Latest: World Bank expands SOFR-linked market with US$1.5bn trade

The five-year structure, which matures on 18 September 2025 and has an interest rate of compounded SOFR +31 basis points, has attracted interest from more than 30 investors. These placed orders in excess of US$1.7 billion, according to the World Bank.

The order book was anchored by bank treasuries and asset managers. Joint lead managers for this transaction were BMO Capital Markets, RBC Capital Markets and Wells Fargo Securities.

‘We are very pleased to offer investors a liquid, SOFR Index-linked product from the World Bank - an issuer of the highest credit, that also enables them to achieve a positive social and development impact,” said Jingdong Hua (pictured), vice president and Treasurer, World Bank. “The continued development of robust alternatives to Libor helps strengthen the global financial system, and we are grateful for the increasing number of investors joining this growing market.’

HKEx hails first Hong Kong/Mainland ETF cross-listing

The first batch of exchange-traded funds (ETFs) in Hong Kong and Shenzhen under the Hong Kong-Mainland ETF cross-listing scheme is now available to investors, marking a new chapter in cross-border ETFs.

The two new ETFs listed today in Hong Kong - the CSOP Yinhua CSI 5G Communications Theme ETF and Hang Seng Harvest CSI 300 Index ETF - invest 90% or more of their total net asset value in an ETF approved by the China Securities Regulatory Commission and currently listed on the SZSE through the Renminbi Qualified Foreign Institutional Investor (RQFII) status. The ETFs have also been approved by the Securities and Futures Commission (SFC). 

HKEx and SZSE have also signed a memorandum of understanding to promote the ETF cross-listing scheme and strengthen the financial connections of the two markets.

Hong Kong’s exchange-traded product market, which include ETFs and leveraged and inverse products, has developed into one of the most diverse structured products markets in Asia.

Australian watchdog deploys product intervention order to impose CfD protections

The Australian Securities and Investments Commission (Asic) has made a product intervention order imposing conditions on the issue and distribution of contracts for difference (CfDs) to retail clients.

The order strengthens consumer protections by reducing CfD leverage available to retail clients and by targeting CfD product features and sales practices that amplify retail clients’ CfD losses.

From 29 March 2021, Asic’s product intervention order will restrict CfD leverage offered to retail clients to a maximum ratio of 30:1 for CfDs referencing an exchange rate for a major currency pair; 20:1 for CfDs referencing an exchange rate for a minor currency pair, gold or a major stock market index; 10:1 for CfDs referencing a commodity (other than gold) or a minor stock market index; 2:1 for CfDs referencing crypto-assets; and 5:1 for CfDs referencing shares or other assets.

The new guidelines also standardise CfD issuers’ margin close-out arrangements that act as a circuit breaker to close-out one or more a retail client’s CfD positions before all or most of the client’s investment is lost, and will protect against negative account balances by limiting a retail client’s CfD losses to the funds in their CfD trading account.

In addition, the order prohibits giving or offering certain inducements to retail clients (for example, offering trading credits and rebates or ‘free’ gifts like iPads).

Asic also confirmed it will not require issuer-specific risk warnings or other disclosure-based conditions as originally proposed in its Product intervention: OTC binary options and CFDs consultation paper (CP 322).

According to the regulator, CfDs have resulted in significant detriment to retail clients. During the volatile five-week period in March and April 2020, Australian retail investors of a sample of 13 CfD issuers made a net loss of more than AUD774m. Previous reviews conducted by the regulator in 2017, 2019 and 2020 also found that most retail clients lose money trading CfDs.

EQM Indexes launches ‘pure junior’ gold index

EQM Indexes has launched the EQM Pure Junior Gold Miners Index (JRGOLD) targeted at investors looking for pure play exposure to global junior and exploratory gold mining stocks.

According to the firm, traditional investment approaches rely on market cap definitions and often include silver miners as well. The index provides improved pure play access to this important subset of the global gold mining industry by targeting metrics such as gold revenue percentage and production levels.

Investing in junior gold mining stocks not only gives investors exposure to the underlying commodity price of gold, but leverage to future exploration and operating potential, providing a diversified complement to the physical asset.

‘There is a strong case for gold exposure in the current market environment of zero to negative interest rates, heightened volatility and uncertainty, and the potential for future inflation,’ said EQM Indexes CEO and co-founder Jane Edmondson.

EQM Indexes, an index developer of disruptive investment themes for the investment industry, has more than US$2 billion in assets (as of 15/10/2020) including US$1.13 billion in passive ETF assets; and US$923 million in active ETF assets referencing ETF indexes as investment universes and/or product-specific benchmarks.

MSCI rolls out climate indices

MSCI has announced the launch of the MSCI Climate Paris Aligned Index Suite, a series of eight new indices built on MSCI’s existing suite of climate indexes.

The new series targets investors seeking to tackle climate change holistically by reducing both their transition and physical risks, identify green opportunities, and align their investment strategies with the 1.5-degree warming scenario, as targeted by the Paris Agreement.

Combining expertise and insight from MSCI’s Climate Risk Center, the indexes include climate data from MSCI’s Climate Value-at-Risk (Climate VaR) tool, scope 3 emissions data and green revenues. The new indices incorporate the Task Force on Climate-related Financial Disclosures recommendations and have been designed to exceed the minimum standards of the EU Paris Aligned Benchmark designation.

The MSCI Climate Paris Aligned Index Suite forms part of a suite of MSCI climate indexes available for various investor needs, including the MSCI Climate Indexes, MSCI Low Carbon Indexes and the MSCI World Ex-Fossil Fuel Indexes.