August 22, 2012

The SEC has passed some do-gooder rules. The first is bribe-prevention:

The Securities and Exchange Commission today adopted rules mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring resource extraction issuers to disclose certain payments made to the U.S. government or foreign governments.

The types of payments related to commercial development activities that need to be disclosed include:
  • Taxes
  • Royalties
  • Fees (including license fees)
  • Production Entitlements
  • Bonuses
  • Dividends
  • Infrastructure Improvements

The new requirements clarify the types of taxes, fees, bonuses, and dividends that are required to be disclosed. These types of payments generally are consistent with the types of payments that the Extractive Industries Transparency Initiative suggests should be disclosed. Congress specifically referenced the EITI in defining “payment” in the law.

The second is about conflict minerals:

The Securities and Exchange Commission today adopted a rule mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to require companies to publicly disclose their use of conflict minerals that originated in the Democratic Republic of the Congo (DRC) or an adjoining country.

The regulatory reform law directed the Commission to issue rules requiring certain companies to disclose their use of conflict minerals that include tantalum, tin, gold, or tungsten if those minerals are “necessary to the functionality or production of a product” manufactured by those companies. Companies are required to provide this disclosure on a new form to be filed with the SEC called Form SD.

Why the US is so eager to enforce laws for the benefit of other countries is quite beyond me. The Globe points out:

The SEC made a point of detailing the costs of the reforms before voting on both rules. The agency has seen prior rules successfully challenged in court based on allegations it did not adequately weigh costs and benefits.

An SEC official estimated the total industry-wide cost of implementing the new conflict minerals rule for companies would be around $3-billion to $4-billion. The annual cost could run between $206-million and $609-million.

On the resource extraction rule, the SEC pegged initial compliance costs at close to $1-billion, and said ongoing compliance costs could run between $200-million and $400-million.

But what the hell? Compliance is always good, right? and we’ve got lots of money.

But in a world in which it is considered rational to treat trading as a kiddie game, what do I know?

Knight Capital Group Inc. (KCG)’s $440 million loss from a computer malfunction this month highlights the dangers of limiting human input in decisions about canceling trades, according to two industry executives.

Regulators should have discretion to reverse transactions when the outcome puts a firm’s survival at risk, said Neal Wolkoff, former chairman and chief executive officer of the American Stock Exchange and ex-head of ELX Futures LP. They should allow “do-overs” in extreme cases, said R. Cromwell Coulson, CEO of OTC Markets Group Inc. (OTCM) in New York.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 7bp, FixedResets off 2bp and DeemedRetractibles up 17bp. Volatility was normal. Volume was low.

PerpetualDiscounts (that wonderful three-constituent index) now yield 4.97%, equivalent to 6.46% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.4%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 205bp – everything unchanged since August 15!

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 0.3178 % 2,333.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.3178 % 3,490.1
Floater 3.12 % 3.16 % 58,389 19.27 3 0.3178 % 2,519.1
OpRet 4.77 % 3.03 % 30,295 0.83 5 -0.0154 % 2,546.9
SplitShare 5.48 % 4.84 % 72,358 4.66 3 0.0400 % 2,801.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0154 % 2,328.9
Perpetual-Premium 5.30 % 2.74 % 95,903 0.40 28 0.0653 % 2,276.9
Perpetual-Discount 4.94 % 4.97 % 99,715 15.48 3 -0.1798 % 2,533.5
FixedReset 4.99 % 3.09 % 172,993 3.94 71 -0.0153 % 2,427.1
Deemed-Retractible 4.94 % 3.32 % 126,122 1.15 46 0.1682 % 2,364.1
Performance Highlights
Issue Index Change Notes
IAG.PR.G FixedReset -1.56 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-30
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.27 %
BAM.PR.M Perpetual-Discount -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-22
Maturity Price : 23.92
Evaluated at bid price : 24.20
Bid-YTW : 4.97 %
HSB.PR.C Deemed-Retractible 1.01 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-09-21
Maturity Price : 25.50
Evaluated at bid price : 26.01
Bid-YTW : -10.09 %
GWO.PR.M Deemed-Retractible 1.55 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.92
Bid-YTW : 4.49 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.L Deemed-Retractible 144,169 RBC crossed 134,200 at 27.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-25
Maturity Price : 26.00
Evaluated at bid price : 27.00
Bid-YTW : 0.39 %
GWO.PR.H Deemed-Retractible 67,111 RBC crossed two blocks of 30,000 each, both at 25.10.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.00 %
MFC.PR.B Deemed-Retractible 41,601 RBC crossed 31,100 at 23.61.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.62
Bid-YTW : 5.39 %
RY.PR.H Deemed-Retractible 37,350 TD crossed 30,000 at 26.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.80
Bid-YTW : 1.26 %
MFC.PR.D FixedReset 32,293 RBC crossed 24,700 at 26.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.29
Bid-YTW : 3.42 %
RY.PR.T FixedReset 31,800 TD crossed 25,000 at 26.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.79
Bid-YTW : 2.57 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.R FixedReset Quote: 26.36 – 26.62
Spot Rate : 0.2600
Average : 0.1838

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-22
Maturity Price : 23.65
Evaluated at bid price : 26.36
Bid-YTW : 3.71 %

MFC.PR.D FixedReset Quote: 26.29 – 26.50
Spot Rate : 0.2100
Average : 0.1442

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.29
Bid-YTW : 3.42 %

IAG.PR.F Deemed-Retractible Quote: 26.40 – 26.65
Spot Rate : 0.2500
Average : 0.1887

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.40
Bid-YTW : 4.84 %

BMO.PR.Q FixedReset Quote: 25.52 – 25.74
Spot Rate : 0.2200
Average : 0.1593

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.52
Bid-YTW : 2.93 %

GWO.PR.N FixedReset Quote: 24.30 – 24.52
Spot Rate : 0.2200
Average : 0.1622

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 3.54 %

BAM.PR.M Perpetual-Discount Quote: 24.20 – 24.39
Spot Rate : 0.1900
Average : 0.1364

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-08-22
Maturity Price : 23.92
Evaluated at bid price : 24.20
Bid-YTW : 4.97 %

One Response to “August 22, 2012”

  1. […] so the pre-tax interest-equivalent spread is now about 215bp, a widening from the 205bp reported August 22 as corporates have improved over the past week while PerpetualDiscounts have been […]

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