PrefBlog

Who says Canada’s big financial institutions aren’t responsive and socially forward-looking? They have demonstrated yet again their concern about the financial comfort of the mentally deficient:

A group including Royal Bank of Canada and five other large investment firms is launching a competitor to the Toronto Stock Exchange, which handles the most trading in Canada.

The new market is designed to attract investors who are upset with what they see as unfair competition from high-frequency traders, who use ultrafast computers to exploit market quirks or to try to get ahead of other investors. The success of the new exchange may hinge on how much discontent there is with high-frequency trading (HFT) activity.
…
The plan is the product of months of work by RBC and a group of supporters including mutual fund giants IGM Financial Inc. and CI Financial Corp., Canadian pension fund PSP Investments and international brokerages ITG and Barclays.

‘Boo-hoo-hoo!’ cry the traders, “Our lunch is being eaten by a mob of parvenu geeks who understand these complicated computer thingamajigs! Save us, save us!’

‘Certainly!’ answer the bosses. ‘We’ll open up a new exchange that makes competition illegal! That will boost profits and cover up our incompetence!’

‘Great idea!’ enthuse the regulators. ‘Just give us a little cut of the take and we’ll make the Competition Act … go away.’

Aequitas, naturally enough, claims its major purpose is to enable double-dipping on transaction fees paid by clients:

Our stakeholders are professional money managers, pension funds, institutional and retail brokers and Canadian issuers, who believe there should be a level playing field for all market participants. A new and different exchange that strikes the right balance between liquidity, price discovery and cost efficiency, and enhances markets for the long-term investor.

It was another day of impressive bounce-back for the Canadian preferred share market, with PerpetualPremiums winning 66bp, FixedResets gaining 26bp and DeemedRetractibles up 65bp. The Performance Highlights table is suitably lengthy. Volume was very high.

PerpetualDiscounts now yield 5.65%, equivalent to 7.34% interest at the standard equivalency factor of 1.3x. Long Corporates now yield 4.65%, so the pre-tax interest-equivalent spread is now about 270bp, hugely elevated from post-Crunch norms and from the 235bp reported June 12.

This entry was posted on Wednesday, June 26th, 2013 at 9:09 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.