ZeroHedge squared its rot for a good booHooHoo about the Litvak charges mentioned on January 28:
Since for the most part, the buyside traders operated with other people’s money, they were largely indiscriminate on the fine pricing nuances of the acquisition (or disposition) of the securities at hand, and while to the “other people’s money” under management whether a given bond was bought for 55 or 55.75, or a given MBS was sold for 72-6 or 72-16 meant little (after all the trade was driven by a big picture view that the security would go up or down much more and certainly enough to cover the bid/ask spread, resulting in much larger profits upon unwind), the transaction price had a huge impact for the bank traders-cum-salesmen arranging said deals. Because when one is selling a $40 million MBS block, a 1 point price swing equals a difference of $400,000. Make 15 such deals per year, and one’s $1,000,000 bonus (assuming a ~15% cut on the profits) is in the bag.
Golly! Whoever would have thought that the sell-side exists to make money?
I once had a buy-side trader tell me he didn’t care much about the pennies – if he got the direction right, he’d do just fine. His intention was to impress me with how much of a gun he was – and to sneer at my scrabbling in the dirt for pennies – but it didn’t work out that way.
Sadly, we have not yet been informed regarding the identities grossly incompetent (or negligent. One of the two.) buy-side traders in the Litvak case; nor does it appear that action will be taken against them for their dereliction of duty. Performance, schmerformance.
The Canadian preferred share market ended the month on a downbeat, with PerpetualPremiums dipping 2bp, FixedResets down 8bp and DeemedRetractibles off 1bp. Volatility was low. Volume was very heavy.
| 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 | -0.1685 % | 2,552.0 |
| FixedFloater | 4.17 % | 3.50 % | 28,868 | 18.36 | 1 | 0.0440 % | 3,896.4 |
| Floater | 2.73 % | 2.92 % | 68,934 | 19.92 | 4 | -0.1685 % | 2,755.5 |
| OpRet | 4.62 % | 1.38 % | 59,944 | 0.38 | 4 | 0.2100 % | 2,600.7 |
| SplitShare | 4.57 % | 4.40 % | 42,671 | 4.28 | 2 | 0.0597 % | 2,914.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2100 % | 2,378.1 |
| Perpetual-Premium | 5.25 % | 0.45 % | 91,070 | 0.09 | 30 | -0.0219 % | 2,349.3 |
| Perpetual-Discount | 4.86 % | 4.91 % | 145,393 | 15.61 | 4 | 0.1734 % | 2,639.9 |
| FixedReset | 4.92 % | 2.93 % | 262,058 | 3.55 | 78 | -0.0782 % | 2,481.5 |
| Deemed-Retractible | 4.88 % | 2.82 % | 139,006 | 0.31 | 45 | -0.0052 % | 2,430.6 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| FTS.PR.H | FixedReset | -2.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-31 Maturity Price : 23.66 Evaluated at bid price : 25.45 Bid-YTW : 2.88 % |
| PWF.PR.P | FixedReset | -1.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-31 Maturity Price : 23.53 Evaluated at bid price : 25.45 Bid-YTW : 3.04 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Z | FixedReset | 135,281 | TD crossed 50,000 at 25.15. Desjardins crossed blocks of 43,000 and 26,500, both at 25.03. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.01 Bid-YTW : 3.12 % |
| ENB.PR.T | FixedReset | 124,763 | TD and Scotia both crossed 25,000 at 25.55; TD bought 10,000 from Nesbitt at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2019-06-01 Maturity Price : 25.00 Evaluated at bid price : 25.52 Bid-YTW : 3.76 % |
| BAM.PF.C | Perpetual-Discount | 100,300 | RBC crossed 50,000 at 25.00; TD crossed 34,600 at the same price, then bought 10,000 from CIBC at the same price again. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-31 Maturity Price : 24.61 Evaluated at bid price : 25.00 Bid-YTW : 4.91 % |
| HSE.PR.A | FixedReset | 83,800 | Desjardins crossed 35,000 at 26.40. RBC crossed 19,900 and Desjardins crossed 25,000, both at 26.45. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-03-31 Maturity Price : 25.00 Evaluated at bid price : 26.48 Bid-YTW : 2.63 % |
| MFC.PR.D | FixedReset | 81,343 | Desjardins crossed 12,600 at 26.60; RBC crossed 22,600 at 26.79. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-06-19 Maturity Price : 25.00 Evaluated at bid price : 26.72 Bid-YTW : 2.13 % |
| BNS.PR.M | Deemed-Retractible | 72,839 | RBC crossed 35,400 at 25.88. YTW SCENARIO Maturity Type : Call Maturity Date : 2016-07-27 Maturity Price : 25.00 Evaluated at bid price : 25.82 Bid-YTW : 3.52 % |
| There were 58 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| PWF.PR.K | Perpetual-Premium | Quote: 25.25 – 26.00 Spot Rate : 0.7500 Average : 0.4275 YTW SCENARIO |
| TCA.PR.Y | Perpetual-Premium | Quote: 52.45 – 53.25 Spot Rate : 0.8000 Average : 0.5283 YTW SCENARIO |
| PWF.PR.P | FixedReset | Quote: 25.45 – 25.88 Spot Rate : 0.4300 Average : 0.2820 YTW SCENARIO |
| FTS.PR.H | FixedReset | Quote: 25.45 – 25.80 Spot Rate : 0.3500 Average : 0.2339 YTW SCENARIO |
| TRI.PR.B | Floater | Quote: 22.95 – 24.00 Spot Rate : 1.0500 Average : 0.9480 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 26.49 – 26.75 Spot Rate : 0.2600 Average : 0.1714 YTW SCENARIO |