Exchange Traded Funds and Securities Lending

What about the liquidity of these investment vehicles? In normal operation, market makers are constantly present to disseminate buyer and seller and act as counterparty investors. Their presence ensures the liquidity of the ETF, even if it is built on the underlying assets or not illiquid. This is where we must bear in mind another practice widespread market: securities lending. Securities lending are at two levels in the world of ETFs. First, the fund issuer may be required to pay the securities in the portfolio to improve profitability. This additional income can be used to reduce the tracking error, or simply return the funds. In this case it should be distributed to the investor again. Second, ETFs are exchange-traded, investors can sell short.


This possibility is heavily used by hedge funds because ETFs can speculate down on an entire index, avoiding the hassle of selling each individual underlying security. The speculator must borrow the security sold short during the holding period of the short position. On the stock market, the stock of available titles is limited, hence a strong demand in the bond market makes way more expensive to borrow, which discourages speculators. It is not the same on the ETF market and they can be created on demand, which allows borrowing amount and so building significant short positions.

This leads to a rather unlikely situation first, where some of the ETF amount of short positions is several times the number of shares actually outstanding! Many holders of ETF therefore hold shares actually "ghosts”, which were sold to them by a short seller, the latter saying that the shares can be created anyway when the time comes. If sellers orders flock to the ETF arbitrage trading seen above, which we have seen, are fully automated trigger.

Specialized intermediaries massive demand the return of the underlying securities of the issuer. But the issuer may either not hold at all, or have lent. He will not be able to deliver immediately, or not being able to deliver at all. However, there are provisions limiting the daily volume of refunds on the money, especially if short positions identified above a certain threshold.

In addition, an “Authorized Participant" must prove , when requesting a refund on the one hand , that it is "real" and not the result of a securities loan at any level of the chain. If such clauses may allow the fund to survive individually in a debacle, they are unlikely to calm the markets. Indeed, if investors are denied the ability to obtain repayment of the shares that they were sold as completely safe and liquid , it is more likely that the panic spreads to all ETF , then why not the underlying assets.

Exchange Traded Funds may be the next bubble! -1

Exchange Traded Funds currently experiencing rapid development in the United States, where they constitute more than half of the daily trading volume in the equity markets. The expansion of these instruments is less visible for the moment in Europe, because in U.S. where half of the market is held by individual investors where as in Atlantic the investors are mainly institutional investors are present in this class asset. Just may be feared that the development of the ETF market is currently powering the next financial meltdown? Recall that the ETF are the basis of funds, that is to say, collective investment vehicles such as UCITS, whose purpose is to replicate the performance of a market index, upward or downward, and whose shares are traded on the stock exchange just like stocks. They offer investors the opportunity to take a position, with management costs and tax costs reduced on a market index, including inaccessible or illiquid markets such as emerging markets, small caps, etc.

There are ETFs on all sectors of the market, and if a little unlikely sector is not yet covered today and in tomorrow it will emerge as new ETF. This is happening almost daily. We will soon invest in the segment of companies specializing in the balloon or tie pins, or companies based in anywhere. If there is no index representing the performance of the sector concerned, no problem, it creates the index and the ETF in stride. The phenomenon went beyond the stock market and extends to all asset classes, bonds (ETN Exchange Traded Notes), commodities (ETC Exchange Traded Commodities), futures, currencies (ETV Exchange Traded Vehicle) etc. The set is grouped under the term FTE, Exchange Traded Products. In short it is a beautiful alphabet soup simmering and is reminiscent of a previous recipe, the securitization (remember the ABS, MBS, RMBS, CMBS, CDO, etc), which had overflowed with some damage collateral for the past 5 years from now.

On the road there is nothing simpler than ETF investor buys an index, and as follows, upward or downward, the performance of the index being tracked. But precisely how this replication is obtained? There are two main methods: physical replication and synthetic replication. With physical replication, the issuer of the ETF actually holds the portfolio securities of the index being tracked. It calculates and communicates information two times: first, the net asset value equal to the valuation at market prices of assets held , divided by the number of shares issued and secondly the market price of the share , which comes from the comparison of buying and selling interests in exchange just like a stock. Both figures; net asset value and share price must be the same to a small margin near.

What will happen in case of divergence? These are specialized intermediaries (“authorized participants "), mandated by the fund issuer, which come into action. If the market value of the share exceeds the net asset value then the ETF is moving faster than the rise in the index, they will buy a basket of stocks in the index. This then delivers their new units; they can sell on the market, realizing a capital gain. Conversely, if the market price is below the net asset value of the fund, they will buy ETFs on the market and present it to again, which reimburses them by delivering the underlying assets. They can then sell these securities on the market and making a profit. These so-called arbitrage transactions are fully automated and have the effect of “realign " asset prices that were uncorrelated. It is the development of algorithmic trading has led to the development of ETFs.

 In case of synthetic replication, the issuer does not directly hold securities of the index, but other assets. It will then go to a specialized intermediary , typically a bank, to negotiate with him a "total return swap " the bank pays the issuer of the ETF 's performance index, while it reverse the performance of assets held in the portfolio. Physical replication is mainly practiced in the United States, where regulation severely limits the use of derivatives by collective investment funds. In Europe, ETFs are equally divided between the two modes of replication. We are mainly interested here in the physical replication, in which today we have a little more perspective. All this cooking takes place behind the scenes between specialized players (asset managers, hedge funds, brokers and banks financing and investment), thus preserving the image of simplicity and transparency between the final investor.

This should not, however, be fooled: many intermediaries are involved in constantly, and we must be aware that they do not by pure philanthropy, but because they have an interest. There was a second there the resemblance securitization market: the first beneficiaries of financial innovation are not the ultimate investors, but those who create and distribute these innovative instruments. That said, proponents point out that these ETF products are primarily funds, and so most of them are within the regulatory framework for the funds. These regulations, both in Europe in the United States, are very demanding especially in terms of transparency to investors . It is up to them to read the prospectus in which he will find, in principle, all the necessary information.

The Euro strengthened against the Dollar !

The Euro strengthened against the dollar late Friday trading in New York , in a fearful market increasingly a budget impasse in the United States and attentive to the speech of several officials of the U.S. central bank. The euro bought 1.3519 dollars against 1.3485 dollars on Thursday at the same time. The European single currency fell against the Japanese currency to 132.88 yen against 133.51 yen yesterday. The dollar also fell against the Japanese currency to 98.24 yen against 99.00 yen on Thursday. Before a crucial deadline in the United States to reach an agreement on the budget of the country, “the clock is ticking and investors get nervous," commented an Economist. " They accelerate their sales dollars , fearing more a closure ( non-essential ) government affects the quality of U.S. assets and hinders growth," the expert added , citing expectations that a partial closure utilities for two weeks would reduce economic growth " 0.3 to 0.5% ." Elected officials must agree to the Congress to ensure continuity of government services on 1 October. A text passed in the Senate Friday is still pressed by the House of Representatives before returning to the Senate for a final vote. You always hope that a last-minute agreement is possible, but this prospect darkens every moment while Congress keeps the dollar and the economy in hostage.

In addition, the market is still uncertain as to when that will choose the Fed to begin to slow its purchases of assets ($ 85 billion per month). It will be based largely on the level of unemployment to make such a decision, which could happen in October or December. Investors therefore waiting for the next monthly report on employment and unemployment situation in the United States, a major indicator to gauge the strength of the recovery in the world's largest economy which is scheduled for publication on October 4. Uncertainties on Friday were reinforced by new interventions leaders and voting members of the Fed, which accentuated the pressure on the dollar. Faced with such remarks, bond rates declined significantly during the session and bringing with them the greenback.

The current Fed policy has the effect of keeping rates low and dilutes the value of the dollar. Traders also scrutinized Italy where resurfaced fears of a new political crisis and trying to take face saving measures. Around 2100 GMT, the British pound rose against the euro at 83.76 pence per euro and climbed against the dollar at 1.6137 dollar per pound. The Swiss franc rose against the euro at 1.2244 Swiss francs to the euro and against the dollar to 0.9052 Swiss francs to the dollar. The ounce of gold finished at $ 1,321.50 at auction Thursday night against 1333 dollars. The Chinese currency finished at 6.1186 Yuan against one dollar for 6.1206 Yuan yesterday.

Understanding Realtor and Real Estate Agent Reviews!

Did you know that for the typical family the most important financial transaction they will make in their lives is buying or selling a home? Amazingly, when making this momentous decision they often do not seem to have any criteria for choosing the real estate agent or realtor who will handle this life changing transaction.

A smooth, trouble-free experience and positive outcome is desired by buyers and sellers. Finding the perfect house in their desired area at the right price and in the least amount of time describes what buyers want. A quick sale close to the listed price is what sellers want.

Key for a positive outcome for both buyers and sellers hinges upon choosing the right realtor or real estate agent.

HOW ONLINE REAL ESTATE AGENT AND REALTOR REVIEWS CAN INSURE A POSITIVE OUTCOME

Reviewing products, services, and professional performances online allows buyers and sellers to share their experiences in many transactions. Sharing both positive and negative experiences is tremendously helpful to people without experience. It is a painless way to make good choices.

ARE ALL WEB REVIEWS RELIABLE AND OF GOOD QUALITY

Unfortunately, online reviews can fail to be reliable. Some posts are actually false reviews. A very positive review can be posted by someone who benefits from that review: not a genuine buyer or seller. Secretly leaving a wonderful review for one's own services or company often happens. And, of course, false and malicious reviews can be left to the detriment of a rival realtor or agent.

WHAT METHODS CAN BE USED TO JUDGE REAL OR FALSE REVIEWS?

A clue is a completely glowing review minus a single negative or neutral comment. Hardly any real estate transaction with a realtor is totally positive. A real review notes one or two things that might have been done better.

A totally negative review posted by a rival company deters buyers going to a competitor. Again, this is a red flag that this review is not genuine.

A real review is honest and forthright, listing both positive and negative results. Actually, the review for the most part could be positive, but note some things that might have been better done.

An objective and helpful review is done by professional reviewers similar to one that might be found at a site like.

Using online reviews can be guides to good choices and decisions when viewed realistically.

Crowdfunding a best alternative to Banks?

The crowd funding begins to touch the world of Start -Up, as an alternative to banks and business funders. Crowd funding is in between barter and solidarity loan capitalism of yesteryear, crowd funding often have much fun and attractions but it is sometimes risky. Many projects that have or will emerge in part through crowd funding (literally financing by the crowd), also called crowd funding. The phenomenon is not new: In 1958, John Cassavetes was able to finance his first film “Shadows “with a call for funds to public through radio. This phenomenon is becoming increasingly important. And now there are more than thirty sites are assisting general public as the crowd funding investors. Few of them are Ulule , MyMajorCompany , Sandawe , KissKissBankBank , Loan Union HelloMerci , Babyloan SmartAngels , Wiseed , Anaxago etc.

 The crowd funding market raised already worth $ 2.5 billion in the United States alone. There are three types of crowd funding. First, there is the gift against gift, nothing but a barter system. Then there is the system of loans or micro-credit. Some are paid, others do not, and that is like solidarity loan. Finally there is the financing of a business project in exchange for shares. The gift system against donation is very common in the world of arts. Projects may be small or substantial. Micro-credit is also very concerned and developed projects in US and abroad, mostly in trade, agriculture etc. According to Ricordeau Vincent, one of the founders of Kiss Kiss BankBank , "the motivation is to give birth to a project without any other return on investment a return emotional . People seek social link, a contact based on sharing, empathy, and trust. It is completely selfless unlike a financial return on investment. "

 For some companies, it is an alternative to banks and business lenders. This is particularly the case of start-ups, with little equity in start-up phase. However, crowd funding sites do not replace the banks. They do not lend money and they do not handle client funds. They are in an intermediate step of advice and not through management. The client chooses his investment and invests himself live in society. The sites just forgive a direct link between investors and entrepreneurs. This is the online community that validates whether the project should be born or not. This is not a window that decides to grant money or not. The risk is real and greater than the stock markets which has the advantage of being more liquid and especially give a real-time indication of the value of its assets.

Capital loss may be total and the second risk is the liquidity, This is an investment you can make for an unlimited period than what you anticipated. So do not invest money that you think you need three to five years. But there is another side: a significant potential gain, as we arrive shortly after the creation of the company. And it's worth it to invest in companies earlier. Here the risk and the reward are fairly standard. Regarding the gift donation against the financial risk is limited because the average financial contribution of users is around 50 Euros. If successful, the trust is garnered monumental. The question of the output is still crucial because all companies are not intended to go on an exchange.

If ramping up its activity, the company may be acquired by a competitor where leaders may choose to redeem the shares of the minority. And the price and the valuation is a matter of negotiation between the parties. Often these issues are anticipated in the shareholders' agreements. Early outputs can also be provided, but the recommended investment period is about 3 to 5 years, to let the company time to create value. In the end, crowd funding today fills a void in the financial needs. It allows artists to project promoters, merchants to support their project to start. Internet also allows them to reach a larger number of donors, lenders or investors, but is by no means a guarantee of success. Crowd funding is still in its early stage. Hence the Crowd funding is a social network linking young companies seeking skills, people willing to integrate a project as a partner or as freelancer and helping each other by joining hands together.