Lobbying against end-user margin requirements for OTC derivatives (mentioned on June 30) appears to have had some effect, according to Jim Hamilton’s World of Securities Regulation in a discussion of a letter from senators Dodd & Lincoln:
The Dodd-Frank Wall Street Reform and Consumer Protection Act does not authorize regulators to impose margin on end users that use derivatives to hedge or mitigate commercial risk, said Senator Chris Dodd and Senator Blanche Lincoln, who have instructed the SEC and CFTC not to make hedging so costly that it becomes prohibitively expensive for end users to manage their risks. In a letter to the Chairs of the House Financial Services and Agriculture Committees, the senators emphasized that Congress does not intend to regulate end users as major swap participants or swap dealers just because they use swaps to hedge or manage the commercial risks associated with their business. Just as Congress has heard the end user community, they said, regulators must carefully consider the impact of regulation and capital and margin on end users.
We’ll see how this works out, but the camel’s got his nose in the tent!
There’s an entertaining scuffle between Themis Trading:
A gift received by a sixth rate player. Now, we didn’t expect to be showered with gifts from the LSE but a simple “thank you” would have been nice. After all, a paper written by “two or three guys” managed to accomplish something that an organization headed by commercial director, Natan Tiefenbrun, couldn’t do by themselves.
So this brings us to the rubbish which was written by that previously mentioned commercial director. If you care to read his piece, here it is: http://tradeturquoise.blogspot.com/
It seems like Natan is tired because he read a piece written by Kate Welling about Themis Trading ([link]). If reading 16 pages gets him tired, maybe he should get some Red Bull. Much of Natan’s rant against Themis Trading sounds like a defense of HFT. Maybe that’s because he also has a very conflicted ownership structure with brokers owning almost half of his MTF.
Natan’s piece is titled Luddites Unite:
One again these self-proclaimed defenders of “fair markets” make dozens of claims about how exchanges, brokers and high-frequency traders are conniving to screw both retail and institutional investors. Here are some of my favourite excerpts:…
By me, the fundamental difference is one of philosophy, explained by Themis principal Sal Arnuk early on in the article that started the spat (which is copy protected, so no quotes for you!). He’s worried about what happened in the Flash Crash to those who panicked and those who had stop-loss orders in place. I suggest that the fact that these people lost money is a good thing. The less stupid money there is in the market, the better.
Much of the hand-wringing regarding securitization revolves around adverse selection – the idea that originators will securitize their worst loans. Credit Sights is alleging an interesting twist on that story:
Spanish savings banks may be hiding losses on home loans by taking non-performing mortgages out of securitized transactions, according to CreditSights Inc.
By carrying the bad loans on their own books the so-called cajas sidestep downgrades to their mortgage-backed securities, the independent bond research firm said in a report.
…
CreditSights follows a sample of 143 Spanish residential mortgage-backed securities collateralized by 136 billion euros ($170 billion) of loans, with about 45 percent originated by cajas. While the savings banks give little information about the state of their loan books, investor reports on the performance of the securitized debt suggest asset quality is weaker than at commercial lenders, CreditSights said.“Caja-originated mortgages are performing much worse than those extended by Spain’s commercial banks,” analysts David Watts, John Raymond and Hana Galetova wrote. By buying mortgages out of the pools “they could have been artificially reducing the level of bad loans in RMBS while simultaneously undermining the quality of the cajas’ own assets,” they wrote.
Over a million people attended the Pride Parade in a stunning rebuke to nasty backstairs whisperers and grandstanding politicians (presumably under the influence of foreign governments). Left to itself, the City of Toronto can’t run a souvlaki cart; I suggest that in future it recognizes its total incompetence and stops interfering with the internal decisions of groups who actually bring money into the city.
Yet another power outage today … and the clowndorks are discussing who should march in somebody else’s parade.
It was a strong day in the Canadian preferred share market, with PerpetualDiscounts gaining 25bp and FixedResets up 23bp, on light 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 | 2.82 % | 2.92 % | 26,350 | 20.31 | 1 | 0.0000 % | 2,048.5 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3307 % | 3,097.5 |
| Floater | 2.32 % | 1.97 % | 49,728 | 22.46 | 4 | -0.3307 % | 2,207.8 |
| OpRet | 4.87 % | 3.46 % | 77,056 | 0.40 | 11 | 0.1307 % | 2,337.4 |
| SplitShare | 6.35 % | 6.31 % | 88,433 | 3.45 | 2 | 0.4179 % | 2,183.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1307 % | 2,137.3 |
| Perpetual-Premium | 5.97 % | 5.91 % | 121,841 | 1.85 | 4 | 0.1491 % | 1,913.5 |
| Perpetual-Discount | 5.93 % | 6.00 % | 186,915 | 13.91 | 73 | 0.2547 % | 1,817.8 |
| FixedReset | 5.35 % | 3.82 % | 320,924 | 3.49 | 47 | 0.2320 % | 2,197.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRI.PR.B | Floater | -1.48 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 1.86 % |
| BMO.PR.N | FixedReset | 1.02 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-27 Maturity Price : 25.00 Evaluated at bid price : 27.80 Bid-YTW : 3.48 % |
| CM.PR.K | FixedReset | 1.14 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.55 Bid-YTW : 3.61 % |
| BNS.PR.O | Perpetual-Discount | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 24.38 Evaluated at bid price : 24.60 Bid-YTW : 5.69 % |
| BMO.PR.H | Perpetual-Discount | 1.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 22.92 Evaluated at bid price : 23.80 Bid-YTW : 5.60 % |
| GWO.PR.J | FixedReset | 1.31 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-01-30 Maturity Price : 25.00 Evaluated at bid price : 26.26 Bid-YTW : 4.51 % |
| BAM.PR.M | Perpetual-Discount | 1.88 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 18.40 Evaluated at bid price : 18.40 Bid-YTW : 6.51 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.C | Perpetual-Discount | 69,950 | RBC bought 10,000 from Scotia at 18.78; TD crossed 47,700 at 18.75. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 18.73 Evaluated at bid price : 18.73 Bid-YTW : 6.07 % |
| PWF.PR.P | FixedReset | 68,974 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 23.16 Evaluated at bid price : 25.10 Bid-YTW : 3.95 % |
| TRP.PR.C | FixedReset | 63,995 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 23.11 Evaluated at bid price : 24.95 Bid-YTW : 3.94 % |
| TRI.PR.B | Floater | 60,300 | RBC sold blocks of 10,000 and 15,000 to anonymous at 23.60; RBC crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 22.98 Evaluated at bid price : 23.25 Bid-YTW : 1.86 % |
| TD.PR.S | FixedReset | 60,230 | RBC crossed 35,000 at 26.00; Desjardins crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-30 Maturity Price : 25.00 Evaluated at bid price : 26.05 Bid-YTW : 3.82 % |
| CM.PR.I | Perpetual-Discount | 42,600 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-07-05 Maturity Price : 19.71 Evaluated at bid price : 19.71 Bid-YTW : 5.97 % |
| There were 18 other index-included issues trading in excess of 10,000 shares. | |||