July 4, 2012

It’s a black day for Canadian capital markets – the regulators have approved the bank-controlled monopoly on infrastructure:

Canada’s Competition Bureau said it won’t challenge the proposed C$3.73 billion ($3.68 billion) bid for the owner of the Toronto Stock Exchange by a group of Canadian financial institutions.

The bureau “does not, at this time, intend” to challenge the acquisition of TMX Group Inc (X), the agency said in a statement posted on its website.

The statement says:

Today, the OSC issued final recognition orders regarding the proposed transactions, following its own review. While the Bureau has an independent mandate to review mergers, the Bureau provided input and advice to the OSC for its consideration relating to the potential impact on competition that could result from the proposed transactions.

While the Bureau conducted its own review of the proposed transactions, the measures contained in the OSC’s final recognition orders materially change the regulatory environment sufficient to substantially mitigate the Bureau’s competition concerns. Accordingly, the Bureau is today issuing a No Action Letter (NAL) to Maple Group in respect to the proposed transactions.”

The Regulatory approval is conditional on there being more jobs for regulators:

Regarding complexity, the Commission has imposed terms and conditions that it feels are necessary in order for it to determine that it is in the public interest to make the orders. We acknowledge that the Commission will require an increase in capacity and capability to effectively manage the increased demands of oversight and the Commission undertakes to do so. To the extent that this increase in capacity and capability results in increased costs of oversight, our expectation is that these costs will be borne by Maple and its regulated affiliates, through the imposition of participation fees and activity fees, rather than by market participants more generally. Our intended enhanced oversight program is described in more detail below.

Due to Maple’s proposal to own the key market infrastructure entities in Canada, which could concentrate risk in Maple, and the significant amount of conflicts that could result, we will be instituting an enhanced oversight program for the Maple Group. This program will include:
  • Regular communication and interaction with board and management
  • Regular communication and interaction with relevant users committees
  • Periodic reporting of activities and development in businesses
  • Periodic oversight reviews
  • Prior approval of certain aspects of operations
  • Access to all information (both regulated and affiliated businesses )
  • External verification of certain information/processes/performance standards
  • Review of access to CDS by unaffiliated marketplaces and dealers
  • Periodic internal review of certain aspects of businesses as specified by the Commission
  • Recovery and resolution plans
  • Change in control approvals

In addition, both the Exchange Recognition Order and CDS Recognition Order specify additional reporting that must
be provided to the Commission. In relation to the additional reporting that must be provided under the Exchange
Recognition Order, we also note that this is in addition to the information filing requirements currently imposed on
recognized exchanges under National Instrument 21-101 Marketplace Operation.

But wait! Could it be possible that lalaLand comes to the rescue? Not for any good reason of course – simply because they don’t want Ontario to get more of the lolly than they do:

The British Columbia Securities Commission, late in the game, unveiled a list of demands that the so-called Maple Group of banks and investors is not happy with, sources said. The parties have been talking for weeks, but have yet to reach a deal.

B.C.’s commission regulates the TSX Venture exchange, home to thousands of small capitalization companies. The B.C. regulator wants at least a quarter of the members of the Maple board to have experience running small companies, and is also demanding that Maple commit to keeping senior jobs in Vancouver.

Also outstanding is approval from Alberta’s securities commission, which also regulates the Venture exchange.

Alberta’s decision is likely to hinge on the outcome of the B.C. talks.

Save us, westerners, save us!

UK politicians are making desperate efforts to whitewash their regulators:

Robert Diamond, who quit yesterday as chief executive officer of Barclays Plc (BARC), sought to blame other banks for misleading markets about their ability to borrow, and regulators for turning a blind eye.

Ordered to testify to British lawmakers after Barclays agreed to pay a record 290-million pound ($455 million) fine for rigging the London interbank offered rate, Diamond said he was “disappointed” regulators failed to act on repeated warnings from Barclays that competitors had lowballed their submissions. Legislators asked him why he took so long to uncover his own firm’s attempts to manipulate interest rates.

“This isn’t just Barclays,” Diamond, 60, told lawmakers at a three-hour hearing of Parliament’s Treasury Select Committee. “Throughout 2007 and 2008, no institution of the 16 banks reporting three-month dollar Libor was at the higher end more consistently than Barclays. Barclays was getting questions about why it was always high and we were saying, ‘We are high because we were reporting at where we were borrowing money.’”

Tucker has asked to defend himself against charges of sins of commission:

Bank of England Deputy Governor Paul Tucker signaled he wants to defend himself and give his version of what happened on a 2008 phone call with former Barclays Plc (BARC) chief Robert Diamond as the Libor scandal escalates.

Less than 90 minutes before Diamond’s appearance today at a hearing of U.K. Parliament’s Treasury Committee over attempted manipulation of the Libor rate, the central bank said Tucker wants to testify “as soon as possible.” He is “keen” to “clarify the position with regard to the events involving the Bank of England, including the telephone conversation with Bob Diamond on Oct. 29, 2008,” according to an e-mailed statement.

Tucker was drawn into the scandal after Barclays released a note of the 2008 call purporting to show that he hinted the bank could cut its Libor rates.

RIM is losing pricing power:

Research In Motion Ltd. (RIM), the BlackBerry maker whose stock has dropped 95 percent since 2008, is under pressure from mobile phone companies to reduce carrier fees that generate $4.09 billion in annual revenue.

RIM said it faces demands to cut the fees paid by customers such as AT&T Inc. after posting its first loss in a decade last week. The fees account for more than a third of revenue at RIM, which is racing to introduce BlackBerry 10 phones and engineer a turnaround.

How’s your pension?

An analysis by pension consulting firm Mercer shows the funded status, or solvency position, of pension plans declined sharply in the second quarter of 2012. Mercer’s revamped pension health index stood at 77 per cent on June 30, down five percentage points from 82 per cent on March 31.

The index, which tracks the performance of a hypothetical model pension plan with typical investments, was at 76 per cent on Dec. 31.

Also Wednesday, an analysis by pension consulting firm Towers Watson showed its pension index fell to 56.3 per cent at June 30 from 57.1 per cent as of Dec. 31, a drop of 0.8 percentage points in the six-month period.

The index also tracks the performance of a hypothetical pension plan that invests using typical asset allocations with 60 per cent invested in stock and 40 per cent in bonds.

The US is getting a lesson on the relationship between paying the piper and calling the tune:

The Church of the Nativity in the Palestinian town of Bethlehem could use a few repairs, but is it in peril? The United Nations Educational, Scientific and Cultural Organization says so, having declared the church an endangered World Heritage site last week.

Palestinians made hay arguing that Israel’s occupation of the West Bank threatened the humble church, said to mark the birthplace of Christ. A UN expert committee disagreed, concluding it faced no danger. The U.S. objected to the “endangered” designation, claiming it was a means to attack Israel, but lost the 13-6 vote.

The episode offers a glimpse of the new Unesco, where the U.S. has diminished clout after having announced its intention to stop funding the organization following Palestine’s admission as a member last October. The U.S. purpose presumably was to punish Unesco. Instead, other countries — notably China and Qatar — have stepped in to fill the 22 percent hole in Unesco’s $325 million annual budget.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums and FixedResets both gaining 5bp, while DeemedRetractibles lost 11bp. Volatility was muted. Volume was very low.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.0402 % 2,298.5
FixedFloater 4.57 % 3.96 % 20,510 17.34 1 0.5808 % 3,448.4
Floater 3.17 % 3.17 % 74,715 19.34 3 0.0402 % 2,481.7
OpRet 4.78 % 2.77 % 36,747 0.96 5 -0.1690 % 2,524.6
SplitShare 5.26 % -3.99 % 41,552 0.46 4 0.0347 % 2,723.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1690 % 2,308.6
Perpetual-Premium 5.40 % 3.84 % 85,139 0.53 26 0.0466 % 2,246.5
Perpetual-Discount 5.01 % 4.99 % 116,489 15.38 7 0.0647 % 2,479.3
FixedReset 5.03 % 3.03 % 192,233 4.43 71 0.0489 % 2,406.3
Deemed-Retractible 4.99 % 3.86 % 136,145 2.86 45 -0.1068 % 2,323.3
Performance Highlights
Issue Index Change Notes
SLF.PR.A Deemed-Retractible -1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.54
Bid-YTW : 5.59 %
RY.PR.H Deemed-Retractible -1.08 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.67
Bid-YTW : 3.15 %
MFC.PR.F FixedReset 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 4.01 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.E Perpetual-Premium 132,300 RBC crossed 130,000 at 25.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-03
Maturity Price : 25.25
Evaluated at bid price : 25.80
Bid-YTW : -23.94 %
GWO.PR.P Deemed-Retractible 96,967 RBC crossed 86,900 at 25.75.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.69
Bid-YTW : 5.07 %
BAM.PF.A FixedReset 84,311 National crossed 49,600 at 25.20; RBC crossed 28,600 at the same price.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-04
Maturity Price : 23.16
Evaluated at bid price : 25.20
Bid-YTW : 4.11 %
RY.PR.P FixedReset 80,985 National crossed 75,200 at 26.53.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.51
Bid-YTW : 2.91 %
BAM.PR.X FixedReset 75,430 TD crossed blocks of 47,100 and 24,500, both at 25.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-07-04
Maturity Price : 23.15
Evaluated at bid price : 24.95
Bid-YTW : 3.29 %
IAG.PR.C FixedReset 55,187 Desjardins crossed 50,000 at 25.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.10 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.E Deemed-Retractible Quote: 25.87 – 26.56
Spot Rate : 0.6900
Average : 0.4057

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.87
Bid-YTW : 5.47 %

ENB.PR.A Perpetual-Premium Quote: 25.55 – 25.89
Spot Rate : 0.3400
Average : 0.2320

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-03
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : -14.45 %

RY.PR.N FixedReset Quote: 26.50 – 26.94
Spot Rate : 0.4400
Average : 0.3353

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 2.93 %

BNA.PR.E SplitShare Quote: 24.90 – 25.25
Spot Rate : 0.3500
Average : 0.2470

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 5.04 %

CU.PR.C FixedReset Quote: 25.75 – 26.00
Spot Rate : 0.2500
Average : 0.1568

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 3.43 %

BNA.PR.D SplitShare Quote: 26.37 – 26.74
Spot Rate : 0.3700
Average : 0.2827

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-08-03
Maturity Price : 26.00
Evaluated at bid price : 26.37
Bid-YTW : -3.99 %

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