Scandinavians might find increased bank capital to be a mixed blessing:
Swedish regulators will require banks to set aside capital equivalent to at least 10 percent of their risk-weighted assets this year, with the minimum rising to 12 percent in 2015. The country’s four biggest banks, including Nordea, already exceed this target.
…
Investors have rewarded the lenders for the perceived extra hedge against losses. It costs about 12 basis points less to insure against losses on senior notes issued by Nordea than it does for equivalent securities sold by Deutsche Bank AG, using five-year credit default swaps. Handelsbanken default-swaps trade 36 basis points lower.
…
The stricter rules now being implemented across Europe will cost banks as much as 115 billion euros ($155 billion) a year, a figure that exceeds total financial industry profits for 2011, Clausen said. In response, banks need to adjust their business models and focus on “capital-light” areas that don’t burden their balance sheets, [European Banking Federation President Christian] Clausen said in an interview last month.Many lenders have already started adjusting their business and cut jobs in retail and corporate lending to focus instead on debt underwriting. Nordea and Danske are both hiring more bankers in units that help manage corporate and agency bond sales. That’s in contrast to cuts elsewhere. Nordea is cutting 10 percent of its workforce, while Danske this month reiterated plans to eliminate 3,000 jobs.
There’s an interesting observation about the profitability of High Frequency Trading:
GETCO gets almost all its revenue from what it calls “market making,” which is essentially the high frequency trading business. In the first nine months of 2011, It brought it $714.1-million in revenue from market making. In the first nine months of last year, that had plunged 44 per cent to $398.5-million. About 68 per cent of that revenue came from equity trading.
GETCO blamed “industry specific trends such as lower market volumes and volatility across all asset classes,” as well as the fact that other players in markets are increasingly “internalizing” their orders – matching buys and sells in house – rather than sending them to markets where GETCO can trade against them. That resulted in lower market share, GETCO said.
This suggests to me that order flow – which comes from clients – is becoming more valuable. Which should, ultimately, result in even better deals for clients. Not to mention increased promotion of idiocy like stop-orders by the brokerages, and perhaps punitive surcharges for limit orders.
The Bank of Canada has released the December Financial System Review, with yet another attempt to justify the reckless imposition of central clearing for derivatives:
Canadian authorities judge that global CCPs will provide a safe, robust and resilient environment for clearing OTC derivatives, provided they comply with the CPSS-IOSCO Principles, meet the four safeguards and comply with specific recognition requirements imposed by Canadian regulators. While work on the safeguards is ongoing, Canadian authorities are satisfied with the direction and pace of the international efforts, including their implementation at global CCPs serving the Canadian market.
SwapClear, in particular, has established:
- Fair and open access: SwapClear’s access criteria ave been revised and are in line with the CPSSI-OSCO Principles and the access safeguard.[note] Five major Canadian banks have direct clearing access to SwapClear, while another is in the process of obtaining membership.
- …
Footnote reads: For example, SwapClear has reduced the minimum net capital requirement for clearing members from $5 billion to $50 million, scaled according to the risk assumed by a member. The requirement that SwapClear members hold a swap book with $1 trillion in notional amount outstanding has also been removed.
Why, the notion of Fair and Open Access just makes my heart go pitty-pat, especially when the fairness and openness of the access will be judged by bureaucrats with no skin in the game. I wonder if SwapClear will allow membership by terrorists, such as Iceland and whoever else the UK happens to be angry with next time?
It was another modestly good day for the Canadian preferred share market, with PerpetualPremiums winning 11bp, FixedResets gaining 2bp and DeemedRetractibles up 10bp. Volatility was low. Volume was above average.
| 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 | -0.1469 % | 2,582.4 |
| FixedFloater | 4.19 % | 3.52 % | 24,398 | 18.28 | 1 | -0.1323 % | 3,877.5 |
| Floater | 2.57 % | 2.90 % | 70,104 | 19.95 | 5 | -0.1469 % | 2,788.3 |
| OpRet | 4.77 % | 0.11 % | 38,866 | 0.30 | 5 | 0.0922 % | 2,610.0 |
| SplitShare | 4.54 % | 4.23 % | 36,412 | 4.25 | 2 | 0.0791 % | 2,930.9 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0922 % | 2,386.6 |
| Perpetual-Premium | 5.23 % | -1.08 % | 84,247 | 0.11 | 29 | 0.1063 % | 2,359.5 |
| Perpetual-Discount | 4.85 % | 4.89 % | 137,140 | 15.63 | 4 | 0.0101 % | 2,648.5 |
| FixedReset | 4.89 % | 2.78 % | 270,731 | 3.35 | 78 | 0.0199 % | 2,497.5 |
| Deemed-Retractible | 4.86 % | 1.76 % | 146,938 | 0.28 | 45 | 0.0973 % | 2,438.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| HSE.PR.A | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.30 Bid-YTW : 2.89 % |
| MFC.PR.J | FixedReset | 1.79 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2018-03-19 Maturity Price : 25.00 Evaluated at bid price : 26.35 Bid-YTW : 2.79 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CU.PR.C | FixedReset | 64,195 | Nesbitt crossed 25,000 at 26.49. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 26.40 Bid-YTW : 2.58 % |
| TD.PR.O | Deemed-Retractible | 37,887 | Scotia crossed 35,000 at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-03-15 Maturity Price : 25.50 Evaluated at bid price : 25.73 Bid-YTW : -4.25 % |
| ENB.PR.T | FixedReset | 36,958 | YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 3.52 % |
| TRP.PR.B | FixedReset | 28,910 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-02-13 Maturity Price : 23.45 Evaluated at bid price : 24.87 Bid-YTW : 2.76 % |
| SLF.PR.A | Deemed-Retractible | 26,461 | National crossed 10,000 at 25.00. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.98 Bid-YTW : 4.87 % |
| ENB.PR.B | FixedReset | 25,175 | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.66 Bid-YTW : 3.31 % |
| There were 37 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| FTS.PR.H | FixedReset | Quote: 25.64 – 26.15 Spot Rate : 0.5100 Average : 0.3606 YTW SCENARIO |
| CM.PR.K | FixedReset | Quote: 26.26 – 26.55 Spot Rate : 0.2900 Average : 0.1753 YTW SCENARIO |
| MFC.PR.E | FixedReset | Quote: 26.55 – 26.80 Spot Rate : 0.2500 Average : 0.1568 YTW SCENARIO |
| RY.PR.C | Deemed-Retractible | Quote: 26.17 – 26.35 Spot Rate : 0.1800 Average : 0.1145 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 25.85 – 26.20 Spot Rate : 0.3500 Average : 0.2864 YTW SCENARIO |
| VNR.PR.A | FixedReset | Quote: 26.84 – 27.04 Spot Rate : 0.2000 Average : 0.1381 YTW SCENARIO |