PrefBlog

Here’s a scary thought from Comrade Peace Prize:

Obama administration advisers said U.S. banks bailed out with taxpayer funds have responsibility to support the president’s effort to overhaul the rules for Wall Street and avoid future financial crises.

White House officials say they are frustrated that major financial firms are fighting President Barack Obama on the regulatory overhaul after taxpayer bailouts helped firms restore profits and near-record compensation for executives.
…
“The American people have a right to be frustrated and angry,” Chief of Staff Rahm Emanuel said on CNN’s “State of the Union” yesterday. Banks receiving aid are “literally going and fighting the very type of regulations and reforms that are necessary to prevent, again, a crisis like this happening.”

After reading the promise that this legislation will tame the business cycle, do you have to read any more? I wouldn’t link to a blog that made that claim … but this is the White House Chief of Staff who’s being quoted!

I haven’t studied the legislation in any detail – but if the best supporting argument they can come up with is ‘You guys screwed up last time, therefore this is right” then it must be pretty bogus.

The SEC is proposing to restrict dark pool trading:

The commission will propose lowering the amount of daily volume in a company’s shares that can be executed in private on any of the networks to 0.25 percent from 5 percent at a hearing tomorrow in Washington, said the people, who declined to be identified because the discussions weren’t public. John Nester, an SEC spokesman, declined to comment.

The rule change may curtail the number of transactions on dark pools, off-exchange platforms run by firms such as Goldman Sachs Group Inc. and Getco LLC that have drawn scrutiny from Democratic Senators Ted Kaufman of Delaware and Charles Schumer of New York. The systems usually shut down trading in a security when they approach the current 5 percent limit.

I’m not sufficiently familiar with dark pools to have a definite opinion on the matter, but my knee-jerk reaction is that this is simply the established exchanges using the current ‘Regulation = Good’ hysteria to advance their interests. The OSC has highlighted a CSA / IIROC Request for Comments on the topic. Interestingly, support for giving the regulators a blank cheque is waning:

A poll conducted for Public Strategies and Politico found that 32 percent of voters support new regulations, while 68 percent say better enforcement of existing regulations is the best approach.
…
The top pollster for the survey, David Iannelli, said a previous poll conducted in December during the height of the Wall Street meltdown found that 67 percent of those surveyed believed more regulations were needed.
…
The poll can be found at www.pstrategies.com.

State Street is alleged to have been naughty:

The case was originally filed under seal by whistleblowers – “Associates Against FX Insider Trading,” who alleged that State Street added a secret and substantial mark-up to the price of interbank foreign currency trades. The interbank rate is the price at which major banks buy and sell foreign currency.

Subsequently, Brown launched an independent investigation into the allegations.

Brown’s investigation revealed that State Street was indeed overcharging the two funds. Despite being contractually obligated to charge the interbank rate at the precise time of the trade, State Street consistently charged at or near the highest rate of the day, even if the interbank rate was lower at the time of trade.

So my question is: who was authorizing the FX trades on the pension fund side? who was checking the trades on the pension fund side? Have they been fired? If nobody was checking and portfolio managers are executing really cool trades without nailing down the FX conversion, has the CEO been fired? This isn’t “the latest example of how clever financial traders violate laws and rip off the public trust”; given that it’s been happening routinely for eight years, its just the latest example of brain-dead portfolio managment.

Red letter day today, as PerpetualDiscounts were up … a whole half bp! FixedResets gained 7bp; there wasn’t much price volatility, but volume was good, with the volume highlights table being entirely FixedResets.

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	-0.4053 %	1,459.5
FixedFloater	6.13 %	4.25 %	47,651	18.53	1	-2.9524 %	2,543.0
Floater	2.67 %	3.11 %	100,218	19.47	3	-0.4053 %	1,823.4
OpRet	4.90 %	-7.84 %	113,770	0.09	15	0.0334 %	2,281.0
SplitShare	6.44 %	6.51 %	541,050	3.95	2	-0.3759 %	2,054.4
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.0334 %	2,085.8
Perpetual-Premium	5.92 %	5.93 %	143,593	13.92	11	0.2583 %	1,846.4
Perpetual-Discount	5.97 %	6.03 %	218,758	13.85	63	0.0056 %	1,735.3
FixedReset	5.51 %	4.23 %	451,062	4.02	41	0.0700 %	2,107.4

Performance Highlights
Issue	Index	Change	Notes
BAM.PR.G	FixedFloater	-2.95 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 25.00 Evaluated at bid price : 17.75 Bid-YTW : 4.25 %
RY.PR.D	Perpetual-Discount	-1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 19.81 Evaluated at bid price : 19.81 Bid-YTW : 5.78 %
BAM.PR.B	Floater	-1.41 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 12.62 Evaluated at bid price : 12.62 Bid-YTW : 3.14 %
BAM.PR.J	OpRet	-1.28 %	YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 5.63 %
CIU.PR.A	Perpetual-Discount	1.03 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 19.61 Evaluated at bid price : 19.61 Bid-YTW : 5.96 %
BMO.PR.L	Perpetual-Premium	1.05 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 24.69 Evaluated at bid price : 24.91 Bid-YTW : 5.92 %
BNS.PR.N	Perpetual-Discount	1.28 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 22.75 Evaluated at bid price : 22.90 Bid-YTW : 5.75 %
IAG.PR.A	Perpetual-Discount	1.44 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-10-20 Maturity Price : 19.02 Evaluated at bid price : 19.02 Bid-YTW : 6.12 %

Volume Highlights
Issue	Index	Shares Traded	Notes
MFC.PR.D	FixedReset	63,173	TD crossed two blocks of 13,600 and one of 13,000, all at 27.76. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.80 Bid-YTW : 4.17 %
TD.PR.S	FixedReset	60,015	RBC crossed blocks of 20,000 and 25,000 shares, both at 25.50. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-08-30 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.35 %
CM.PR.L	FixedReset	53,478	Desjardins bought 37,300 from CIBC at 27.28. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.28 Bid-YTW : 4.32 %
TRP.PR.A	FixedReset	48,694	Recent new issue. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-01-30 Maturity Price : 25.00 Evaluated at bid price : 25.20 Bid-YTW : 4.51 %
RY.PR.X	FixedReset	46,602	Scotia bought 10,000 from RBC at 27.99. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-23 Maturity Price : 25.00 Evaluated at bid price : 27.80 Bid-YTW : 4.01 %
TD.PR.E	FixedReset	39,525	TD crossed 20,000 at 27.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.17 Bid-YTW : 4.19 %
There were 37 other index-included issues trading in excess of 10,000 shares.

This entry was posted on Wednesday, October 21st, 2009 at 12:10 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.