Fascinating developments in High Frequency Trading technology:
Currently, data take 64 milliseconds (give or take a few fractions of an eye blink) to travel round-trip between New York and London along a cable built in 1998 called the AC-1.
According to its New Jersey-based operator, Hibernia Atlantic, the $300 million Project Express will be 5.2 milliseconds faster than the AC-1, with an execution time of 59.6 milliseconds. That will make Project Express the world’s fastest transatlantic cable when it opens in 2013 and the first to achieve round-trip trading speeds of less than 60 milliseconds. Unless someone beats them to it.
As of this morning, it appears someone will. A small company called Perseus Telecom, in partnership with a subsidiary of India’s big telecom company, Reliance Communications, has announced the launch of QuanTA, a fiber-optic cable stretching from Long Island to the U.K. with an expected round-trip execution time of less than 60 milliseconds by the end of 2012.
This must be for arbitrage between Europe & New York – if it was just New York, it would be easier to set up the infrastructure here, with colocation on the Exchange floor.
The Europeans are getting a little testy:
German Chancellor Angela Merkel said balanced budgets are the best answer to the debt crisis, rebuffing French Socialist presidential candidate Francois Hollande’s campaign pledge to reverse Europe’s austerity drive.
…
Merkel, who faces two German state elections in May and a national election in the fall of 2013, joined with Sarkozy to craft the euro area’s crisis response over the past year and backed him for re-election. She insisted on the need for austerity today, saying Europe’s “credibility” depends on reducing deficits and debt.“We’re not saying that saving solves all problems,” she told a conference in Berlin. Still, “you can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.”
It has become an article of faith that you shouldn’t trust the mainstream Credit Rating Agencies because – gasp! – they’re paid by the issuers. You should choose a investor-pay agency:
The U.S. Securities and Exchange Commission accused Egan-Jones Ratings Co. and founder Sean Egan of making misrepresentations about the firm’s experience rating asset-backed and government securities in a 2008 application to become a nationally recognized statistical ratings organization.
Egan-Jones falsely claimed in the application that it had about 150 outstanding ABS issuer ratings and 50 government ratings, the SEC said today in an administrative proceeding filed in Washington. At the time of the July 2008 application, the firm hadn’t issued any such ratings and therefore didn’t meet requirements for registration as an NRSRO, the SEC said.
Egan-Jones is one of nine firms registered with the SEC as an NRSRO, which means companies can use their credit ratings to meet regulatory requirements. Egan-Jones is paid by investors.
There’s some more cheerful European bank news:
European lenders, more reliant than ever on emergency aid after borrowing $1.3 trillion from their central bank, may need additional cash infusions until policy makers stem the crisis engulfing Spain and Italy.
After more than 30 bond sales in the first quarter, no bank has sold unsecured debt this month, and the cost of insuring against default has soared to levels last seen in January. Financial stocks, which rallied 20 percent following the European Central Bank’s December decision to provide unlimited three-year loans, are now 2 percent lower since then.
Investors are balking after some lenders used the ECB cash to boost holdings of sovereign debt and governments struggled to rein in deficits. Because banks post collateral in exchange for the ECB loans, the amount unsecured bondholders would get back in a default has shrunk. That has raised funding costs for what Morgan Stanley estimates is about 700 billion euros ($924 billion) of debt lenders must refinance by the end of 2013.
It was a mixed day for the Canadian preferred share market, with PerpetualPremiums down 6bp, FixedResets up 6bp and DeemedRetractibles winning 9bp. The Performance Highlights table is comprised entirely of BAM winners, but I don’t think much can be read into that: the PerpetualDiscounts are just bouncing back from a bit of weakness, and the BAM Floaters are the only Floaters in the index. Volume was below average.
Update, 2012-4-25: This post originally reported after-tax yields. The following is pre-tax:
| 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 | 3.2477 % | 2,506.6 |
| FixedFloater | 4.42 % | 3.78 % | 32,371 | 17.80 | 1 | 0.1399 % | 3,564.5 |
| Floater | 2.88 % | 2.89 % | 44,101 | 20.00 | 3 | 3.2477 % | 2,706.4 |
| OpRet | 4.76 % | 2.73 % | 52,856 | 1.15 | 5 | -0.1225 % | 2,504.0 |
| SplitShare | 5.25 % | 0.32 % | 74,454 | 0.64 | 4 | 0.2382 % | 2,693.8 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1225 % | 2,289.7 |
| Perpetual-Premium | 5.47 % | 1.73 % | 80,983 | 0.11 | 23 | -0.0603 % | 2,222.8 |
| Perpetual-Discount | 5.17 % | 5.23 % | 154,665 | 15.05 | 10 | 0.3986 % | 2,411.1 |
| FixedReset | 5.02 % | 3.02 % | 191,000 | 2.19 | 67 | 0.0585 % | 2,398.7 |
| Deemed-Retractible | 4.97 % | 3.77 % | 196,015 | 1.99 | 46 | 0.0926 % | 2,309.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| BAM.PR.M | Perpetual-Discount | 1.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-24 Maturity Price : 22.44 Evaluated at bid price : 22.85 Bid-YTW : 5.23 % |
| BAM.PR.N | Perpetual-Discount | 1.38 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-24 Maturity Price : 22.42 Evaluated at bid price : 22.76 Bid-YTW : 5.25 % |
| BAM.PR.C | Floater | 1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-24 Maturity Price : 17.92 Evaluated at bid price : 17.92 Bid-YTW : 2.95 % |
| BAM.PR.B | Floater | 3.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-24 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 2.85 % |
| BAM.PR.K | Floater | 4.76 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-24 Maturity Price : 18.26 Evaluated at bid price : 18.26 Bid-YTW : 2.89 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PR.F | FixedReset | 80,843 | Desjardins crossed 15,000 at 25.75; RBC crossed blocks of 25,000 and 11,500, both at 25.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.76 Bid-YTW : 3.66 % |
| SLF.PR.D | Deemed-Retractible | 69,501 | RBC crossed 65,000 at 22.75. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.71 Bid-YTW : 5.76 % |
| BMO.PR.M | FixedReset | 66,800 | Nesbitt crossed 54,500 at 25.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2013-08-25 Maturity Price : 25.00 Evaluated at bid price : 25.88 Bid-YTW : 2.95 % |
| ELF.PR.H | Perpetual-Discount | 45,280 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-04-24 Maturity Price : 24.61 Evaluated at bid price : 25.01 Bid-YTW : 5.54 % |
| TD.PR.K | FixedReset | 42,077 | Nesbitt crossed 40,000 at 26.90. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.96 Bid-YTW : 2.64 % |
| CM.PR.M | FixedReset | 36,500 | RBC crossed 25,000 at 27.25. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 27.20 Bid-YTW : 2.46 % |
| There were 24 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.E | Perpetual-Premium | Quote: 25.17 – 25.48 Spot Rate : 0.3100 Average : 0.2300 YTW SCENARIO |
| ENB.PR.A | Perpetual-Premium | Quote: 26.00 – 26.24 Spot Rate : 0.2400 Average : 0.1617 YTW SCENARIO |
| RY.PR.B | Deemed-Retractible | Quote: 25.76 – 26.06 Spot Rate : 0.3000 Average : 0.2247 YTW SCENARIO |
| RY.PR.G | Deemed-Retractible | Quote: 25.52 – 25.75 Spot Rate : 0.2300 Average : 0.1623 YTW SCENARIO |
| TCA.PR.Y | Perpetual-Premium | Quote: 52.17 – 52.50 Spot Rate : 0.3300 Average : 0.2725 YTW SCENARIO |
| BAM.PF.A | FixedReset | Quote: 25.30 – 25.49 Spot Rate : 0.1900 Average : 0.1385 YTW SCENARIO |