July 29, 2010

The Europeans are taking a look at High Frequency Trading:

High-frequency trading will be investigated by regulators to “better understand any risks,” Europe’s top market watchdog said in a report on proposed industry rules.

A planned European Union market regulator should also have the power to set standards for the tools used by high-frequency traders, such as the practice of placing computer servers close to trading venues to speed up market access, the Committee of European Securities Regulators told the European Commission.

Powers for the proposed European regulator should keep pace “with new technological advances, increasingly fragmented equity markets” and “shortcomings” in post-trade information, Sally Dewar, a managing director at the U.K. Financial Services Authority, said in an e-mailed statement today.

There’s nothing wrong with them familiarizing themselves with the issue – the rules-makers should know how the game is played! – but the Europeans have come up with so much wierd stuff lately that it will be most interesting to see what comes of it.

The bill to encourage banks to extend small-business credit has stalled in the Senate:

Senate Republicans blocked a measure that would cut taxes and ease credit for small businesses, saying they objected that Democrats refused to consider their amendments to extend expiring tax breaks.

The Senate voted 58-42 today to end debate on the bill, falling short of the 60 votes required to consider the legislation for passage.

The legislation was faulted by Republicans such as Senator Richard Shelby of Alabama for being a government rescue similar to the $700 billion bank bailout of 2008. The program might induce banks to make risky loans, lawmakers said.

“The lack of credit for small businesses is a problem that needs to be addressed,” Shelby said during Senate debate last week. “I do not, however, believe that we should try and solve this problem with another expensive and bureaucratic government program.”

There will be congressional hearings into Basel III, which should satisfy my desire to understand the changes better. I mean, we’re certainly not going to see any discussion by OSFI or the Ottawa Mickey Mouse League, are we?

Christopher Dodd and Barney Frank, authors of the U.S. financial overhaul, plan hearings on the status of global talks to revise bank-capital standards amid worries that proposed rules are being watered down.

The Senate Banking Committee, chaired by Dodd, will hold the discussions on the Basel process in September, said Sean Oblack, a spokesman for the Connecticut Democrat. Frank, the Massachusetts Democrat who heads the House Financial Services Committee, also plans to hold a hearing on the subject, said spokesman Steven Adamske. Neither panel has set a date nor decided who will be asked to testify.

Say what you like about what comes out of Congress – and I do! – the research that goes into these hearings is first-rate.

TD Bank has issued 5-year covered bonds in USD at 2.20%:

DBRS has today finalized the rating of AAA on the Covered Bonds, Series 1 (the Covered Bonds) issued under The Toronto-Dominion Bank (TD) EUR 10 billion Global Public Sector Covered Bond Programme (the Programme). The Covered Bonds (USD 2 billion) have a coupon rate of 2.20% and a hard-bullet maturity date of July 29, 2015.

The ratings are based on several factors. First, the Covered Bonds are senior unsecured direct obligations of TD, which is the second largest bank in Canada and rated AA and R-1 (high) with a Stable trend by DBRS. Second, in addition to a general recourse to TD’s assets, the Covered Bonds are supported by a diversified collateral pool (the Cover Pool) of prime credit home equity lines of credit (HELOCs) insured by Canada Mortgage & Housing Corporation (CMHC). CMHC is an agent of Her Majesty in right of Canada and is rated AAA by DBRS. The Cover Pool was approximately $10.7 billion as of April 19, 2010. Third, the Covered Bonds benefit from several structural features, such as a reserve fund, when applicable; a minimum rating requirement for swap counterparties, servicer and cash manager; and, lastly, the funding of pre-maturity liquidity if TD’s rating falls below certain thresholds.

Little of interest happened on reasonably good volume today, with PerpetualDiscounts up 2bp and FixedResets about as close to flat as you can get.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
(at bid)
Mod Dur
Issues Day’s Perf. Index Value
Ratchet 2.88 % 2.96 % 23,452 20.16 1 0.0000 % 2,078.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.0914 % 3,148.4
Floater 2.52 % 2.15 % 39,083 21.96 4 -0.0914 % 2,244.0
OpRet 4.89 % 3.57 % 92,120 0.34 11 -0.0814 % 2,339.0
SplitShare 6.22 % 1.71 % 76,900 0.08 2 0.0429 % 2,229.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0814 % 2,138.8
Perpetual-Premium 5.93 % 5.66 % 106,845 1.79 4 -0.1871 % 1,939.3
Perpetual-Discount 5.82 % 5.89 % 184,222 14.05 73 0.0155 % 1,861.7
FixedReset 5.32 % 3.47 % 312,437 3.43 47 0.0016 % 2,225.5
Performance Highlights
Issue Index Change Notes
HSB.PR.D Perpetual-Discount -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-07-29
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.94 %
POW.PR.D Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-07-29
Maturity Price : 21.31
Evaluated at bid price : 21.31
Bid-YTW : 5.92 %
Volume Highlights
Issue Index Shares
BAM.PR.H OpRet 59,500 TD crossed blocks of 40,000 and 18,600 shares, both at 25.75.
Maturity Type : Call
Maturity Date : 2010-10-30
Maturity Price : 25.25
Evaluated at bid price : 25.61
Bid-YTW : 1.81 %
TD.PR.G FixedReset 44,685 TD crossed blocks of 15,000 and 11,000 shares, both at 27.51.
Maturity Type : Call
Maturity Date : 2014-05-30
Maturity Price : 25.00
Evaluated at bid price : 27.50
Bid-YTW : 3.49 %
TD.PR.O Perpetual-Discount 43,723 Nesbitt crossed 15,200 at 21.70.
Maturity Type : Limit Maturity
Maturity Date : 2040-07-29
Maturity Price : 21.65
Evaluated at bid price : 21.65
Bid-YTW : 5.64 %
TD.PR.K FixedReset 35,085 TD crossed 20,000 at 27.55.
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.55
Bid-YTW : 3.59 %
RY.PR.X FixedReset 27,030 RBC crossed 20,000 at 27.60.
Maturity Type : Call
Maturity Date : 2014-09-23
Maturity Price : 25.00
Evaluated at bid price : 27.60
Bid-YTW : 3.48 %
MFC.PR.D FixedReset 26,672 TD crossed 15,900 at 27.91.
Maturity Type : Call
Maturity Date : 2014-07-19
Maturity Price : 25.00
Evaluated at bid price : 27.78
Bid-YTW : 3.81 %
There were 34 other index-included issues trading in excess of 10,000 shares.

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