PrefBlog

The SEC has proposed an asinine, politicized, rule:

The proposed rule would prohibit securitization participants of an ABS for a designated time period from engaging in certain transactions that would involve or result in any material conflict of interest. Two criteria to determine whether the transaction involves a material conflict of interest are set out in the rule proposal.
…
EXAMPLE 1: Among other things, the proposed rule could — if certain conditions are otherwise met — prohibit a firm from packaging an ABS, selling the ABS to an investor, and subsequently shorting the ABS to potentially profit at the same time as the investor would incur losses.

EXAMPLE 2: The proposed rules also could — if certain conditions are otherwise met — prohibit a firm from allowing a third party to help assemble an ABS in a way that creates an opportunity for the third party to profit from the failure of the ABS.

So, when you’re putting together an ABS, you’re not allowed to ask the guy who’s shorting the stuff to you what he’s willing to sell. And don’t take a position opposite your clients, because the SEC knows for a fact that no investor who has ever lived is smart enough to be allowed to take a view contrary to a dealer.

S&P downgraded Italy:

Italy’s credit rating was cut one level to A by Standard & Poor’s, which said the outlook remains “negative.”

The rating for Italy, which has Europe’s second-largest debt load, was lowered from A+, S&P said today in a statement. The firm said Italy’s net general government debt is the highest among A rated sovereigns, and now expects it to peak later and at a higher level than it previously anticipated.

“In our view, Italy’s economic growth prospects are weakening and we expect that Italy’s fragile governing coalition and policy differences within parliament will continue to limit the government’s ability to respond decisively to domestic and external macroeconomic challenges,” S&P said in a statement.

Italy follows Spain, Ireland, Portugal, Cyprus and Greece as euro-region countries having their credit rating cut this year.

Dealbreaker has another excellent piece on the problems regarding defining “proprietary trading”.

The Canadian preferred share market took a loss today, with PerpetualDiscounts losing 29bp, FixedResets down 9bp and DeemedRetractibles off 4bp. There was an uptick in volatility, all to the downside. Volume was so low one might be forgiven for thinking it was Christmas!

This entry was posted on Monday, September 19th, 2011 at 10:28 pm 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.