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Currency ETC Assets Rise $45mn in 2 Months and Trading Volumes Soar
as Investors Build Long US Dollar Positions and Turn Negative on Yen
18/01/10
- Assets rise over $45 million following successful launch on the LSE
- 74% of investors currently long USD, with USD strengthening 2.8% since mid November
- Short Japanese Yen (SJPY) the most popular trade, capturing 49% of assets
- The Canadian dollar (LCAD) holds highest net long positions
- Eight liquidity providers and four Multilateral Trading Facilities signed up to Currency ETCs, the most successful launch yet
London, 18/01/2010 - ETF Securities (ETFS), which launched the world’s largest and Europe’s first platform of Exchange Traded Currencies (Currency ETCs) in November 2009, has seen assets in the platform grow to $45 million after only two months of trading with weekly trading volumes rising over 400% over the period.
Currency ETCs which are Long USD and short G10 currencies have seen the most interest from investors, making up 74% of assets with USD strengthening 2.8% since the inception of the currency platform (as measured by the US Dollar Index, DXY). ETFS Short JPY Long USD (SJPY) has been the most popular trade, capturing 49% of assets, while the Canadian dollar held the most net long positions.
The platform has seen steady increasing turnover since the inception with trading volumes growing at over 150% per week. 75% of trading volumes have occurred in ETCs which are long USD and short G10 currencies, with ETFS Short AUD Long USD (SAD) and ETFS Short GBP Long USD (SGBP) each taking 21% share of trading volumes, followed by ETFS Short EUR Long USD (SEUR, 14%) and ETFS Short JPY Long USD (SJPY, 12%).
Martin Arnold, Senior Analyst, ETF Securities, commented:
“The return of investor risk appetite was a key theme in 2009 and signaled the beginning of a long period of structural weakness for the US Dollar. More volatile currencies like the Australian and New Zealand Dollars performed strongly. Sentiment began to reverse toward year end as investors became more wary about whether the strong price performance of risk assets in 2009 could be sustained. As a result, the beginning of 2010 has been characterised by a degree of caution. As a result, investors have looked to use short Currency ETCs like ETFS Short EUR Long USD (SEUR) and ETFS Short JPY Long USD (SJPY) to implement more cautious trading strategies”.
Since inception, Currency ETCs which were Long USD (except for Canadian Dollar) performed best as the USD strengthened. The table below shows the best performing currencies since inception of the Currency ETCs on 12 November 2009 and also the past 12 months. Over the last 12 months, long versions of the higher yielding G-10 currency indices were in the top five performers such as the Australian Dollar and New Zealand Dollar.
| MSFX Currency Indices since inception |
| Short EURO Index TR |
3.5% |
| Short Swedish Krona Index |
2.9% |
| Long Canadian Dollar Index TR |
1.9% |
| Short Sterling Index TR |
1.5% |
| Short Swiss Franc Index TR |
1.1% |
| MSFX Currency Indices over the past 12 months |
| Long Australian Dollar Index TR |
43.6% |
| Long New Zealand Dollar Index (TR) |
38.3% |
| Long Norwegian Krone Index (TR) |
27.3% |
| Long Swiss Franc Index TR |
21.0% |
| Long Swedish Krona Index TR |
17.0% |
Source: ETF Securities, Bloomberg, Returns are in USD to 15 January 2010 from 16 Janary 2009 (1yr)
The first 18 Currency ETCs were listed on the LSE on the 12th November and track MSFX Currency IndicesSM. Since inception, the Currency ETCs have rapidly generated interest with eight liquidity providers signing up and four Multilateral Trading Facilities (MTFs) to provide investors access to these new securities.
The 18 initial Currency ETCs provide long or short passive exposure to G10 currencies versus the US Dollar and include AUD, CAD, CHF, EUR, GBP, JPY, NOK, NZK and SEK. The ETCs also provide exposure to local interest rates in addition to FX movements. For example the implied interest rate incorporated into the MSFX Long Australian Dollar IndexSM averaged approximately 5% p.a. over the past five years.
Similar to Exchange Traded Funds (ETFs), ETCs are liquid, accessible and simple. ETCs can be created and redeemed on a continuous basis by market makers, matching the tremendous liquidity of the underlying foreign exchange markets but traded on a regulated exchange in the same way as an equity. The average daily turnover of the global FX market is about $3.2 trillion which compares to the average daily turnover of $450 billion for global equities, $48 billion for the New York Stock Exchange and $6 billion for the London Stock Exchange. Thus currencies are much more liquid than equities.
ETF Securities launched the Currency ETC platform due to investor demand for secure, transparent and liquid exchange traded products. Currency ETCs are fully backed* by eligible collateral to the value of at least 100% of the total value of all Currency ETCs outstanding which is held in a segregated custody account with BNY Mellon. The collateral is adjusted daily to ensure credit risk is minimised. Currency ETCs are backed by the same eligible collateral criteria as ETF Securities’ existing Commodity ETCs. With ETF Securities’ Commodity ETC assets having grown by approximately 150% in 2009 to over $16 billion and volumes having doubled to around $1 billion per week, it is clear that investors have widely accepted the ETC structure as a secure vehicle of choice for exposure to commodities. As a result, the ETC product structure has been replicated to include currencies.
For further information, please contact:
Helen Burden
Tel: +44 (0) 20 7448 4330
Email: helen.burden@etfsecurities.com
Conference Call:
Access the Global FX Market with Currency ETCs
Date: Tuesday 19th January 2009
Time: 11:00am and 3:00pm London Time
Speaker: Scott Thompson, Head of Sales, UK & Ireland, ETF Securities Ltd
This call will discuss:
- New Currency ETCs & MSFXSM Currency Indices
- Investment Case for Currencies
- Currencies as an Asset Class
- Low Correlation Provides Diversification Benefits
- Low Volatility Boosts Risk-Adjusted Returns
- Implement Strategic & Tactical Views with Currencies
- Liquidity Model & Pricing
To register your place today: www.etfsecurities.com/en/events/etfs_events_calls.asp
Notes to Editors:
ETF Securities is a provider of Exchange Traded Commodities (ETCs) and 3rd generation Exchange Traded Funds (ETFs). The management of ETF Securities pioneered the development of ETCs, with the world's first listing of an ETC, Gold Bullion Securities in Australia and London in 2003 and then the world's first entire ETC platform which was listed on the London Stock Exchange in September 2006.
The Exchange Traded Products (ETPs) provide investors with a wide variety of investment strategies, with ETPs offering resource equities, physical, long, forward, leveraged and short exposure to all commodity sectors and now G10 Currencies.
ETPs are simple to access as they are traded in five currencies (EUR, USD, GBP, AUD and JPY) and listed on nine major exchanges globally including the London Stock Exchange, the New York Stock Exchange, the Tokyo Stock Exchange, NYSE-Euronext Paris, NYSE-Euronext Amsterdam, Deutsche Börse, Borsa Italiana, the Australian Securities Exchange and the Irish Stock Exchange.
*Currency ETCs are fully collateralised. The total value of Currency ETCs outstanding is backed by between 100% and 110% of Eligible Collateral held in a segregated Custody Account with BNY Mellon. The value of the Currency ETCs and Eligible Collateral are marked to market daily so that at the end of the previous trading day, all Currency ETCs are fully backed to minimise counterparty risks.
To learn more about ETF Securities go to: www.etfsecurities.com
Disclaimer:
This press release does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities (together the "Securities") of ETFS Foreign Exchange Limited, ETFS Commodity Securities Limited, ETFS Metal Securities Limited or ETFS Oil Securities Limited or any shares (the "Shares") of ETFS Fund Company public limited company (the "Fund") or any other shares or securities, nor shall it or any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto. Any offer, invitation or solicitation shall be made solely by means of the relevant prospectus (plus any supplements thereto) in the case of the Securities or the prospectus together with the relevant sub-fund supplement in the case of the Shares (in each case the "Prospectus") and recipients of this advertisement who are considering a purchase of Securities or Shares following distribution of the Prospectus are reminded that any such purchase should be made solely on the basis of the information contained in such Prospectus. This advertisement does not constitute any recommendation regarding the Securities or the Shares. The communication of this press release is not being made by, and this press release has not been approved by, an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000 (the "FSMA"). Accordingly this press release is not being distributed to, and must not be passed on to, the general public in the United Kingdom. The communication of this press release or any other document issued in connection with the offer and sale of the Shares or Securities is only being made to and directed at those persons in the United Kingdom falling within the definition of Investment Professionals (as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), or high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order or any person to whom it may otherwise lawfully be made (all such persons together being referred to as "relevant persons"). The communication of this press release (or any other document issued in connection with the offer and sale of the Shares or Securities) must not be acted upon or relied upon by persons who are not relevant persons. The Fund is a collective investment scheme for the purposes of the FSMA and is a recognised scheme for the purposes of the FSMA. Persons distributing this press release must satisfy themselves that it is lawful to do so. All applicable provisions of the FSMA must be complied with in respect of anything done in relation to the Shares or Securities in, from or otherwise involving the United Kingdom. Collateralised currency securities are complex, structured products involving a significant degree of risk and are not suitable or appropriate for all types of investor. They are aimed at sophisticated, professional and institutional investors and any other person wishing to invest must seek appropriate financial, tax and other advice from independent financial advisors with appropriate regulatory authorisation and qualifications.
This is not an offer of securities for sale in the United States. The Shares and Securities have not been and will not be registered under the US Securities Act or any other applicable law of the United States. The Shares and Securities are being offered and sold only outside the United States to non-US persons in reliance on the exemption from registration provided by Regulation S of the US Securities Act. None of ETFS Foreign Exchange Limited, ETFS Commodity Securities Limited, ETFS Metal Securities Limited, ETFS Oil Securities Limited and ETFS Fund Company public limited company (each an "Issuer") has been or intends to become registered as an investment company under the United States Investment Company Act of 1940 (as amended) (the "Investment Company Act") and related rules. Neither the Shares nor the Securities or any beneficial interest therein may be reoffered, resold, pledged or otherwise transferred in the United States or to US persons. If an Issuer determines that any holder of shares is a US Person or any holder of Securities is a Prohibited US Person (being a US Person who is not a "qualified purchaser" as defined in the Investment Company Act), the Issuer may redeem the Shares or Securities (as the case may be) held by that Security Holder in accordance with the provisions described in the Prospectus. Neither the Shares nor the Securities may be purchased with plan assets of any "employee benefit plan" within the meaning of section 3(3) of the United States Employee Retirement Income Security Act of 1974, as amended ("ERISA"), any "plan" described in section 4975(e)(1) of the United States Internal Revenue Code of 1986, as amended (the "Code") or any entity whose underlying assets include "plan assets" of any of the foregoing by reason of an employee benefit plan's or other plan's investment in such entity, which employee benefit plan, plan or entity is subject to Title I of ERISA or section 4975 of the Code or any United States Federal, state, or local law or non-United States law that is substantially similar to the prohibited transaction provisions of section 406 of ERISA or section 4975 of the Code (any such employee benefit plan, plan or entity, a "Prohibited Benefit Plan Investor"). If the Issuer determines that any Security Holder is a Prohibited Benefit Plan Investor, the Issuer may redeem the Securities or Shares held by that person in accordance with the provisions described in the relevant Prospectus.
Index disclaimer: The Morgan Stanley Indices are the exclusive property of Morgan Stanley & Co. Incorporated (“Morgan Stanley”). Morgan Stanley and the Morgan Stanley index names are service mark(s) of Morgan Stanley or its affiliates and have been licensed for use for certain purposes by the Issuer and ETF Securities Limited. The financial securities referred to herein are not sponsored, endorsed, or promoted by Morgan Stanley, and Morgan Stanley bears no liability with respect to any such financial securities. The Prospectus contains a more detailed description of the limited relationship Morgan Stanley has with the Issuer and any related financial securities. No purchaser, seller or holder of this product, or any other person or entity, should use or refer to any Morgan Stanley trade name, trademark or service mark to sponsor, endorse, market or promote this product without first contacting Morgan Stanley to determine whether Morgan Stanley’s permission is required. Under no circumstances may any person or entity claim any affiliation with Morgan Stanley without the prior written permission of Morgan Stanley.
ETF Securities Limited, ETFS Foreign Exchange Limited, ETFS Commodity Securities Limited, ETFS Metal Securities Limited, ETFS Oil Securities Limited, and Gold Bullion Securities Limited are each regulated by the Jersey Financial Services Commission. ETFS Fund Company PLC is regulated by the Financial Regulator in Ireland.
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