Themis Trading has published another “mini white paper” by Sal L. Arnuk and Joseph Saluzzi, Why Institutional Investors Should Be Concerned About High Frequency Traders. Their second so-called “problem” is actually a highly desirable feature:
2. HFT volume can generate false trading signals.
This can cause other investors to buy at a higher price, or sell at a lower price, than they would otherwise. A spike in HFT volume can cause an institutional algorithm order based on a percentage of volume to be too aggressive. A spike can attract momentum investors, further exaggerating price moves. Seeing such a spike, options traders can start to build positions, which, in turn, can attract risk arbitrage traders who believe there’s potential news that could affect the stock.
As a fundamental, value based investor, I say “Super!”. The more that securities are moved off their fundamental value, the more opportunities I will have to take advantage of the difference and make some money for my clients.
From a policy perspective, the underperformance of morons – who pretend sophisitication due to their use of algorithms, a four-syllable word, or who are attracted by momentum, or who care to bet that there’s news coming, implicitly accepting and trading on the efforts of insider traders – will assist their exit from the workforce. Which is a Good Thing, to the extent that underperformance has an actual effect on employment prospects.
Today’s 2-Year Treasury auction set two records:
Treasuries remained lower after the government sold a record-tying $44 billion of two-year debt at the lowest yield ever, the first of three note sales this week totaling a record $118 billion.
The securities drew a yield of 0.802 percent, compared to the forecast of 0.786 percent in a Bloomberg News survey of eight of the Federal Reserve’s 18 primary dealers and below the 0.922 percent drawn at an auction in December. The bid-to-cover ratio, which gauges demand by comparing total bids with the amount of securities offered, was 3.16, compared to 3.63 at the previous auction. The average at the last 10 auctions was 2.92.
HSBC Canada is calling some sub-debt:
HSBC Bank Canada today announced its intention to redeem all $100,000,000 of its 4.39% subordinated debentures due 21 January 2015 (the “Debentures”). In accordance with their terms, the Debentures will be redeemed at 100% of their principal amount plus accrued interest to the redemption date. The redemption will occur on 21 January 2010 and will be financed out of the general corporate funds of HSBC Bank Canada.
These debs are described as:
The interest rate is fixed at 4.39 per cent until January 2010 and thereafter the rate reprices at the 90 day average bankers’ acceptance
rate plus 1.00 per cent.
The market edged up a little today – PerpetualDiscounts up 9bp and FixedResets down 2bp – on slighly lower volume.
| 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 | -0.8506 % | 1,500.1 |
| FixedFloater | 6.05 % | 4.16 % | 41,630 | 18.59 | 1 | -2.8108 % | 2,575.9 |
| Floater | 2.60 % | 3.04 % | 90,413 | 19.57 | 3 | -0.8506 % | 1,874.1 |
| OpRet | 4.81 % | -4.28 % | 119,128 | 0.09 | 14 | -0.0736 % | 2,305.8 |
| SplitShare | 6.35 % | -3.26 % | 330,025 | 0.08 | 2 | 0.2635 % | 2,115.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.0736 % | 2,108.4 |
| Perpetual-Premium | 5.88 % | 5.54 % | 125,290 | 2.40 | 4 | 0.1884 % | 1,870.9 |
| Perpetual-Discount | 5.84 % | 5.88 % | 185,165 | 14.04 | 70 | 0.0918 % | 1,779.1 |
| FixedReset | 5.46 % | 3.90 % | 391,330 | 3.94 | 41 | -0.0238 % | 2,139.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.G | FixedFloater | -2.81 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 25.00 Evaluated at bid price : 17.98 Bid-YTW : 4.16 % |
| CM.PR.P | Perpetual-Discount | -1.46 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 22.41 Evaluated at bid price : 22.96 Bid-YTW : 6.03 % |
| TRI.PR.B | Floater | -1.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 19.41 Evaluated at bid price : 19.41 Bid-YTW : 2.04 % |
| TD.PR.S | FixedReset | -1.21 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.03 Bid-YTW : 3.87 % |
| CU.PR.B | Perpetual-Premium | 1.00 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2012-07-01 Maturity Price : 25.00 Evaluated at bid price : 25.25 Bid-YTW : 5.57 % |
| PWF.PR.G | Perpetual-Discount | 1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2011-08-16 Maturity Price : 25.00 Evaluated at bid price : 25.15 Bid-YTW : 5.80 % |
| MFC.PR.C | Perpetual-Discount | 1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 19.28 Evaluated at bid price : 19.28 Bid-YTW : 5.85 % |
| SLF.PR.C | Perpetual-Discount | 1.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 19.31 Evaluated at bid price : 19.31 Bid-YTW : 5.76 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.D | FixedReset | 213,718 | Nesbitt crossed 200,000 at 27.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.60 Bid-YTW : 4.07 % |
| TD.PR.G | FixedReset | 51,115 | RBC crossed 30,000 at 27.60. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-30 Maturity Price : 25.00 Evaluated at bid price : 27.66 Bid-YTW : 3.82 % |
| GWO.PR.X | OpRet | 42,979 | Dundee crossed 34,500 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2010-10-30 Maturity Price : 25.67 Evaluated at bid price : 26.17 Bid-YTW : 3.32 % |
| PWF.PR.D | OpRet | 41,100 | Nesbitt crossed 30,000 at 26.40; RBC crossed 10,600 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2009-12-23 Maturity Price : 25.60 Evaluated at bid price : 26.37 Bid-YTW : -25.38 % |
| BMO.PR.J | Perpetual-Discount | 33,801 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 20.25 Evaluated at bid price : 20.25 Bid-YTW : 5.59 % |
| BAM.PR.N | Perpetual-Discount | 32,092 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2039-11-23 Maturity Price : 17.52 Evaluated at bid price : 17.52 Bid-YTW : 6.92 % |
| There were 28 other index-included issues trading in excess of 10,000 shares. | |||
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