Something amazing has been said about dark pools:
While money managers don’t always like what happens in the $23 trillion U.S. stock market, they’re too fond of dark pools to let them go extinct, according to a professor whose research was presented to the Senate.
“Dark pools have existed forever,” Robert Battalio of the University of Notre Dame said in a phone interview last week. “You can shut down these dark pools and just new forms will arise somewhere else.”
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“There are bad dentists out there, there are bad store clerks, so you’ve got to separate the structure from the bad apple,” Battalio said. “Order flow will always have multiple venues to execute on — upstairs markets — because one size doesn’t fit all.”
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The best way for investors to avoid mistreatment is to analyze the performance of their brokers to make sure they’re getting a fair shake, Battalio said.
“analyze the performance of their brokers”? It will never happen, but it’s nice to know I’m not the only guy making ridiculous suggestions.
There’s a new marketing proposal designed to tighten the hegemony of the usual suspects over Canadian finance:
Canada’s newest planned stock exchange is a step closer to reality, as regulators laid out the grounds under which the Aequitas exchange could be approved and sought comments from market users on some of the more controversial aspects.
Aequitas’s Neo Exchange is designed to appeal to traders who are concerned that their trades might be bait for predatory high-frequency trading strategies (a la those detailed in the book Flash Boys), and so has been carefully constructed to try to ensure any such strategies won’t work.
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Aequitas is owned by a group of investors that spans brokers and investors, including Barclays, Royal Bank of Canada, BCE Inc., CI Investments, ITG Canada, and OMERS.
This will also appeal to traders who don’t want to analyze the performance of their brokers and are willing to pay extra to avoid having to learn something new.
Bloomberg has a good editorial on the BNP Paribas affair:
Some will argue that the bank got off too lightly. A more telling criticism is that no individuals have been prosecuted.
The documents show that top managers knowingly — flagrantly — conspired to skirt U.S. sanctions. Employees acted on orders from Paris and Geneva-based managers who didn’t want to lose the lucrative business of Sudanese, Cuban and Iranian entities. Those countries were willing to pay dearly to be able to trade internationally while under U.S. embargo. BNP ultimately handled $190 billion in transactions for them.
An excellent jobs indicator hammered Treasuries today:
Treasuries fell a second day after a private jobs report boosted speculation growth is strong enough for the Federal Reserve to consider higher rates. U.S. stocks were little changed near records, while emerging-market equities climbed to a 13-month high and copper gained.
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The 10-year Treasury yield rose six basis points to 2.62 percent.
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U.S. companies added 281,000 workers to their payrolls in June, figures from the ADP Research Institute showed today, before the Labor Department’s monthly job’s report tomorrow. A gauge of global equities closed at an all-time high yesterday after data showed manufacturing activity expanding in countries from China to the U.K. and the U.S. Federal Reserve Chair Janet Yellen said there is no need to change current monetary policy to address financial stability concerns.
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Yellen said last month that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth. She emphasized the need to put more Americans back to work and downplayed concerns about asset-price bubbles and incipient inflation.Yellen said today that regulatory tools, and not interest rates, should be the main way to promote financial stability. The comments are significant because economists worry that central banks may now be causing a worldwide reach for yield as interest rates are suppressed by monetary policy.
… and a bounce in the loonie is causing concern:
The dollar first hit the 94-cent mark yesterday, during the Canada Day holiday, and pushed higher today to reach 94.1 cents, before slipping below to about 93.8 cents by early afternoon.
Ms. Sutton, Scotiabank’s chief currency strategist, expects the loonie has further room to run, though that has to stop at some point.
“Is it sustainable that CAD sits at 94?” she said, referring to the currency by its symbol.
“It’s probably making the Bank of Canada incredibly uncomfortable, as well as exporters,” Ms. Sutton added, speculating that the central bank will cite the stronger currency in its next policy outing later this month.
The Bank of Canada under Governor Stephen Poloz is counting on stronger exports, which cost less in the U.S. market when the loonie declines.
Bloomberg has an interesting piece on the de-malling of America:
A Dying Breed: What some writers used to call the malling of America is done. Try to find anyone breaking ground for a new regional shopping mall, those hulking structures with 100-plus stores surrounded by vast asphalt parking lots. Since 1990, when 16 million-square-feet of mall space opened, building has tailed off, and 2007 was the first year in more than four decades when no large malls opened in the U.S. Only one has opened since then, in 2012.
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Holdout Politicians: Malls are, in large measure, creations of tax policy and regulatory benefits. Mall construction took off in the 1950s, and again in the early 1980s, when changes to the tax code let financiers recover their investments faster with accelerated depreciation schedules, according to historian Thomas Hanchett of the Levine Museum of the New South in Charlotte, North Carolina. Mall developers also took advantage of legal changes in the 1960s and 1970s that allowed companies known as real estate investment trusts to pass almost all of their income through to investors tax-free.Malls are still getting breaks. Last year, Minnesota’s legislature approved $250 million in tax benefits to help pay for a doubling in size of the country’s second-biggest mall, Mall of America. The money came from a fund set up to reduce economic disparities between rich and poor areas. New Jersey, meanwhile, has funneled $390 million to a struggling mall project in the Meadowlands known as Xanadu that was supposed to open in 2006. The developers now expect the mall to open in 2016 with a new name — American Dream.
It was another good day for the Canadian preferred share market, as it continued its recent tradition of ignoring the bond market completely (at least on a day-to-day basis); PerpetualDiscounts won 18bp, FixedResets were up 6bp and DeemedRetractibles gained 3bp. Volatility was muted. Volume was low.
PerpetualDiscounts now yield 5.21%, equivalent to 6.77% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 4.3%, so the pre-tax interest-equivalent spread is now about 245bp, unchanged from the figure reported June 18.
| 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 | 1 | 0.1381 % | 2,531.9 |
| FixedFloater | 4.29 % | 3.57 % | 30,124 | 18.20 | 1 | 0.5452 % | 3,999.8 |
| Floater | 2.90 % | 2.99 % | 44,312 | 19.78 | 4 | 0.1381 % | 2,733.8 |
| OpRet | 4.01 % | -8.40 % | 88,801 | 0.08 | 1 | 0.1568 % | 2,725.4 |
| SplitShare | 4.69 % | 3.72 % | 54,845 | 3.15 | 6 | 0.1657 % | 3,129.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1568 % | 2,492.1 |
| Perpetual-Premium | 5.52 % | -6.43 % | 80,370 | 0.08 | 17 | 0.1040 % | 2,419.4 |
| Perpetual-Discount | 5.24 % | 5.21 % | 112,542 | 15.03 | 20 | 0.1751 % | 2,571.8 |
| FixedReset | 4.39 % | 3.58 % | 206,143 | 8.62 | 76 | 0.0562 % | 2,557.9 |
| Deemed-Retractible | 4.98 % | 1.30 % | 136,432 | 0.15 | 43 | 0.0296 % | 2,546.5 |
| FloatingReset | 2.68 % | 2.34 % | 120,842 | 3.85 | 6 | -0.3358 % | 2,498.5 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Deemed-Retractible | -1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 23.34 Bid-YTW : 5.47 % |
| ELF.PR.G | Perpetual-Discount | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-02 Maturity Price : 21.78 Evaluated at bid price : 22.16 Bid-YTW : 5.36 % |
| TRP.PR.B | FixedReset | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-02 Maturity Price : 20.35 Evaluated at bid price : 20.35 Bid-YTW : 3.54 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| ENB.PF.C | FixedReset | 146,550 | TD crossed blocks of 50,000 and 40,000, both at 25.21. Dejsardins bought 14,900 from anonymous at 25.30. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-02 Maturity Price : 23.22 Evaluated at bid price : 25.31 Bid-YTW : 4.10 % |
| PWF.PR.R | Perpetual-Premium | 100,931 | Desjardins crossed 100,000 at 25.70. YTW SCENARIO Maturity Type : Call Maturity Date : 2021-04-30 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 5.17 % |
| GWO.PR.N | FixedReset | 97,643 | Desjardins crossed blocks of 71,000 and 21,400, both at 21.50. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.50 Bid-YTW : 4.70 % |
| BMO.PR.P | FixedReset | 82,495 | Scotia crossed 25,00 at 25.70. TD crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-02-25 Maturity Price : 25.00 Evaluated at bid price : 25.65 Bid-YTW : 2.21 % |
| ENB.PR.D | FixedReset | 66,629 | Nesbitt crossed blocks of 25,000 and 27,000, both at 24.96. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-02 Maturity Price : 23.25 Evaluated at bid price : 24.89 Bid-YTW : 3.86 % |
| BMO.PR.S | FixedReset | 62,010 | Scotia crossed 25,000 at 25.50. TD crossed 25,000 at the same price. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2044-07-02 Maturity Price : 23.33 Evaluated at bid price : 25.51 Bid-YTW : 3.73 % |
| There were 22 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| MFC.PR.F | FixedReset | Quote: 23.10 – 23.70 Spot Rate : 0.6000 Average : 0.4016 YTW SCENARIO |
| GWO.PR.N | FixedReset | Quote: 21.50 – 21.92 Spot Rate : 0.4200 Average : 0.2548 YTW SCENARIO |
| RY.PR.E | Deemed-Retractible | Quote: 25.52 – 25.81 Spot Rate : 0.2900 Average : 0.1871 YTW SCENARIO |
| SLF.PR.I | FixedReset | Quote: 25.90 – 26.26 Spot Rate : 0.3600 Average : 0.2574 YTW SCENARIO |
| GWO.PR.L | Deemed-Retractible | Quote: 25.70 – 25.99 Spot Rate : 0.2900 Average : 0.1958 YTW SCENARIO |
| IAG.PR.A | Deemed-Retractible | Quote: 23.34 – 23.60 Spot Rate : 0.2600 Average : 0.1759 YTW SCENARIO |