ISDA Announces Market Agreed Coupon Contract for OTC Interest Rate Swaps
(Apr 2013)
The International Swaps and Derivatives Association (ISDA) just announced the publication of a standardized form for over-the-counter (OTC) interest rate swaps called the Market Agreed Coupon (MAC) contract. The contract attempts to standardize the offering of interest rate swaps in the OTC market by specifying available tenors (1, 2, 3, 5, 7, 10, 15, 20 and 30 years), coupon increments (25 basis points), effective dates (IMM dates) and currencies (USD, EUR, GBP, JPY, CAD and AUD).
The MAC...
Are ETF Flows Costly to ETF Investors?
(Apr 2013)
Exchange-traded funds (ETFs) are often lauded for their ability to efficiently create or redeem shares in response to changes in demand for the fund (known as fund flows). However, new research suggests that some ETFs that hold international securities may face transactional frictions that prevent them from tracking their benchmarks as well as other ETFs.
When there is an imbalance between supply and demand for an ETF, authorized participants (APs) create or redeem shares of the ETF to...
SEC Litigation Releases: Week in Review - April 19th, 2013
(Apr 2013)
SEC Files Subpoena Enforcement Action Against Andrew Farmer and Iridium Capital, Ltd. for Failure To Produce Documents in Market Manipulation Investigation
April 18, 2013, (Litigation Release No. 22680)
Last week, the SEC filed a subpoena enforcement action against Andrew Farmer and Iridium Capital, Ltd. "According to the filing, the SEC is investigating possible market manipulation in connection with transactions in the securities of Chimera Energy Corporation." Subpoenas were issued last...
Taking the Teeth out of the STOCK Act
(Apr 2013)
NPR reported earlier this week that Congress has quietly overhauled important provisions of the STOCK Act . For those that don't know, the STOCK ("Stop Trading on Congressional Knowledge") Act was signed into law in April 2012 and sought to prevent "Members of Congress and employees of Congress from using nonpublic information derived from their official positions for personal benefit, and for other purposes."
The STOCK Act was supposed to prevent Members and Congressional staff from trading...
FINRA Fines Merrill Lynch for Failing to Provide Best Execution to Customers
(Apr 2013)
FINRA announced yesterday that it has fined Merrill Lynch more than one million dollars "for failing to provide best execution in certain customer transactions involving non-convertible preferred securities executed on one of its proprietary order management systems (ML BondMarket)" as well as inadequate supervision.
FINRA's Department of Market Regulation found what amounts to a systematic issue in the ML BondMarket software that prevented customer orders from being evaluated at the most...
New Study Comparing Indexed and Actively Managed Funds
(Apr 2013)
NerdWallet, a San Francisco based personal investing site, has performed a historical study of the returns on almost 8,000 mutual funds and ETFs over a ten year period and found that passive indexed funds tend to outperform actively managed funds on average. In fact, they found that only 24% of actively managed funds outperformed the average return of the indexed funds. These results are consistent with the annual SPIVA Scorecard produced by S&P Dow Jones Indices, which found in both 2012...
Major Tenants-in-Common Sponsor Charged with Fraud
(Apr 2013)
Four former executives of DBSI, one of the largest sponsors of tenants-in-common (TIC) interests, have been indicted on 83 counts of securities fraud, wire fraud, mail fraud, and interstate transportation of stolen property. The indictment is seeking approximately $169 million in forfeiture of properties and assets, alleging that the executives misrepresented the financial condition of DBSI to potential investors. The executives named wereformer president Douglas Swenson, general counsel...
SEC Litigation Releases: Week in Review - April 12th, 2013
(Apr 2013)
Securities and Exchange Commission v. Glenn Hoppes, United States Energy Corp., TN-KY Development Fund LP, TN-KY Development Fund II LP and TN-KY Development Fund III LP
April 8, 2013, (Litigation Release No. 22669)
According to the complaint (opens to PDF), Glenn Hoppes and four companies he controls ("United States Energy Corp., TN-KY Development Fund LP, TN-KY Development Fund II LP, and TN-KY Development Fund III LP") fraudulently offered "unregistered investments in oil drilling projects"...
Credit Spread Futures and the Futurization of CDS
(Apr 2013)
Yesterday S&P Dow Jones Indices announced the launch of three credit spread indices based upon constituents of the S&P 500. The indices are part of a suite of indices that "are designed to track the credit default swap market for global corporate credits, including those in distinct Global Industry Classification Standard (GICS®) sectors and sub-industries".*
S&P Dow Jones licensed the indices to the electronic exchange trueEX-- "the world's first CFTC-designated, Dodd-Frank compliant...
