PrefBlog

The Bloomberg editorial board wants more paperwork:

The Securities and Exchange Commission last month took a half-step by requiring markets to build a $4.1 billion system that can generate audit trails of all transactions. The trouble with this system is that trading data won’t be generated until the next day, a feature the industry insisted on. Day-old data might not help regulators much when they are called upon the instant a market blows up. (It took five months to confirm the cause of the flash crash.) Nor is it clear that the system will be able to pinpoint the identity of every party in a transaction.
…
The SEC and stock exchanges should also require major trading firms to demonstrate that their software programs are reliable before letting them go live. Now, firms are simply urged to adhere to an industry-recommended set of best practices. Unleashing a flawed program, as Knight seems to have done, is unacceptable.

Market apologists have said Knight’s errant trades caused no harm to anyone other than Knight and its shareholders, who saw the value of their investment shrink by about $600 million in a few hours. Yet who can be so certain the next bug-infested program won’t inflict much more damage? And what might have happened if Knight, which handled about 11 percent of all U.S. stock trading before the errors, had shut down?

Plus, the argument that Knight only hurt itself is bogus: Investors withdrew $127 billion from stock mutual funds in the 12 months ended in June. Repeated computer-trading misfires — not to mention the financial crisis of 2008 — erode confidence in U.S. markets. At some point, regulators and Wall Street have to decide whether the quest for speed is worth the chaos that can result.

$4.1-billion for a trade tracking system. You can put a Mars buggy on Mars for less than that. Has anybody, anywhere, ever seen a cost-benefit analysis for increased regulation? As far as I can tell, the attitude is – this might be worth something, so we should build it no matter what the cost.

As are most calls for increased regulation, Bloomberg’s argument depends upon dizzying leaps of logic and extremely vague fear-mongering:

• Yet who can be so certain the next bug-infested program won’t inflict much more damage?: Just, what, exactly, are you afraid of?
• And what might have happened if Knight, which handled about 11 percent of all U.S. stock trading before the errors, had shut down?: Golly, I don’t know. The end of the universe, maybe?
• Investors withdrew $127 billion from stock mutual funds in the 12 months ended in June. Repeated computer-trading misfires — not to mention the financial crisis of 2008 — erode confidence in U.S. markets.: Just what, if any, connection is there between these two sentences? How is confidence in US markets eroded? What is the effect of this loss of confidence?

Assiduous Reader beluga alleges:

I placed a limit order for YLO.PR.C at 43 cents today at 10am. Got two partial fills with a 100 shares left at the end of the day. I then noticed YLO.PR.C closed at 40 cents and there were trades at 0.425 and 0.40 just before 3pm.

Called to find out what happened. My order was routed to Alpha and after the partial fills didn’t go back to TSX.

This is contrary to my understanding of the National Best-Bid-and-Offer rules. Does anybody have any other ideas?

Interesting staffing kerfuffle at AGF:

AGF Management Ltd. is suing a former star manager and a U.S. investment firm, alleging they engineered the departure of most of AGF’s emerging markets team and cost the Canadian firm millions in lost business.

Patricia Perez-Coutts, who oversaw the top-performing AGF Emerging Markets mutual fund and related institutional accounts, left AGF with four members of her team in May to run money for Dallas-based Westwood Holdings Inc.

Two lessons there:

• That’s why you’ve got to give your star managers a piece of the action
• That’s why fundcos don’t promote star managers any more

I liked the Michael Osborne’s op-ed on TMX / Maple:

The approval of the Maple deal bears all the hallmarks of the creation of a “Canadian champion.” Proponents argue that we should accept reduced competition at home, in order to create Canadian champions that have the resources to take on the world. The problem is that monopolies become bloated and inefficient, and unable to compete in world markets. Instead of a Canadian champion, we get an uncompetitive Canadian backwater ripe for foreign takeover.

Ripe for foreign takeover indeed, unless the feds decide it is in the national interest for one group of Canadians to stick it to another group of Canadians. As they have done.

It was a mildly negative day for the Canadian preferred share market, with PerpetualPremiums losing 5bp, FixedResets off 3bp and DeemedRetractibles down 2bp. Volatility was mild. Volume was low.

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	0.4843 %	2,300.8
FixedFloater	0.00 %	0.00 %	0	0.00	0	0.4843 %	3,441.7
Floater	3.16 %	3.20 %	65,234	19.21	3	0.4843 %	2,484.2
OpRet	4.76 %	2.30 %	32,697	0.87	5	0.2456 %	2,536.7
SplitShare	5.49 %	5.00 %	67,493	4.64	3	-0.0533 %	2,757.9
Interest-Bearing	0.00 %	0.00 %	0	0.00	0	0.2456 %	2,319.6
Perpetual-Premium	5.30 %	4.04 %	104,784	1.15	28	-0.0549 %	2,271.0
Perpetual-Discount	4.98 %	4.97 %	99,656	15.49	3	-0.2232 %	2,510.3
FixedReset	4.99 %	3.09 %	181,174	3.79	71	-0.0288 %	2,421.7
Deemed-Retractible	4.96 %	3.54 %	139,111	1.19	46	-0.0170 %	2,351.6

Performance Highlights
Issue	Index	Change	Notes
PWF.PR.O	Perpetual-Premium	-1.28 %	YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.31 Bid-YTW : 4.87 %
BAM.PR.B	Floater	1.20 %	YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-08-07 Maturity Price : 16.85 Evaluated at bid price : 16.85 Bid-YTW : 3.14 %

Volume Highlights
Issue	Index	Shares Traded	Notes
TD.PR.G	FixedReset	202,317	Nesbitt crossed blocks of 147,200 and 50,000, both at 26.62. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.64 Bid-YTW : 2.42 %
BMO.PR.O	FixedReset	62,996	TD crossed 29,800 and 26,900, both at 26.68. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-05-25 Maturity Price : 25.00 Evaluated at bid price : 26.79 Bid-YTW : 2.24 %
FTS.PR.H	FixedReset	58,745	National crossed 50,000 at 25.42. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-08-07 Maturity Price : 23.59 Evaluated at bid price : 25.55 Bid-YTW : 2.85 %
TD.PR.O	Deemed-Retractible	56,230	Desjardins crossed 50,000 at 25.98. YTW SCENARIO Maturity Type : Call Maturity Date : 2012-09-06 Maturity Price : 25.75 Evaluated at bid price : 25.97 Bid-YTW : -4.51 %
ENB.PR.N	FixedReset	52,972	Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-08-07 Maturity Price : 23.16 Evaluated at bid price : 25.20 Bid-YTW : 3.89 %
MFC.PR.B	Deemed-Retractible	52,088	Scotia crossed 33,700 at 23.56. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.59 Bid-YTW : 5.54 %
There were 18 other index-included issues trading in excess of 10,000 shares.

Wide Spread Highlights
Issue	Index	Quote Data and Yield Notes
BNA.PR.D	SplitShare	Quote: 26.43 – 26.80 Spot Rate : 0.3700 Average : 0.2510 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-09-06 Maturity Price : 26.00 Evaluated at bid price : 26.43 Bid-YTW : 1.00 %
PWF.PR.O	Perpetual-Premium	Quote: 26.31 – 26.63 Spot Rate : 0.3200 Average : 0.2024 YTW SCENARIO Maturity Type : Call Maturity Date : 2018-10-31 Maturity Price : 25.00 Evaluated at bid price : 26.31 Bid-YTW : 4.87 %
BAM.PR.O	OpRet	Quote: 25.73 – 25.99 Spot Rate : 0.2600 Average : 0.1529 YTW SCENARIO Maturity Type : Option Certainty Maturity Date : 2013-06-30 Maturity Price : 25.00 Evaluated at bid price : 25.73 Bid-YTW : 2.30 %
POW.PR.A	Perpetual-Premium	Quote: 25.41 – 25.80 Spot Rate : 0.3900 Average : 0.2877 YTW SCENARIO Maturity Type : Call Maturity Date : 2012-09-06 Maturity Price : 25.00 Evaluated at bid price : 25.41 Bid-YTW : -9.71 %
HSB.PR.E	FixedReset	Quote: 26.80 – 27.06 Spot Rate : 0.2600 Average : 0.1664 YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-30 Maturity Price : 25.00 Evaluated at bid price : 26.80 Bid-YTW : 3.07 %
VNR.PR.A	FixedReset	Quote: 25.86 – 26.10 Spot Rate : 0.2400 Average : 0.1582 YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 25.86 Bid-YTW : 3.79 %

This entry was posted on Tuesday, August 7th, 2012 at 8:38 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.