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’Awaiting the MBS settlement fail fee
It’s been a while since FT Alphaville looked at settlement fails, but the following chart from RBC Capital Markets did catch our eye this week:
As RBC notes, there’s a new settlement failure fee coming into force in the US for MBS securities on February 1,
The S&P 500 ETF that’s a little bit zut alors, sacrebleu!
Back in October, iShares, the world’s leading exchange traded fund provider, decided to set an important transparency example for the ETF industry. The ETF provider began providing the market with details of its securities lending operations.
The ETF wash rule
FT.com reporter Jason Abbruzzese submits this guest post for FT Alphaville.
They say nothing in life is certain apart from death and taxes. But, as it turns out, if you’re trading exchange traded funds the latter is becoming increasingly more questionable.
The US Treasury investment that’s a bit bunga bunga
As we all know by now, providers of swap-backed ETFs have no obligation to collateralise funds with anything resembling the indices being tracked.
It’s all okay, because the collateral is marked-to-market every day,
How ‘Delta One’ really works
One thing we’ve learnt about Delta One is that it’s head-scratchingly, mind-bogglingly tricky to explain.
And exactly how the division makes money, outside of the fees it charges investors is even harder to work out.
The 15:00, 15:50 and 15:59 effect
Anyone following the markets will know that end-of-day volatility has been a problem since at least the 2008 crisis.
Despite that, it’s only in the last month that mainstream pundits have begun to look more closely at the issue,
The power of the dark inventory
FT Alphaville is reading Robert Harris’ The Fear Index at the moment, and would like to take this opportunity to recommend it as required reading for anyone who enjoys a good Jason Bourne style adventure,
A ’5x Inverse Eurozone Volatility ETN’ to save the Eurozone?
Has the answer to the eurozone problem been staring us in the face all this time? Could we equitise the EFSF and float the stock to investors so as to raise funds, rather than relying on bond insurance?
FT Alphaville would like you to consider the following offering*:
Are ETFs responsible for short-covering rallies?
In a Ponzi scheme, investors get duped into thinking their money has been invested in a profit-generating investment, when in reality their investment doesn’t actually exist.
Rather than being invested,
More to the ETF volatility debate than meets the eye
On Wednesday, the US senate will hold a subcommittee hearing on exchange traded funds and their impact on market structure.
Three key questions the senators will be asking in the opinion of Nicholas Colas,
How China’s currency system is like a giant ETF
As FT Alphaville has written before, China effectively manages four different price paths for its currency, the renminbi.
Critical for its future flexibility, however, is the exchange between the so-called offshore CNH and the onshore CNY market.
ETF phantom liquidity
What’s the difference between ETFs and derivatives?
In our opinion, one can skew market fundamentals by messing with underlying assets, while the other one can’t.
Let us explain using an analogy.
Volcker’s ‘Delta one’ loophole
Last week, Bloomberg provided more details of what’s to be expected from the upcoming Volcker rule.
The headline focused on the fact that all bank divisions would be subject to restrictions that would limit their ability to take advantage of short-term price movements in securities and derivatives markets for proprietary gain (or loss,
Another one for the ETF apologists
There’s nothing like a trading scandal and regulator attention focused on a subject once defended to the hilt to encourage a little reflection.
Here’s a nice example.
On the week that the UBS trading scandal broke out,
Leveraged ETFs: not for retail investors
FT.com reporter Jason Abbruzzese submits this guest post for FT Alphaville.
These things always seem to start with the best intentions.
Leveraged ETFs are becoming an industry whipping boy,
Europe’s fragmented ETF settlement system
A fundamental challenge when trying to understand what’s going on in the world of exchange traded funds is that no generalisations can be made.
Not only is every ETF structured differently — it can depend on the asset classes it tracks or which provider it’s issued by — there are also major differences related to the markets they trade in.
The curse of Delta one strikes UBS
This is a snapshot of the Linkedin page of UBS equity trader Kweku Adoboli, the man the FT understands was arrested in connection to the €2bn unauthorised UBS trade, as seen through FT Alphaville reporter Izabella Kaminska’s Linkedin profile:
Why gold forward rate inversion is important
Here’s a crazy situation to consider.
The gold lease rate (which can also be understood as gold Libor, the gold interest rate or the cost of shorting gold) is becoming increasingly negative at the short end.
More than 2.8m tonnes of hidden copper stocks
The debate over how much copper is being stored ‘off market’ in private inventories — not part of the LME inventory system — has been going on for a while.
The general position taken by investment bank analysts is that supply is tight.
BofA’s Merrill Lynch ETF
Warren Buffett’s Bank of America warrants are perilously close to out-of-the-money territory on Friday.
Shares in everyone’s favourite lawsuit piñata were trading at $7.22 (down 8.72 per cent) at pixel time.
When US Treasuries diverge from Italian bonds… [Updated]
Attention algobots, headline traders and French regulators.
In this post we are going to direct readers to some publicly available information about Lyxor’s (Societe Generale’s asset management arm) fixed income ETFs.
A year in financial instability
It may have escaped your attention but on Tuesday afternoon the Financial Stability Oversight Council (FSOC) published its first annual report into the state of the US financial system. Click below for 160 pages of pdf fun:
Settlement failure financing, ETF edition
FT Alphaville has referred in previous posts to the emerging global settlement failure issue. We’d now like to address the curious case of settlement fail patterns across the repo universe.
As we have already noted,
ETF arbitrage, Chinese trust edition
For those who still question the notion that ETFs “manufacture arbitrage” for anyone smart enough or well positioned enough to exploit the opportunity, we bring you the latest example of ETF arbitrage in action,
If you pay peanuts for ETFs, you get…
We had always heard stories about how profitable ETFs were for banks.
For example, people had told us that official management fees were clearly a red herring. By and large, the money was being made in the background,
European money market funds are hemorrhaging
Here’s an interesting chart from Société Générale compiled using data from EPFR Global.
It shows recent flows in and out of European money-market funds.
As can be seen, they’re seemingly hemorrhaging once again:
The high-yield exodus, charted
From Data Explorers – a chart to show how shares on loan in iShares’ iBoxx high-yield corporate bond ETF have basically trebled since June 10:
More coverage over here…
The BoE outs Europe’s synthetic ETF exposure
There was a sprinkling of ETF talk in the Bank of England’s latest Financial Stability Report out on Friday — much of it warning about synthetic products, echoing concerns flagged by other regulators this year and by the Bank itself in 2010.
Behold, the high-yield exodus
Uh oh. This is worrying.
From Standard Chartered’s latest credit research report on Friday:
Investors continue to desert HY bond funds in droves as outflows accelerate.
Meanwhile, the WSJ reports: