Maple Bonds are wonderful things! Portfolios can be diversified and, given current conditions, institutional investors can take advantage of some of the greatly elevated yields on US Financials without taking on currency risk.
This post, however, is due to a paragraph in an IIAC review of the Maple market:
Costs still need to come down
Having to possibly deal with legislation and regulation in 13 different jurisdictions can dissuade distribution in some provinces and territories and disadvantage investors. Regulatory fees range from $0 in Prince Edward Island to flat fees of up to $500 in Ontario to fees of three basis points of face value in British Columbia. For example, $100 million in Maple bonds distributed to B.C. residents adds $30,000 to all-in costs; distribution of $100 million to Quebec or Alberta investors adds a further $25,000 per province to issuer expenses for little or no work by the regulators. Market-watchers are concerned that the differences in registration fees could distort efficient distribution of the securities or – worse – make it uneconomical for issuers to issue in parts of Canada at all.
The IIAC has written to the Canadian Securities Administrators (CSA) asking them to extend the passport framework as part of Passport 2 to exempt market instruments, including Maple bonds. For exempt issuances, the IIAC asked the CSA to allow a simple single form filing with a lead regulator and payment of a single low flat, rather than ad valorem, fee to promote national distribution. This would also help CSA members meet their common goal of fostering fair, efficient and transparent capital markets for investors.
What would be really nice would be if the materials relevant to each issue were centrally published via a SEDAR-like facility. There is, for example, a Lehman Brothers issue in which I am interested, but the lead manager is of the view that showing the offering documents to anybody other than a primary purchaser is illegal, since it’s a private placement. The details are on Bloomberg, right? And due-diligence consists of looking at Bloomberg, right? Idiots.