The latest news on the High Frequency Trading media frenzy is amusing:
Brad Katsuyama, a young Canadian working at RBC Capital Markets in New York, is the hero of [Michael] Lewis’s book [Flash Boys: A Wall Street Revolt]. He creates a tool called Thor, which is designed to protect investors from the rest of Wall Street.
When RBC, a smaller player in the U.S. market, couldn’t get traction with the tool, Katsuyama left to set up his own stock exchange IEX Group.
As it happens, I discussed Thor in the market report of December 13, 2012:
And look what passes for brilliant innovation among the old-money crowd! As mentioned on 2012-2-8, RBC received a good dose of breathless adoration for it’s THOR execution product. And what does THOR do, one might ask? According to the product sheet:
Latency normalization is an important factor in securing liquidity and obtaining best execution.
• THOR’s synchronization logic compensates for timing differentials across North America, minimizing cancellation windows for high-frequency trading algorithms; this significantly reduces information leakage, leading to higher fill rates.So the programme staggers the sending times to minimize the difference in the exchange’s receiving times, thereby minimizing the window in which the Evil HFT Layerer can cancel his misdirecting order. May I be excused for thinking that this idea is a teensy-weeny little bit obvious? As well as resulting from a simple reverse-engineering investigation, rather than breaking new ground?
Is there anything quite so revealing of the intellectual bankruptcy of HFT opponents and their hangers-on as this? OK, so Katsuyama – or his team, whatever – developed an approach to compensate for differential latency. OK, fine, sounds like it’s probably a good thing (although we now learn that RBC ‘couldn’t get traction’ with the tool), but honestly, is this really all that impressive? It’s nothing original, just reverse-engineering a trading strategy that is eating your lunch in a very, very simple manner and coming up with compensation. Just another day at the office … but very impressive to the old money club, enough to make him a “hero”.
There was an interesting letter circulated by the FDIC today:
Highlights:
- DDoS attacks are continuing against financial institutions’ public-facing Web sites.
- Financial institutions that experience DDoS attacks may face a variety of risks, including operational and reputation risks.
- DDoS attacks may be a diversionary tactic by criminals attempting to commit fraud.
- Financial institutions are expected to address DDoS readiness as part of their ongoing business continuity and disaster recovery plans and to take certain specific steps, as appropriate, to detect and mitigate such attacks.
- The attached statement includes references to guidance and publications to assist institutions in mitigating the risks from DDoS attacks.
Suggested Distribution:
- FDIC-Supervised Banks (Commercial and Savings)
The attached statement states:
In the latter half of 2012, an increased number of DDoS attacks were launched against financial institutions by politically motivated groups. These DDoS attacks continued periodically and increased in sophistication and intensity. These attacks caused slow website response times, intermittently prevented customers from accessing institutions’ public websites, and adversely affected back-office operations. In other cases, DDoS attacks served as a diversionary tactic by criminals attempting to commit fraud using stolen customer or bank employee credentials to initiate fraudulent wire or automated clearinghouse transfers.
…
In addition to the FFIEC guidance, several other publications are available to help organizations mitigate the risks from DDoS attacks. The Department of Homeland Security’s National Cybersecurity and Communications Integration Center published a DDoS Quick Guide on January 29, 2014. This Quick Guide provides useful information on attack possibilities and traffic types and should be shared with an institution’s IT department and the institution’s online banking service provider, if applicable. The Quick Guide is available at www.uscert.
gov/sites/default/files/publications/DDoS%20Quick%20Guide.pdf
Ooh! That looks interesting! A guide on DDos issued by Homeland Security! I bet that’s rigorous!
References
http://www.prolexic.com/knowledge-center-dos-and-ddos-glossary.html
http://www.cso.com.au/article/443802/ssl_ddos_attacks_-_growing_trend/
http://jncie.files.wordpress.com/2008/09/801003_protecting-the-network-from-denial-of-service-floods.pdf
http://en.wikipedia.org/wiki/MAC_flooding
http://www.ibrahimhasan.com/content/understanding-and-protecting-against-mac-address-flooding
https://www.owasp.org/images/4/43/Layer_7_DDOS.pdf
http://softwareandnetworks.wordpress.com/
https://www.kb.cert.org/CERT_WEB/services/vul-notes-cert.nsf/b38c0892d481f5d385256d4b005d34ea/e0bf4978a23a358385257179006cb1d8?OpenDocument
http://class10e.com/Microsoft/what-layer-in-the-osi-model-is-responsible-for-logging-on-and-off/
www.books.google.com/books?isbn=1118141350
http://www.wisegeek.com what-is-mac-flooding.htm
http://quizlet.com/14023507/lesson-2-defining-networks-with-the-osi-model-flash-cards/
http://www.cisco.edu.mn/CCNA_R&S_%28Switched_Networks%29/course/module2/2.2.2.3/2.2.2.3.html
http://www.linuxforu.com/2011/11/cyber-attacks-explained-dos-and-ddos/
http://www.prolexic.com/knowledge-center-dos-and-ddos-glossary.html
http://learnfromtheleader.com/Downloads/SRS/TSFADP.pdf
http://zuhairmirza-informative.blogspot.com/2013/04/dos-and-ddos-glossary-of-terms-part-2.html
http://webcyber.co.uk/?p=128
https://www.cisco.com/web/ME/exposaudi2009/assets/docs/layer2_attacks_and_mitigation_t.pdf
http://www.prolexic.com/knowledge-center-dos-and-ddos-glossary.html
http://www.ddosattacks.biz/ddos-101/glossary/proxy/
http://www.prolexic.com/news-events-pr-end-of-quarter-ddos-attacks-itsok.html
http://www.us-cert.gov/ncas/alerts/TA13-088A
Blogs? Wikipedia? Gimme a break, please. This is a high-school essay. I’m all in favour of government instruction books containing links to authoritative sources, but not … blogs. Not … Wikipedia. Couldn’t they have got somebody who really knew his stuff to write something with real references?
We might have an entertaining turf battle in the States:
Recently, however, the Commission’s authority in the mutual fund industry—an industry in which the SEC has capably served as the primary regulator for almost 75 years—has been undercut by the activities of the Financial Stability Oversight Council (“FSOC”) and its research arm, the Treasury Department’s Office of Financial Research (“OFR”).
…
However, rather than continuing to discuss the merits of the research and analysis—or lack thereof—in OFR’s report, I would simply note that there needs to be a mechanism by which the full Commission, not just the Chair and SEC staff, provide meaningful input and coordinate with the leadership of FSOC and OFR. The Dodd-Frank Act envisions such coordination; for instance, the Dodd-Frank Act contemplates that federal agencies, including the Commission, would assist OFR on its work upon request. I do not think that assistance should be limited to one representative of the Commission, or limited to the SEC’s staff. Clearly, the expertise and judgment that the securities laws imbues in the presidentially appointed, Senate-confirmed Commissioners is undercut when there is an end-run around the Commissioners tasked with running the SEC.Let me be clear, the work of FSOC and OFR to identify and mitigate systemic risk is important. However, there is real danger in that work being compromised if the full five-member Commission is cut out of the process. The SEC and our fellow regulators should assist FSOC’s efforts in a thorough and objective manner. My interest is in making sure that the full expertise and judgment of the Commission—and all the Commissioners—is being utilized, and that our authority and expertise are not being undercut. For the protection of our economy, financial regulators across the U.S. federal government have to work together to address risks and threats to the stability of our financial markets.
Before leaving the subject of the OFR report, I note that just last Friday, the Department of the Treasury announced that FSOC will hold a conference in May on the asset management industry and its activities. While I welcome the effort to better understand the asset management industry, this does not address the issues arising from the criticisms of the OFR report’s quality, research, and analysis, or the issues that arise when the SEC’s decision makers are excluded from the process. FSOC and OFR should acknowledge the Commission’s—and, in particular, the Commissioners’—role as the primary regulator of the asset management industry.
There are two lunar eclipses this year – April 15 and October 8. Mark your calendars!
It was a fine day for the Canadian preferred share market, with PerpetualDiscounts winning 23bp, FixedResets up 11bp and DeemedRetractibles gaining 7bp. Volatility was minimal. Volume was below average.
PerpetualDiscounts now yield 5.48%, equivalent to 7.12% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.5%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 260bp, unchanged from March 26.
| 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 | 0.1407 % | 2,466.3 |
| FixedFloater | 4.69 % | 4.29 % | 36,508 | 17.72 | 1 | 0.1978 % | 3,619.2 |
| Floater | 2.95 % | 3.06 % | 50,326 | 19.62 | 4 | 0.1407 % | 2,662.9 |
| OpRet | 4.65 % | -1.13 % | 95,476 | 0.21 | 3 | -0.0129 % | 2,688.3 |
| SplitShare | 4.80 % | 4.24 % | 65,275 | 4.28 | 5 | 0.0159 % | 3,089.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0129 % | 2,458.2 |
| Perpetual-Premium | 5.54 % | -4.40 % | 104,669 | 0.09 | 13 | 0.1664 % | 2,373.6 |
| Perpetual-Discount | 5.45 % | 5.48 % | 126,421 | 14.60 | 23 | 0.2262 % | 2,465.6 |
| FixedReset | 4.69 % | 3.68 % | 217,164 | 4.31 | 79 | 0.1121 % | 2,520.1 |
| Deemed-Retractible | 5.04 % | 1.86 % | 156,213 | 0.16 | 42 | 0.0721 % | 2,479.0 |
| FloatingReset | 2.63 % | 2.56 % | 191,702 | 4.30 | 5 | 0.1123 % | 2,455.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| PWF.PR.P | FixedReset | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-02 Maturity Price : 23.08 Evaluated at bid price : 23.45 Bid-YTW : 3.68 % |
| ELF.PR.H | Perpetual-Discount | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-02 Maturity Price : 24.04 Evaluated at bid price : 24.45 Bid-YTW : 5.63 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Z | FixedReset | 207,792 | Nesbitt crossed 175,500 at 24.15. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.21 Bid-YTW : 3.66 % |
| BNS.PR.A | FloatingReset | 107,494 | Nesbitt crossed 100,000 at 25.26. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-04-25 Maturity Price : 25.00 Evaluated at bid price : 25.26 Bid-YTW : 2.46 % |
| GWO.PR.P | Deemed-Retractible | 83,660 | Desjardins crossed blocks of 15,000 and 65,000, both at 25.04. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.02 Bid-YTW : 5.43 % |
| IFC.PR.A | FixedReset | 82,871 | TD crossed 72,000 at 24.20. Nesbitt crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.03 Bid-YTW : 4.19 % |
| PWF.PR.F | Perpetual-Discount | 64,534 | Desjardins crossed 62,700 at 24.25. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-04-02 Maturity Price : 24.07 Evaluated at bid price : 24.33 Bid-YTW : 5.48 % |
| MFC.PR.C | Deemed-Retractible | 54,256 | TD crossed 45,600 at 21.85. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.80 Bid-YTW : 6.19 % |
| There were 27 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRP.PR.A | FixedReset | Quote: 23.36 – 23.99 Spot Rate : 0.6300 Average : 0.3711 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 23.45 – 23.87 Spot Rate : 0.4200 Average : 0.2614 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 25.62 – 25.97 Spot Rate : 0.3500 Average : 0.2238 YTW SCENARIO |
| BNS.PR.L | Deemed-Retractible | Quote: 25.52 – 25.87 Spot Rate : 0.3500 Average : 0.2403 YTW SCENARIO |
| CU.PR.F | Perpetual-Discount | Quote: 21.70 – 21.92 Spot Rate : 0.2200 Average : 0.1424 YTW SCENARIO |
| CU.PR.D | Perpetual-Discount | Quote: 23.72 – 24.04 Spot Rate : 0.3200 Average : 0.2523 YTW SCENARIO |