October 2, 2014

Treasury trading is going electronic:

While investors traditionally negotiated prices for U.S. Treasuries by telephone, they’re increasingly turning to computer-based marketplaces for a range of price quotes from different dealers. A record 48 percent of trades in U.S. government debt have occurred on electronic platforms this year, up from 31 percent in 2012, according to a Greenwich Associates study released yesterday.

There’s a new pseudo-scandal:

A high-frequency trader was indicted for “spoofing,” the placing and immediate canceling of orders to manipulate commodities markets, in what the U.S. Justice Department says is the first criminal case of its kind.

Michael Coscia, 52, of Rumson, New Jersey, the principal of Panther Energy Trading LLC, was indicted by a federal grand jury in Chicago and charged with six counts of commodities fraud and six of spoofing. He’s accused of illegally reaping nearly $1.6 million as a result of orders placed through CME Group Inc. (CME) and European futures markets in 2011.

Matt Levine of Bloomberg is a superb journalist. He not only explains the allegations better than the news story did, he also adds some wise words of his own:

Basically, spoofing doesn’t hurt fundamental investors directly.11 Fundamental investors trade based on fundamental views of value, not order-book information, so they shouldn’t be thrown off by fake bids and offers. Also they probably trade too slowly to even notice this sort of spoofing. Spoofing only directly hurts market-makers, whose job is to buy and sell in reaction to changes in supply and demand. In most modern markets, that means primarily high-frequency traders. If the FBI is going after spoofing, that’s good for other high-frequency traders. The reason to crack down on spoofing is that high-frequency traders are socially valuable and need to be protected.

I wouldn’t object to exchange-initiated rules about order cancellation – say, a black-out period of one second, so an order can’t be cancelled until it has been live for a second. But anti-spoofing laws – with criminal penalties, yet! – aren’t just silly, they’re extremely difficult to enforce.

Canadian Utilities, proud issuer of , has been confirmed at Pfd-2(high) by DBRS:

DBRS has today confirmed the ratings of the Unsecured Debentures and Issuer Rating of Canadian Utilities Limited (CU or the Company) at “A,” along with confirming the Commercial Paper and Cum. Preferred Shares at R-1 (low) and Pfd-2 (high), respectively, all with Stable trends. The confirmation reflects (a) the low-risk regulated electric and gas business of its wholly owned subsidiary, CU Inc. (CUI; rated A (high) by DBRS), which accounts for approximately 65% of consolidated earnings, (b) the self-sustaining and minimal funding requirements for its non-regulated operations, and (c) the low level of debt at the holding company level ($200 million). The one-notch differential in the ratings of CU and CUI primarily reflects structural subordination at CU.

It was a poor day for the Canadian preferred share market, with PerpetualDiscounts losing 10bp, FixedResets down 8bp and DeemedRetractibles off 1bp. Volatility, while modest, was comprised entirely of losing FixedResets. Volume was 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 3.10 % 3.08 % 25,038 19.51 1 0.3320 % 2,691.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.2334 % 4,121.7
Floater 2.89 % 3.04 % 60,571 19.67 4 -0.2334 % 2,767.6
OpRet 4.05 % 2.45 % 100,049 0.08 1 0.0395 % 2,729.3
SplitShare 4.29 % 3.86 % 95,393 3.87 5 0.0557 % 3,152.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0395 % 2,495.6
Perpetual-Premium 5.47 % 2.78 % 73,032 0.08 18 0.0109 % 2,445.7
Perpetual-Discount 5.33 % 5.17 % 101,710 15.08 18 -0.0981 % 2,583.3
FixedReset 4.21 % 3.75 % 179,084 8.64 73 -0.0752 % 2,554.2
Deemed-Retractible 5.00 % 2.50 % 102,204 0.39 42 -0.0067 % 2,563.0
FloatingReset 2.56 % 0.18 % 79,785 0.25 6 -0.0326 % 2,540.9
Performance Highlights
Issue Index Change Notes
SLF.PR.G FixedReset -1.74 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 4.87 %
TRP.PR.C FixedReset -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 21.08
Evaluated at bid price : 21.08
Bid-YTW : 3.82 %
TRP.PR.B FixedReset -1.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 19.20
Evaluated at bid price : 19.20
Bid-YTW : 3.82 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.Z FixedReset 64,553 RBC crossed 50,000 at 25.40.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 23.32
Evaluated at bid price : 25.40
Bid-YTW : 3.69 %
RY.PR.W Perpetual-Premium 56,082 RBC crossed 50,000 at 25.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-01
Maturity Price : 25.00
Evaluated at bid price : 25.15
Bid-YTW : 3.97 %
ENB.PR.P FixedReset 38,000 TD crossed 35,000 at 24.02.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 22.79
Evaluated at bid price : 23.94
Bid-YTW : 4.23 %
BMO.PR.K Deemed-Retractible 37,429 TD crossed 35,000 at 25.96.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-25
Maturity Price : 25.50
Evaluated at bid price : 25.95
Bid-YTW : -3.10 %
TD.PR.O Deemed-Retractible 31,887 Called for redemption October 31.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-11-30
Maturity Price : 25.00
Evaluated at bid price : 25.29
Bid-YTW : 2.79 %
GWO.PR.S Deemed-Retractible 27,500 Scotia crossed 23,300 at 25.60.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.58
Bid-YTW : 5.00 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
SLF.PR.G FixedReset Quote: 21.50 – 21.90
Spot Rate : 0.4000
Average : 0.2590

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.50
Bid-YTW : 4.87 %

TRP.PR.C FixedReset Quote: 21.08 – 21.40
Spot Rate : 0.3200
Average : 0.1933

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 21.08
Evaluated at bid price : 21.08
Bid-YTW : 3.82 %

SLF.PR.D Deemed-Retractible Quote: 22.29 – 22.45
Spot Rate : 0.1600
Average : 0.1018

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.29
Bid-YTW : 5.90 %

ELF.PR.F Perpetual-Discount Quote: 24.03 – 24.22
Spot Rate : 0.1900
Average : 0.1356

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 23.72
Evaluated at bid price : 24.03
Bid-YTW : 5.52 %

BAM.PR.N Perpetual-Discount Quote: 21.02 – 21.15
Spot Rate : 0.1300
Average : 0.0817

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 21.02
Evaluated at bid price : 21.02
Bid-YTW : 5.69 %

ENB.PR.F FixedReset Quote: 24.22 – 24.40
Spot Rate : 0.1800
Average : 0.1322

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2044-10-02
Maturity Price : 22.99
Evaluated at bid price : 24.22
Bid-YTW : 4.19 %

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