There is word of a crackdown on “algorithmic” traders:
Algorithmic traders and quant funds are under close scrutiny from a U.S. Securities and Exchange Commission enforcement team responsible for policing hedge funds, the unit’s co-chief said at securities law forum.
The SEC is “very much focused” on possible misconduct by traders who primarily use computer models to execute investment strategies, and more cases in those areas are likely, Bruce Karpati said today during a Practising Law Institute panel discussion in New York. Investigators are zeroing in on firms with “aberrational performance,” he said, without giving details on practices that are under scrutiny.
The February case in which Karpati’s asset-management team accused Axa Rosenberg Group LLC of causing $217 million in customer losses by concealing a coding error was “wake-up a call for all quant managers” to be fully forthcoming about the risks of their strategies, he said at the time. Axa paid $242 million to resolve the claims.
But the quoted example is about quantitative analysis:
In late June 2009, a BRRC employee discovered an error in the Model’s computer code that had been introduced in 2007 and that effectively eliminated one of the key components in the Model for controlling for certain types of risk. This employee later discussed his finding in a meeting with Rosenberg, BRRC’s Director, and a small group of BRRC employees who were working under Rosenberg’s guidance on an enhancement to the Model. Rosenberg directed the others to keep quiet about the error and to not inform others about it, and he directed that the error not be fixed at that time. Before and after discovery of the error, ARIM’s clients were expressing dissatisfaction with their portfolios’ underperformance. During the several months that Rosenberg and the BRRC employees concealed the error, ARG, ARIM, and BRRC failed to disclose the error, misrepresented the Model’s ability to control risk, and ascribed underperformance to market volatility and factors having nothing to do with the error. Due to Rosenberg’s directive, ARG’s Global CEO did not learn of the error as soon as he should have. The error was disclosed to the Global CEO in November 2009. The error impacted more than 600 client portfolios and caused approximately $217 million in losses. ARG disclosed the error to clients on April 15, 2010.
So it’s not all that clear whether the crackdown is on algorithms or quantitative analysis. Reporters generally don’t know the difference.
Carney has assiduously promoted the government line for the past three years – maybe he’ll be rewarded:
The Harper government is pushing for the Bank of Canada Governor to be the next chief of the Financial Stability Board (FSB), the group charged with co-ordinating the overhaul of international banking regulations on behalf of the Group of 20 nations.
It was a grisly day for the Canadian preferred share market, with PerpetualDiscounts off 15bp, FixedResets down 14bp and DeemedRetractibles losing 48bp. Volatility was relatively high, with a big tilt towards the downside. Volume was anemic – more like Christmas than the start of a new quarter.
| 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 | -2.0785 % | 2,033.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -2.0785 % | 3,058.7 |
| Floater | 3.54 % | 3.55 % | 54,309 | 18.44 | 2 | -2.0785 % | 2,195.9 |
| OpRet | 4.85 % | 3.20 % | 57,947 | 1.59 | 8 | 0.0389 % | 2,443.9 |
| SplitShare | 5.41 % | -0.47 % | 53,080 | 0.40 | 4 | -0.2813 % | 2,479.6 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0389 % | 2,234.7 |
| Perpetual-Premium | 5.69 % | 4.95 % | 110,309 | 0.58 | 13 | -0.2756 % | 2,114.5 |
| Perpetual-Discount | 5.38 % | 5.51 % | 110,210 | 14.66 | 17 | -0.1478 % | 2,234.9 |
| FixedReset | 5.16 % | 3.33 % | 208,234 | 2.71 | 61 | -0.1406 % | 2,317.0 |
| Deemed-Retractible | 5.09 % | 4.60 % | 230,334 | 7.73 | 46 | -0.4838 % | 2,182.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Deemed-Retractible | -2.95 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.72 Bid-YTW : 6.40 % |
| BAM.PR.K | Floater | -2.30 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 14.85 Evaluated at bid price : 14.85 Bid-YTW : 3.55 % |
| SLF.PR.B | Deemed-Retractible | -1.90 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 6.31 % |
| BAM.PR.B | Floater | -1.85 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 14.83 Evaluated at bid price : 14.83 Bid-YTW : 3.56 % |
| MFC.PR.D | FixedReset | -1.62 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.09 Bid-YTW : 5.01 % |
| BNS.PR.O | Deemed-Retractible | -1.52 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2015-04-28 Maturity Price : 25.50 Evaluated at bid price : 26.00 Bid-YTW : 4.78 % |
| BAM.PR.M | Perpetual-Discount | -1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 21.58 Evaluated at bid price : 21.58 Bid-YTW : 5.54 % |
| PWF.PR.P | FixedReset | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 23.34 Evaluated at bid price : 25.38 Bid-YTW : 3.07 % |
| W.PR.H | Perpetual-Discount | -1.24 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 24.30 Evaluated at bid price : 24.59 Bid-YTW : 5.60 % |
| BNA.PR.E | SplitShare | -1.22 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 22.69 Bid-YTW : 6.82 % |
| PWF.PR.G | Perpetual-Premium | -1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 24.69 Evaluated at bid price : 25.01 Bid-YTW : 6.00 % |
| GWO.PR.H | Deemed-Retractible | -1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.43 Bid-YTW : 5.70 % |
| TCA.PR.X | Perpetual-Premium | -1.10 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-15 Maturity Price : 50.00 Evaluated at bid price : 50.44 Bid-YTW : 4.95 % |
| BNS.PR.J | Deemed-Retractible | -1.05 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-10-29 Maturity Price : 25.00 Evaluated at bid price : 25.50 Bid-YTW : 4.05 % |
| GWO.PR.I | Deemed-Retractible | -1.02 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.23 Bid-YTW : 5.99 % |
| SLF.PR.H | FixedReset | -1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 4.01 % |
| IAG.PR.F | Deemed-Retractible | -1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.55 Bid-YTW : 5.66 % |
| BAM.PR.J | OpRet | 1.11 % | YTW SCENARIO Maturity Type : Soft Maturity Maturity Date : 2018-03-30 Maturity Price : 25.00 Evaluated at bid price : 26.50 Bid-YTW : 4.37 % |
| CIU.PR.A | Perpetual-Discount | 1.25 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 23.00 Evaluated at bid price : 23.44 Bid-YTW : 4.94 % |
| NA.PR.O | FixedReset | 1.79 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-15 Maturity Price : 25.00 Evaluated at bid price : 27.80 Bid-YTW : 2.12 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.B | FixedReset | 321,190 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 23.17 Evaluated at bid price : 25.15 Bid-YTW : 3.67 % |
| RY.PR.N | FixedReset | 28,300 | RBC crossed 24,200 at 26.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-02-24 Maturity Price : 25.00 Evaluated at bid price : 26.90 Bid-YTW : 3.24 % |
| CM.PR.G | Perpetual-Discount | 18,265 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2041-10-03 Maturity Price : 24.55 Evaluated at bid price : 24.87 Bid-YTW : 5.42 % |
| TD.PR.M | OpRet | 15,900 | Called for redemption. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-04-30 Maturity Price : 25.25 Evaluated at bid price : 25.73 Bid-YTW : 2.70 % |
| TD.PR.I | FixedReset | 15,431 | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.22 Bid-YTW : 3.36 % |
| BNS.PR.L | Deemed-Retractible | 14,539 | YTW SCENARIO Maturity Type : Call Maturity Date : 2016-04-27 Maturity Price : 25.00 Evaluated at bid price : 24.95 Bid-YTW : 4.49 % |
| There were 10 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TCA.PR.X | Perpetual-Premium | Quote: 50.44 – 51.24 Spot Rate : 0.8000 Average : 0.5261 YTW SCENARIO |
| BNS.PR.O | Deemed-Retractible | Quote: 26.00 – 26.79 Spot Rate : 0.7900 Average : 0.5419 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 21.72 – 22.34 Spot Rate : 0.6200 Average : 0.3847 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 22.69 – 23.30 Spot Rate : 0.6100 Average : 0.4536 YTW SCENARIO |
| SLF.PR.B | Deemed-Retractible | Quote: 22.25 – 22.67 Spot Rate : 0.4200 Average : 0.2659 YTW SCENARIO |
| BNS.PR.K | Deemed-Retractible | Quote: 25.11 – 25.53 Spot Rate : 0.4200 Average : 0.2683 YTW SCENARIO |