Deutsche Bank’s not letting the grass grow under their feet:
Deutsche Bank AG, Germany’s largest bank, plans to raise at least 9.8 billion euros ($12.5 billion) in its biggest-ever share sale to take over Deutsche Postbank AG and meet stricter capital rules.
…
Deutsche Bank fell 2.32 euros, or 4.6 percent, to 47.70 euros in Frankfurt trading on Sept. 10, giving the company a market value of 29.6 billion euros. Postbank jumped 1.23 euros, or 4.8 percent, to 27.04 euros, valuing the bank at 5.9 billion euros.Ackermann, who previously said the bank would only raise capital for acquisitions, is trying to build up the bank’s so- called stable businesses of retail banking and asset management, and reduce reliance on investment banking, which accounted for 78 percent of pretax profit in the first half.
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Postbank’s Tier 1 capital ratio, a measure of financial strength, fell to 6.6 percent under the most severe scenario of the European Union stress tests conducted in July, compared with the 6 percent minimum required to pass. Deutsche Bank’s ratio, by contrast, stood at 9.7 percent under the toughest test.
There is continued feeling that High Frequency Traders aren’t quite our type of person, dear:
The U.S. Securities and Exchange Commission has spent 15 years remaking the stock market into 11 competing exchanges and hundreds of computer-driven traders. In the process it has virtually eliminated the traditional market makers who bought and sold stocks when no one else would.
Now the SEC is concerned the revolution has gone too far, leaving markets vulnerable when selling starts to snowball.
…
Specialists at the NYSE maintained “fair and orderly” markets by stepping in themselves when buyers and sellers weren’t available. Similar to market makers on the Nasdaq, they took risks in return for the ability to see supply and demand for stocks and profit from the difference between the bid and offer prices. Both businesses suffered when exchanges started pricing stocks in penny increments in 2001, squeezing profit out of the bid-ask spread.The SEC is in the “early stages of thinking about whether obligations on market makers akin to what used to exist might make sense,” Schapiro told reporters on Sept. 7. The issue is “whether the firms that effectively act as market makers during normal times should have any obligation to support the market in reasonable ways in tough times,” she said during a speech in New York the same day.
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“The playing field has leveled dramatically,” said Joe Ratterman, chief executive officer of exchange operator Bats, which accounts for 11 percent of U.S. stock trading. “It used to be easy for a specialist to work off a 6- or 12-cent spread, but when he had to offer a penny spread it became hard to make a fat living. A new breed of firms stepped in and learned to be efficient. Those firms replaced the ones that were less efficient.”
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The Brady Commission report on the October 1987 crash found NYSE specialists and Nasdaq market makers performed erratically and didn’t stem the downward slide of prices. Many Nasdaq market makers didn’t answer their phones, ignoring customers, while overwhelmed NYSE specialists who had bought as sell orders flooded in later gave up or halted trading, according to the January 1988 report by the Presidential Task Force on Market Mechanisms, led by former New Jersey Republican Senator Nicholas Brady.
The article highlighted Vanguard’s comment letter:
Vanguard and its investors have benefited fiom the competition that today’s market structure facilitates. Over the past fifteen years, the competition among trading venues and significant technologtcal advancements have greatly reduced transaction costs for all investors across our markets. Although Vanguard does not engage in “high frequency trading” and does not operate a “dark pool,” we believe much of the public concern over “high fiequency trading” is misplaced and believes such activity, appropriately examined, contributes to a more efficient market that benefits all investors.
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Various groups have attempted to quantify the reduction in transaction costs over the last ten to fifteen years. The Commission will continue to receive this data throughout the comment period. While the data universally demonstrate a significant reduction in transaction costs over the last ten to fifteen years, the precise percentages vary (estimates have ranged from a reduction of 35% to more than 60%). Vanguard estimates are in this range, and we conservatively estimate that transaction costs have declined 50 bps, or 100 bps round trip. This reduction in transaction costs provides a substantial benefit to investors in the form of higher net returns. For example, if an average actively managed equity mutual fund with a 100% turnover ratio would currently provide an annual return of 9%, the same fund would have returned 8% per year without the reduction in transaction costs over the past decade.
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Vanguard supports a trade-through rule that provides “depth-of-book protection because protecting quotations at multiple price levels encourages the display of limit orders, which, for the reasons set forth above, benefits all investor.
The recent IIROC report trumpeted Canadian-style depth-of-book protection.
Vanguard believes the Commission should consider the costs and benefits of a “trade-at” rule in which a trading center that was not displaying the NBBO price at the time a marketable order was received could either: “1) execute the order with significant price improvement (such as the minimum allowable quoting increment (generally one cent)); or 2) route lSOs to full displayed size of NBBO quotations and then execute the balance of the order at the NBBO price.”
Such a rule would clearly provide an incentive to display limit orders which, as discussed above, Vanguard believes is in the best interests of all investors.
Vanguard is missing the point. The purpose of public markets is to give the private school guys the opportunity to make a fat living with no brains and less work. What do customers have to do with it?
Another good move upwards on hefty volume in the Canadian preferred share market, with PerpetualDiscounts gaining 32bp and FixedResets up 4bp. MFC issues had a notable day, with three issues featured on the nice side of the performance table. MFC.PR.A had another day of high volume; I see on CBID that the recent MFC senior bond issue, 4.079% of 2015, are quoted to yield 4.12% … basically even-yield with the preferreds, so the 160-odd bp of tax effectiveness looks very nice for a five-year term.
| 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 | 0.8337 % | 2,079.1 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.8337 % | 3,149.5 |
| Floater | 2.92 % | 3.43 % | 62,908 | 18.69 | 3 | 0.8337 % | 2,244.8 |
| OpRet | 4.87 % | -0.18 % | 91,379 | 0.21 | 9 | 0.3382 % | 2,379.6 |
| SplitShare | 5.95 % | -34.66 % | 64,288 | 0.09 | 2 | 0.1439 % | 2,364.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3382 % | 2,175.9 |
| Perpetual-Premium | 5.71 % | 5.42 % | 125,918 | 5.52 | 14 | 0.3378 % | 1,981.8 |
| Perpetual-Discount | 5.60 % | 5.68 % | 191,586 | 14.36 | 63 | 0.3216 % | 1,944.1 |
| FixedReset | 5.25 % | 3.08 % | 272,381 | 3.32 | 47 | 0.0419 % | 2,264.3 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.R | FixedReset | -1.53 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-30 Maturity Price : 25.00 Evaluated at bid price : 26.23 Bid-YTW : 4.39 % |
| SLF.PR.A | Perpetual-Discount | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 20.71 Evaluated at bid price : 20.71 Bid-YTW : 5.76 % |
| PWF.PR.E | Perpetual-Discount | 1.05 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 23.06 Evaluated at bid price : 24.00 Bid-YTW : 5.77 % |
| MFC.PR.D | FixedReset | 1.11 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-19 Maturity Price : 25.00 Evaluated at bid price : 27.30 Bid-YTW : 4.01 % |
| HSB.PR.C | Perpetual-Discount | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 22.91 Evaluated at bid price : 23.13 Bid-YTW : 5.52 % |
| GWO.PR.L | Perpetual-Discount | 1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 24.39 Evaluated at bid price : 24.60 Bid-YTW : 5.75 % |
| SLF.PR.E | Perpetual-Discount | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 19.77 Evaluated at bid price : 19.77 Bid-YTW : 5.71 % |
| TRI.PR.B | Floater | 2.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 23.20 Evaluated at bid price : 23.50 Bid-YTW : 2.22 % |
| MFC.PR.B | Perpetual-Discount | 2.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 19.57 Evaluated at bid price : 19.57 Bid-YTW : 5.98 % |
| MFC.PR.C | Perpetual-Discount | 2.44 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 18.90 Evaluated at bid price : 18.90 Bid-YTW : 5.99 % |
| RY.PR.H | Perpetual-Premium | 2.92 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-06-23 Maturity Price : 25.00 Evaluated at bid price : 25.77 Bid-YTW : 5.20 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.A | OpRet | 196,414 | Nesbitt crossed 100,000 at 25.00; RBC crossed three blocks of 25,000 each, all at the same price. YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2015-12-18 Maturity Price : 25.00 Evaluated at bid price : 25.00 Bid-YTW : 4.11 % |
| BNS.PR.Y | FixedReset | 79,498 | Scotia crossed 68,500 at 25.23. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 25.12 Evaluated at bid price : 25.17 Bid-YTW : 3.31 % |
| RY.PR.A | Perpetual-Discount | 47,835 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2040-09-13 Maturity Price : 21.35 Evaluated at bid price : 21.35 Bid-YTW : 5.26 % |
| CM.PR.D | Perpetual-Premium | 45,667 | TD crossed 28,300 at 25.38. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-05-30 Maturity Price : 25.00 Evaluated at bid price : 25.32 Bid-YTW : 5.42 % |
| BMO.PR.P | FixedReset | 43,364 | TD crossed 30,000 at 27.52. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-03-27 Maturity Price : 25.00 Evaluated at bid price : 27.50 Bid-YTW : 3.06 % |
| TRP.PR.C | FixedReset | 37,125 | RBC crossed 25,000 at 25.98. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-03-01 Maturity Price : 25.00 Evaluated at bid price : 25.88 Bid-YTW : 3.78 % |
| There were 39 other index-included issues trading in excess of 10,000 shares. | |||