) research is a challenge, albeit the unbundling movement is helping to address that issue.  Without further ado, the MarketsMuse Fixed Income team is happy to share an ‘evergreen’ piece from one such highly-trained and completely conflict-free expert. You’ve seen the work from Neil Azous of Rareview Macro LLC here before and the banner of his publication “Sight Beyond Sight” speaks volumes.

Roll the tape….

A segment from our daily global macro newsletter, Sight Beyond Sight, written at the end of July – What Investment Grade Credit is Really Telling Us – made the cover of the back-to-school issue of the IRP Journal, a recently launched magazine that is digitally distributed to institutional investors and features current research from independent research providers (aka IRP’s). As our readership expands deeper into Asia we are pleased to have been selected to be on the cover by this Hong Kong-based publisher.

In the past few days, US investment grade (IG) credit spreads have reached new three year wides. Historically, the absolute level of these spreads is consistent with periods of economic and financial market stress. Additionally, the daily volatility of these spreads has increased dramatically in recent weeks.

Below is a chart of the Moody’s Baa Corporate Bond yield spread over the US 30-year Treasury yield.

what investment grade credit spreads are telling us marketsmuse neil azous rareview macro

What is the significance of this observation?

Investment grade corporate bonds are one of the least risky investments within the capital structure, and less sensitive to changes in default risk due to economic weakness. Moreover, the credit market is arguably, next to the slope of the yield curve, the greatest predictor of future economic stress.

The most widely cited explanation for the recent widening in spreads is that it is due to the amount of new investment grade credit issuance. Indeed, that is one factor as new issuance (+SSA) set a record pace yesterday after having surpassed $1 trillion, a level not reached last year until mid-September.

However, the recent widening of the spreads is not just down to the recent surge in corporate issuance. Issuance is simply not a large enough driving force to cause this level of “stress”. The reasons for this widening are two-fold.

Firstly, the aggregate level of issuance, to a degree, is beginning to finally catch up with the market after years of sensational appetite. Corporations, in aggregate, are raising their leverage levels by issuing the new debt and not using the proceeds to grow their revenues or cash flows to compensate. Put another way, the market is beginning to segregate between issuance related to refinancing a company’s “credit stack” as part of its normal annualized funding requirements and pure capital redeployment for the benefit investors.

By the way, not only is the IG spread widening, signaling the distinction noted above, but the equity markets are now doing so as well. See the below chart of the ratio of the S&P 500 to the S&P 500 BUYUP index overlaid with the US Treasury 5-30yr yield curve. Stock buy-backs are simply underperforming in 2015 after multiple years of out-performance as the yield curve steepens in anticipation that interest rate hikes will slow the capital redeployment process down. As a reminder, it is much easier to slow a buy-back than reduce a dividend as the former has a time-band and discretion to implement and the latter generally is a board-level decision.

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Buyside Block Trading Venue Luminex Readies Launch

As if there were not enough electronic trading platforms,  the buyside remains determined to have their own equities trading platform open only to buy-side block trading peers. MarketsMuse Tech Talk Editors tip our hats to  for the following update re  Luminex Trading & Analytics, the ATS block trading venue backed by a consortium of large asset managers, which recently announced an updated management team in preparation for the venue’s Q4 launch.

The new management team in place is led by Jonathan Clark, former managing director and head of U.S. equities trading a BlackRock, who will serve as Luminex Trading’s CEO. Clark replaces interim CEO Michael Cashel, who will return to his position as SVP of Fidelity Trading Ventures. Plans for Clark to take over as permanent CEO were previously announced, and as of Tuesday he has officially begun the role.

Plans to build the Luminex Trading venue, which is backed by nine leading investment managers that collectively manage approximately 40 percent of U.S. fund assets, were first announced in January.

The venue will be a buy-side only block trading platform “open to any investment manager primarily focused on the long term and with the desire to trade large blocks of stock with other investment managers,” according to an earlier announcement from the company. The nine investment managers in the consortium backing Luminex are BNY Mellon, BlackRock, Capital Group, Fidelity Investments, Invesco, JPMorgan Asset Management, MFS Investment Management, State Street Global Advisors and T. Rowe Price.

David Hagen, Luminex
David Hagen, Luminex

Luminex Trading announced four other members of the management team this week. Brian Williamson will be head of sales, tasked with further building the client base. Williamson was previously senior global relationship manager with Liquidnet. James Dolan is chief compliance officer, joining the company from Fidelity, where he was previously vice president of compliance for Fidelity Institutional. David Hagen will head product development as Luminex Trading’s new head of product. He was previously director at Pico Quantitative Trading. David Consigli is the company’s new controller, joining from IDB Bank.

Luminex says its platform will offer investment managers lower-cost and more efficient block trading, with transparent trading rules and protocols.

Global Macro Rareview: ETF Investors and The Ivy Portfolio

If the second shoe is actually falling as US (and all other) equities markets appear to indicate this morning, MarketsMuse ETF and Global Macro editors were stimulated by having Sight Beyond Sight with this morning’s coffee, courtesy of Rareview Macro’s Neil Azous. Of particular interest, Azous points to Mebane Faber’s The Ivy Portfolio for those who have defaulted to using exchange-traded funds and to the reference to Occam’s Razor, a principle that global macro enthusiasts will appreciate.

Without further ado, please find an extract from this morning’s edition of Sight Beyond Sight…

Corporate Buybacks Not Strong Enough to Save Stocks Today…Retest of the Lows Now Underway

  • Negative Statistical Analogs
  • No September First of the Month Inflows
  • China Quantitative Tightening (QT)
  • Trends Switch to Medium- from Short-Term
  • Correlation Breakdown
Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

The key takeaways to start September are invisible to the naked eye; a little sight beyond sight is required this morning in order to see them clearly.

Firstly, we are not sure who the source was, but the following S&P 500 analog was sent to us:

In the 11 times the S&P 500 fell by more than 5% in August it declined in 80% of the subsequent Septembers; the average decline in September in those years was 4%.Now, there are many statistics with similar odds of success being circulated out there, but in aggregate these one-liners miss the bigger picture, in our opinion.

The message is that the higher volatility witnessed during August has carried over into September. It took eight hours of the overnight session for S&P futures (ESU5) to confirm 65% of the above analog, as the index was -2.6% at one point.

Secondly, the first of the month inflows into risk assets that professionals are accustomed to relying on to support their long equity positions has gone missing this year. Inflows into equities are generally expected to follow the simultaneous release of PMI manufacturing data, especially when the data historically points to a stronger global growth profile. However, the data released this morning was uniformly weak, and serves as a reminder of the regional synchronicity – that is, Japan’s consumption-led recovery is faltering, the US has a second half of the year inventory overhang to work through, Europe’s inflation profile is reverting back to pre-“QECB” profile, and China remains an unknown.

Thirdly, given the overall weakness in risk assets the sell-off in the German Bund (RXU5) over the last 24-hours is confounding professionals. Occam’s Razor, a principle that states that among competing hypotheses that predict equally well, the one with the fewest assumptions should be selected, suggests that the Chinese central bank is once again selling dollars and foreign fixed income reserves to buy yuan. As a reminder, FX intervention means foreign reserves have to shrink. The mechanics are as follows: sell foreign sovereign bonds > receive US dollars (USD), euro (EUR), yen (JPY) > use USD/EUR/JPY proceeds to buy CNY = no impact to private economy.

The Chinese Yuan, both the onshore (USD/CNY) and offshore (USD/CNH) versions, is trading at its strongest level since the devaluation. The key difference today however is that the central bank is not defending yuan weakness. Instead, in the spirit of managing volatility, it appears it is proactively reminding speculators who their daddy is and doing a good job of crushing their souls at the same time.

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SunGard ETF Pricing Glitch Update: BNY Has $220bil Headache

As reported earlier this week by MarketsMuse, a “computer glitch” suffered by market data vendor Sungard Systems has left custodian BNY Mellon still scrambling to price Net Asset Value (NAV) for nearly 10% of exchange-traded funds held by customers. Late Wednesday, BNY said 20 mutual fund companies and 26 ETF providers have experienced “some pricing problems.” According to sources, the snafu has impacted $220bil worth of assets.

According to Bloomberg news, “A technology breakdown at Bank of New York Mellon Corp., leaving it unable to price more than 10 percent of U.S. exchange-traded funds and some mutual funds, may be causing investors to overpay for them.

BNY Mellon said Thursday in a statement that it’s working “round-the-clock” to fix a technology issue at vendor SunGard Data Systems Inc. The snafu has prevented the bank from issuing net asset values, the equivalent of closing prices, for the funds. The bank said 20 mutual fund companies and 26 ETF providers have experienced some pricing problems.

The bank said customers have been able to continue trading the affected funds. But in the absence of accurate prices, some investors may have paid more than they should when purchasing them, said Ben Johnson, director of global ETF research at Morningstar Inc.

Johnson said that figuring out how to compensate investors hurt by the system failure will be a headache. He said mutual fund investors are likely to suffer more damage, because net asset values play a more critical role for funds than they do for ETFs.

U.S. Securities and Exchange Commission rules do not specifically address this matter, said an SEC official who asked not to be named. The bank’s liability may depend on the wording of its contractual agreements with the funds rather than securities law, the official said.

Kevin Heine, an BNY Mellon spokesman, declined to comment on the matter.

SunGard Apology

SunGard, a financial software company with annual revenue of $2.8 billion, said in a statement Thursday that the incident was not caused by any external or unauthorized system access, and wasn’t related to the market turmoil this week. The issue was caused by an operating system change performed by SunGard on Saturday, Aug. 22.

“We at SunGard apologize to BNY Mellon for the adverse impact this unfortunate incident has had on its operations and clients,” SunGard Chief Executive Officer Russ Fradin said…”

For the full story from Bloomberg, please click here

ETF Pricing Glitch Rattles BNY; SunGard Software Snafu

When it rains it pours. While many ETF investors have been sucker-punched while trying to execute orders during the past several highly volatile days, MarketsMuse finds that a second shoe dropped Monday on the heads of thousands of BNY Mellon customers thanks to a software snafu attributed to market data vendor SunGard systems. The “computer glitch” has impacted the Net Asset Value (NAV) pricing for nearly 800 exchange-traded funds and mutual funds administered by BNY, the world’s largest custodian.

According to the Wall Street Journal, BNY Mellon raised the alarm with regulators and held emergency calls with customers to try and resolve the problem.The system, known as InvestOne and run by financial software provider SunGard, resumed with limited capacity on Tuesday but was still not fully operational on Wednesday, leaving BNY Mellon with a backlog of funds to price.

sungard glitch1Morningstar, Inc., the fund research firm said that 796 funds were missing their net asset values on Wednesday, including ETFs operated by Goldman Sachs, Guggenheim Partners and several dozen mutual funds sold by Federated Investors. Invesco PowerShares Capital Management had 11 ETFs affected by the glitch, a spokeswoman said.

BNY Mellon said it was able to construct Monday net asset values (NAVs) for all affected funds. But there remains a backlog of Tuesday NAVs that still need to be generated.

The problems with calculating the net asset value of ETFs could raise trading costs for investors, said Todd Rosenbluth, director of ETF and mutual-fund research at S&P Capital IQ.

Several traders said they were forced to calculate their own net asset value for ETFs and that they widened the spreads, or the difference, between listed buying and selling prices to accommodate for the higher risk of trading.

“We measure our edge in terms of subpennies,” one trader said. “We can’t afford to be off by a penny.”

Early in the week, BNY Mellon notified regulators and U.S. stock exchanges about the issue. The Securities and Exchange Commission is monitoring the situation, an SEC official said.

“No one here can understand why it’s not up and running yet,” said one executive at a firm that was affected.

For the full coverage by the WSJ, please click here


Market Mayhem: A Rare View From Global Macro Guru

One needs to have ‘been there and seen that’ for at least twenty years in order to have been “loaded for bear” in advance of this morning’s equities market rout. At least one of the folks who MarketsMuse has profiled during the past many months meets that profile; and those who have a true global macro perspective such as Rareview Macro’s Neil Azous have pointed to the credit spread widening during the past number of months as a prime harbinger of things to come. And so they have…

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

Last night, Neil Azous published one of his finer commentaries in advance of this morning’s global equities market rout and incorporated a great phrase:

“Man looks in the abyss, there’s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.” – Lou Mannheim, Wall Street, 1987


The highlights of last night’s edition of “Sight Beyond Sight” are below…

  • Big Picture View
  • S&P 500 View
  • Asset allocation Requires Swimming Against the Tide – Low-to-Negative Downside Capture
  • Long German versus Short US Equities (Currency Hedge)
  • US Fixed Income – Short 2016 Eurodollars
  • Long European & Japanese Equities (FX hedged), US Biotech and US 10-Yr Treasuries
  • Long US Energy Sector
  • Volatility – Sell Apple Inc.; Not the S&P 500 or VIX
  • Harvesting S&P 500 Index Option Skew
  • Long Agricultural Call Options
  • Long US Housing (Hedged)
  • Technical Mean Reversion – Short EUR/BRL
  • Long Euro Stoxx 50 Index Dividend Futures (symbol: DEDA Index)

To read the full edition of the Sight Beyond Sight special Sunday (Aug 23 2015) commentary, please click here*

*Subscription is required; a free, 10-day trial is available

Neil Azous is the founder and managing member of Rareview Macro, an advisory firm to some of the world’s most influential investors and the publisher of the daily newsletter Sight Beyond Sight.

Eaton Vance ETMFs Get Boost By RIA Titan Envestnet

MarketsMuse blog update is courtesy of and initial reporting by and profiles the deal between RIA titan Envestnet and mutual fund king Eaton Vance, which is now approved to promote its novel, actively-managed ETF product “NextShares.” NextShares are exchange-traded funds that are both actively managed and unlike any other ETF product, does not disclose the underlying components of the respective ETFs. These products now go by the acronym “ETMFs.”

Since its approval, Eaton Vance has had to work hard to convince competitive money managers to license its patent and persuade broker-dealers that it is in their interest to make NextShares available to advisers even though the funds don’t offer the same underlying fees to encourage distributors. Eaton Vance’s NextShares-promoting subsidiary, Navigate Fund Solutions, has had to make that case before it even has a product on the market or a distribution partner. provides a global directory of regulated securities industry professionals operating in 30 major countries across the free world.

The deal is a big win for Eaton Vance, an actively managed mutual fund company that’s hoping to replace those products with a potentially more tax-efficient vehicle that could lower costs and improve performance for investors. Envestnet is a major gatekeeper in the fast-growing market of independent financial advisers, providing services for over $700 billion in client assets.

In a statement, an Envestnet executive, Jim Patrick, described NextShares as a “groundbreaking fund structure” and said the company sees offering the funds as part of its mission to help advisers deliver “wealth management services in the most cost- and tax-efficient way possible.”


NextShares was the first and remains the only structure approved by the Securities and Exchange Commission that allows an actively managed open-end fund to trade on exchanges without regularly disclosing its holdings. Portfolio managers resist showing the securities they buy and sell, in part to prevent being taken advantage of by competitors.

– See more at:

Into Africa: Exchanges To Cross-List Local ETFs

When investors think about ETFs, most are focused on the nearly 2000 products that trade within US markets and leading countries in the EU; few realize that Africa is no longer just a ‘Frontier Market’, and some go as far to argue that Africa (once again?) represents a burgeoning investment marketplace.

Aside from various market prognosticators who are promoting the “Into Africa” message, local exchanges across the region are taking steps to convey that very same message. According to recent reports, talks are under way between market participants in South Africa, Nigeria and Kenya to launch the cross listing of exchange traded funds (ETFs), a move that is intended to lead to improved liquidity on Africa’s exchanges.

While many know The Market Vectors Africa Index ETF (NYSEARCA:AFK) for being perhaps the most efficient way to express exposure to the entire region, ETF issuers are working to cross list new and existing ETFs on other exchanges, while the exchanges themselves are putting in place the right frameworks to enable this.

The concept of cross listing an ETF is the same as cross listing a share, or listing it on more than one exchange. It provides domestic investors with access to opportunities from another market, in the convenient and cost effective form of an ETF. By cross listing ETFs on African exchanges, investors will be given access to liquid company shares tracked by indices such as the FTSE/JSE Top 40, the FTSE/NSE Kenya 15 Index, and the MSCI/Nigeria.

African-Stock-Market-Performance-at-Mid-Year-2015-11Africa’s Fastest growing asset class: Exchange-Traded Funds

“ETFs are one of the fastest growing asset-class categories in the world. By collaborating with Africa’s largest stock exchanges, we hope to spearhead this trend in Africa,” explains Donna Oosthuyse, the director for capital markets at the JSE.

Added Oosthuyse, “The cross listing of ETFs will fulfil two main functions: investors will have exposure to a diverse range of top-performing South Africa, Nigerian and Kenyan companies in a convenient and cost-effective way; and the cross-listings of ETFs will improve the liquidity of Africa’s largest stock exchanges.” Oosthuyse says that the advantages for companies included in the ETF indices, and for the exchanges from whence they come, are that ETFs need to be “fully covered”. “This means that the asset manager that is managing the ETF portfolio has to buy and sell the underlying shares on the home exchange, depending on the activity of buying and selling of the ETF.”

Home market liquidity

If an ETF from Kenya or Nigeria, for instance, is listed on the JSE, she adds, then the asset manager in Kenya or Nigeria has to buy and sell the constituent shares on the home market, as units in the ETF are bought and sold. This drives liquidity in the home market.

“In addition to this, it provides extra visibility on the shares on that exchange to new investors who in all likelihood don’t yet trade on that market.” Haruna Jalo-Waziri, the executive director of business development at the Nigerian Stock Exchange, says: “This collaboration underscores our commitment to providing investors with a wide range of investment products to help them realise their financial goals. ETFs are becoming attractive to many investors offering them portfolio diversification and reduced cost of investing.

Building African Financial Markets Seminar

Meanwhile, as part of an on-going effort to deepen and promote liquidity, choice of products and investor interest across African markets, the JSE and the African Securities Exchanges Association (ASEA), supported by the World Bank Group, will be hosting the third Building African Financial Markets Seminar from 16 to 18 September. The conference will gather key representatives from stock exchanges, regulatory bodies, stockbroking firms and other market participants from several African countries. Ideas on how to grow Africa’s capital markets will be discussed. editors invite you to read more:

Trading Ahead: Dark Pool Operator ITG Gives Itself Best Ex and Gets $20mil Fine

According to the blog, MarketsMuse reports that “dark pool” operator ITG and its agency-only, best-ex, ‘conflict free’ brokerdealer affiliate AlterNet Securities appear to have been providing themselves with best-ex by capturing order information from ITG institutional customers and for that, they will pay  a record SEC fine of $20.3 million to settle charges that they operated a secret trading desk, the U.S. Securities and Exchange commission announced this week.

As described the SEC — and, unusually, admitted to by ITG ( ITG, -4.29% ) — there were two main charges — that the company operated a proprietary trading desk when it claimed to be “agency only,” and that it then used the confidential trading information of its dark-pool subscribers without disclosing that.

The regulator “found that despite telling the public that it was an “agency-only” broker whose interests don’t conflict with its customers, ITG operated an undisclosed proprietary trading desk known as “Project Omega” for more than a year.”

On Monday, ITG CEO Bob Grasser stepped down to be replaced by E*trade veteran Jarrett Lilien in the wake of the scandal and news of the SEC’s proposed fine. ITG General Counsel Mats Goebels also resigned, according to news reports.

An SEC press statement added, “[while] ITG claimed to protect the confidentiality of its dark pool subscribers’ trading information, during an eight-month period Project Omega accessed live feeds of order and execution information of its subscribers and used it to implement high-frequency algorithmic trading strategies (aka “HFT”), including one in which it traded against subscribers in ITG’s dark pool called POSIT.” provides a global database of brokerdealers operating in more than three dozen countries throughout the free world. – See more at:

Unlike previous SEC settlements where the accused pays a fine and does not admit any guilt, ITG admitted wrongdoing. Further, it will “pay disgorgement of $2,081,034 (the total proprietary revenues generated by Project Omega) plus prejudgment interest of $256,532 and a penalty of $18 million that is the SEC’s largest to date against an alternative trading system,” according to the SEC. 

For the full story from, please click here


Up at BATS: Another Edge; EDGX Options Exchange Approved

MarketsMuse Strike Price section spots news that BATS Global has received approval from the Securities and Exchange Commission to open its second options trading venue, EDGX Options. Launch of the EDGX Options system is tentatively set for Monday, November 2, BATS said.

The actual SEC Approval Order from the SEC can be found here.

As reported by Traders Magazine, EDGX Options will be based on a customer priority/pro rata allocation model and is designed to complement its BZX Options market, the exchange operator’s first U.S. options market which had a 10.8% market share in July, and one that is a “pure” price-time priority market. The launch of EDGX Options will enable BATS to compete for a new segment of order flow that does not trade on the price-time markets that BATS currently operates.

“We are pleased to receive approval from the SEC to launch EDGX Options and we are looking forward to making our mark in a new segment of the options market,” said Bryan Harkins, executive vice president and head of U.S. Markets at BATS. “Two-thirds of U.S. options market volume is executed on exchanges with a pro rata model and we believe we can help make markets better for participants in this segment of the market through our innovative technology, operating efficiency, market-leading pricing, and first-class customer service.”

Attention Wall Street BlockHeads: Get Your Bitcoins Here

MarketsMuse fintech update is a “bid on” to prior Wall Street bitcoin initiative coverage, and following is courtesy of excerpt from 4 Aug story by Bloomberg LP reporter Andrew Leising, ” Wall Street, Meet Block 368396, the Future of Finance.”

Justin Brownhill, SenaHill
Justin Brownhill, SenaHill

When Justin Brownhill wants to check up on one of his latest investments through fintech merchant bank SenaHill Partners LP, he only needs to check the ledger unpinning bitcoin. The address: block 368396.

That’s the new digital home for the equity stake his firm made in Symbiont, a startup using bitcoin’s underlying blockchain software to make it quicker and easier to prove ownership of assets or transfer them between buyers and sellers.

Putting its money where its mouth is, Symbiont on Tuesday morning digitized and published several of its equity investments to the blockchain, which drives the bitcoin digital currency. That means the stakes will forever be part of that public record, allowing dividend payments or stock-option conversions to happen automatically.

“I woke up this morning and thought, ‘This is a historic moment,’” Brownhill, a managing partner at New York-based SenaHill, said in an interview after the Symbiont presentation on Tuesday. The merchant bank has investments in over a dozen other private companies. “Our job now is to go and espouse the benefits to all our portfolio companies,” he said.

Wall Street is becoming enamored with the potentially transformational way blockchain could overhaul how derivatives, bonds, loans and other asset classes work, dramatically simplifying the process of tracking ownership and accelerating the transfer of assets from one person to another.

Smart Securities

Symbiont’s innovation is creating what it calls smart securities. The company is now practicing what it preaches: its founders’ stakes as well as shares and options granted to employees have been converted into encrypted code that lives in the bitcoin blockchain — the same ledger where any purchases and sales of the digital currency are recorded. Symbiont customers can do likewise to track changes in ownership interests.

“Today is the day crypto joins Wall Street,” Symbiont Chief Executive Officer Mark Smith said to the room full of investors, bankers and reporters in New York. Representatives of JPMorgan Chase & Co., Morgan Stanley and other financial institutions were among the audience members.

Symbiont’s not alone in trying to bring the blockchain to Wall Street. Other firms investigating finance-related uses of blockchain include Digital Asset Holdings LLC, headed by former JPMorgan Chase & Co. banker Blythe Masters; Nasdaq OMX Group Inc.; Ripple Labs; and the New York Stock Exchange.

In June, Symbiont raised $1.25 million from a group of investors including former NYSE chief Duncan Niederauer; former Citadel LLC executive Matt Andresen; two co-founders of high-frequency trading firm Getco LLC, Dan Tierney and Stephen Schuler; and SenaHill.

For the full story from Bloomberg LP, please click here

News Alert: SEC Set To Hit Pimco With Wells Notice in Probe of Bond ETF

Bond giant Pacific Investment Management Co. aka Pimco said Monday that it received a Wells Notice from the SEC and the firm could be sued by the country’s top securities regulator over how it valued assets in ETF $BOND, one of its most popular exchange-traded bond funds aimed at small investors.

MarketsMuse Flash News courtesy of WSJ; photo image courtesy of Bloomberg LP.

The Pimco Total Return ETF, previously managed by star investor Bill Gross, has been under investigation by the Securities and Exchange Commission for at least a year for artificially boosting returns, The Wall Street Journal has reported.

Pimco disclosed Monday that it received a so-called Wells notice from the SEC, an indication that the agency intends to file a civil enforcement action against the firm related to its investigation. The notice isn’t a formal allegation of wrongdoing and it doesn’t mean the agency has found that any laws were violated.

The original story from WSJ is available via this link

Global Macro Think Tank Rate Hike Hedge: A Rareview Special

Within the context of continuous guessing as to the outlook for a rate hike, and how to hedge fixed income portfolios accordingly, getting a strong fix on fixed income strategies has proven to be a challenge for a vast majority of professional investors during the past 24-26 months, many of whom have replaced high-priced wall hangings with dart boards.  Many other managers prefer to simply hum “Lower for Longer” to themselves. For global macro-focused fund managers, MarketsMuse spotlights a refreshing update from Rareview Macro LLC, the global macro think tank and publisher of professional newsletter “Sight Beyond Sight.”  Below please find opening excerpt from today’s edition

Neil Azous, Rareview Macro
Neil Azous, Rareview Macro

We are pleased to present our new portfolio construction, including four new trade ideas and a tail risk hedge that make up our core fixed income strategy. As is customary, each one includes our standard trade matrix with a pre-defined game plan for managing gains and losses.

For those that regularly traffic in fixed income, we look forward to any feedback you may have and a spirited debate on our ideas. We are confident they are sufficiently robust to survive some criticism.  For those not in fixed income, please feel free to share this internally with your colleagues who are.

  • TRADE 1 – Gradual/Variable pace of rate hikes
  • TRADE 2 – Leverage on Gradual/Variable pace of rate hikes
  • TRADE 3 – Targeted field bet on no rate hikes in 2015, recession book overlay
  • TRADE 4 – “Uncertainty” Risk Premium
  • TRADE 5 – Choke Yourself Tail Hedge


  • Thematic view, not tied to day-to-day movements in the long bond
  • Multiple sources of return attribution
  • High return on capital: Low option premium outlay, high leverage
  • High risk/reward: Lose 1.5% (realistic) to 3% (absolute) of the NAV to make 6% to 8%
  • Both quantitative and qualitative risks clearly expressed

Above is the teaser, those interested in drilling down into the above, today’s edition of Sight Beyond Sight is available by clicking this link.