Matthew Katke has pleaded guilty to being a bond trader:
A former Nomura Holdings Inc. and Royal Bank of Scotland Group Plc trader pleaded guilty in a securities-fraud case and agreed to cooperate with U.S. prosecutors.
Matthew Katke pleaded guilty Wednesday to conspiracy to commit securities fraud for participating in a multimillion-dollar scheme to cheat customers who bought and sold bonds, U.S. Attorney Deirdre Daly in Connecticut said in a statement. A lawyer for Katke, Richard Albert, declined to comment on the plea.
…
As part of the scheme, Katke and his co-conspirators made misrepresentations to induce buying customers to pay inflated prices and sellers who were customers to accept deflated prices for bonds, prosecutors said.
It’s basically similar to the Litvak case, last discussed on PrefBlog on March 7, 2014, which is currently being appealed:
But the government failed to prove that Litvak acted with the fraudulent intent necessary for a securities fraud conviction, his attorneys told the Second Circuit Wednesday, adding that the court failed to instruct the jury that they couldn’t convict him without that element.
“The government prosecuted Mr. Litvak for conduct that was not a crime,” attorneys for Litvak wrote in the brief. “The district court’s deficient jury instructions, and its exclusion of evidence central to Mr. Litvak’s defenses of immateriality and good faith, exacerbated the flaws inherent in the government’s theory of the case and enabled the jury to reach a verdict that does not comply with the law.”
…
But Litvak’s attorneys countered Wednesday that under the government’s theory, “garden-variety statements” made in the course of any negotiation could be used to support felony charges.“Every car salesman who tells a customer that he cannot lower his price any further because he would earn only a miniscule profit on the sale as it is would be guilty of fraud,” they said in the brief.
Although Litvak was sentenced in July, the Second Circuit in October granted his bail request while he awaits the outcome of his appeal, saying there’s a substantial chance Litvak’s conviction will be overturned.
But the war on markets is being led by weenies who’ve never traded a bond:
Investigators have been finding signs that dealers are lying to clients and striking improper deals such as parking debt, Michael Osnato, head of the complex financial instruments group in the Securities and Exchange Commission’s enforcement division, said in an interview earlier this year. He called bad behavior in the market “more pervasive than we would like.”
So we must all be regulators (until the objective of making everything exchange-traded has been reached):
Regulators have been trying to change behavior on Wall Street after the worst financial crisis since the Great Depression, extracting tens of billions of dollars in settlements for probes ranging from sales of mortgage bonds to the setting of benchmark interest rates.
Banks placed at least eight traders on leave last year amid investigations of activities after the financial crisis in the markets for bonds backed by loans and leases, where trades aren’t executed on exchanges and prices generally aren’t disclosed publicly, people with knowledge of the decisions said at the time.
“People in the industry are scared of making a mistake or even asking a question,” said Andrew J. Frisch, a lawyer who’s represented people against whom enforcement actions have been brought. The heightened scrutiny and sense that it can lead to arbitrary regulatory actions is putting traders on a “knife’s edge,” he said.
The government’s case against former Jefferies Group LLC trader Jesse Litvak raised the specter that certain types of alleged dishonesty can be treated as criminal even though they’re regarded as commonplace by traders and investors. The Litvak case is one model for future potential action by investigators, people with knowledge of the matter said in November.
…
The agency is using technology to further its policing of markets, combing repositories of data such as Finra’s Trace system to look for red flags instead of waiting for complaints, he said. Employers as well as individuals may be held accountable, he said.
And adult behaviour will no longer be required:
Canter testified for the prosecution saying the spreadsheet showed that Litvak had misled him about how much Jefferies had paid for bonds, including one instance when Canter agreed to raise a bid, yet the firm still paid the original price.
Canter, then AllianceBernstein’s portfolio manager responsible for its public-private investment fund, said Litvak apologized after being confronted following a long weekend. Litvak said it was a “hard year” and that “guys were doing whatever they needed” to make money, according to Canter. Canter said he was “very angry” and yelled at Litvak.
Canter told the jury that he put Jefferies in “the penalty box” after confronting Litvak in November 2011, stopped doing business with the firm for about a month and hadn’t done much with Jefferies since.
Because regulation is wonderful:
David Sutton is looking for the worst possible news about Uber Technologies. An accident in San Francisco, an assault in Boston: Such bad tidings for Uber are ammunition for Sutton, a 48-year-old publicist. “Uber is a creep magnet,” Sutton says in a news release sent to U.S. local and national media outlets in February.
Sutton is a hired gun in the dirty war that’s broken out between old-line taxi companies and Uber, the ride-share phenom. His client, a powerful trade association, represents 1,000 taxi and limousine firms worldwide. These firms want to kill the young juggernaut—or at least buy themselves enough time to develop rival car-hailing apps.
…
Behind the scenes, one of the world’s largest private transportation companies—a firm few people have probably ever heard of—is exerting pressure through operators like Sutton. The company, Transdev, is Uber’s single biggest competitor. It has 10,000 vehicles in more than 100 cities worldwide, including Denver, London, and Paris, as well as shuttle services to 50 airports in North America. Transdev is co-owned by two French companies—Veolia Environnement, a public utility company, and Caisse des Dépôts et Consignations, a state-owned bank. And it’s lobbying hard to contain the disruption to the $11 billion global taxi market.
…
Joseph says Transdev subsidiaries have prompted investigations into Uber by sending letters to regulators in core markets like Colorado, Maryland, and Pennsylvania. Transdev was also among the companies that took the battle to a commercial court in Paris, which last year resulted in a 100,000-euro ($107,000) fine for Uber’s UberPop ride-sharing service, Europe’s equivalent of UberX.
On another note, there is push to make American universities more expensive members of the Junior Justice League:
Three U.S. senators introduced a new bill on Wednesday, March 11, that would require all colleges receiving federal funding to appoint an independent advocate to help sexual assault victims.
The revamped Survivor Outreach and Support on Campus Act, also known as the S.O.S. Campus Act, is sponsored by Democratic Senators Barbara Boxer of California, Kirsten Gillibrand of New York, and Tim Kaine of Virginia. It hits the Senate floor weeks after a dozen senators introduced a bipartisan sexual assault bill that would steepen penalties for colleges that fail to report attacks.
If passed, the legislation would require colleges receiving federal funding to appoint a confidential, independent advocate to guide students who’ve reported being sexually assaulted through the disciplinary process. The advocate would help students access medical care and forensic exams, if necessary; make sure students are aware of their options for reporting sexual assault to law enforcement; and help students get counseling and crisis intervention services. They would not require students to report the sexual assault to police or to university officials.
It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 7bp, FixedResets up 8bp and DeemedRetractibles off 10bp. Despite this apparent calm, the Performance Highlights table shows a lot of churn, dominated by winning FixedResets. Volume was above average.
PerpetualDiscounts now yield 5.01%, equivalent to 6.51% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.8%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 270bp, a narrowing from the 280bp reported March 4.
For as long as the FixedReset market is so violently unsettled, I’ll keep publishing updates of the more interesting and meaningful series of FixedResets’ Implied Volatilities. This doesn’t include Enbridge because although Enbridge has a large number of issues outstanding, all of which are quite liquid, the range of Issue Reset Spreads is too small for decent conclusions. The low is 212bp (ENB.PR.H; second-lowest is ENB.PR.D at 237bp) and the high is a mere 268 for ENB.PF.G.
Remember that all rich /cheap assessments are:
» based on Implied Volatility Theory only
» are relative only to other FixedResets from the same issuer
» assume constant GOC-5 yield
» assume constant Implied Volatility
» assume constant spread
Here’s TRP:
Click for Big
TRP.PR.E, which resets 2019-10-30 at +235, is bid at 24.12 to be $1.15 rich, while TRP.PR.G, resetting 2020-11-30 at +296, is $1.16 cheap at its bid price of 24.71.
Click for Big
Another excellent fit, but the numbers are perplexing. Implied Volatility for MFC continues to be a conundrum, although it declined substantially today. It is still too high if we consider that NVCC rules will never apply to these issues; it is still too low if we consider them to be NVCC non-compliant issues (and therefore with Deemed Maturities in the call schedule).
Most expensive is MFC.PR.L, resetting at +216 on 2019-6-19, bid at 24.05 to be $0.47 rich, while MFC.PR.H, resetting at +313bp on 2017-3-19, is bid at 25.89 to be $0.42 cheap.
Click for Big
The fit on this series is actually quite reasonable – it’s the scale that makes it look so weird.
The cheapest issue relative to its peers is BAM.PR.R, resetting at +230bp on 2016-6-30, bid at 21.21 to be $0.61 cheap. BAM.PF.E, resetting at +255bp 2020-3-31 is bid at 23.80 and appears to be $0.42 rich.
Click for Big
This is just weird because the middle is expensive and the ends are cheap but anyway … FTS.PR.H, with a spread of +145bp, and bid at 16.60, looks $1.51 cheap and resets 2015-6-1. FTS.PR.K, with a spread of +205bp and resetting 2019-3-1, is bid at 23.71 and is $1.01 rich.
Click for Big
The cancellation of the previously announced deflationary environment had an immediate effect on the implied three month bill rate, with investment-grade pairs predicting an average over the next five years of a whopping 0.10%
Click for Big
Shall we just say that this exhibits a high level of confidence in the continued rapacity of Canadian banks?
| 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 | 2.6243 % | 2,385.8 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 2.6243 % | 4,171.4 |
| Floater | 3.18 % | 3.16 % | 71,256 | 19.35 | 3 | 2.6243 % | 2,536.2 |
| OpRet | 4.07 % | 0.99 % | 105,146 | 0.27 | 1 | 0.0000 % | 2,764.8 |
| SplitShare | 4.47 % | 4.42 % | 54,365 | 4.45 | 5 | 0.1556 % | 3,211.5 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0000 % | 2,528.1 |
| Perpetual-Premium | 5.29 % | 0.35 % | 56,366 | 0.08 | 25 | 0.0250 % | 2,520.6 |
| Perpetual-Discount | 5.00 % | 5.01 % | 157,285 | 15.40 | 9 | 0.0714 % | 2,795.8 |
| FixedReset | 4.40 % | 3.62 % | 236,637 | 16.69 | 82 | 0.0751 % | 2,422.9 |
| Deemed-Retractible | 4.91 % | -0.50 % | 106,129 | 0.14 | 37 | -0.0970 % | 2,652.6 |
| FloatingReset | 2.53 % | 2.97 % | 84,528 | 6.32 | 8 | 0.2679 % | 2,336.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| TRP.PR.C | FixedReset | -3.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 17.05 Evaluated at bid price : 17.05 Bid-YTW : 3.78 % |
| BAM.PR.R | FixedReset | -1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 21.21 Evaluated at bid price : 21.21 Bid-YTW : 3.96 % |
| IAG.PR.A | Deemed-Retractible | -1.43 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.15 Bid-YTW : 5.03 % |
| CIU.PR.C | FixedReset | -1.26 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 16.44 Evaluated at bid price : 16.44 Bid-YTW : 3.63 % |
| BMO.PR.R | FloatingReset | 1.01 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 2.83 % |
| BAM.PR.B | Floater | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 15.85 Evaluated at bid price : 15.85 Bid-YTW : 3.14 % |
| BAM.PF.F | FixedReset | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 23.24 Evaluated at bid price : 25.12 Bid-YTW : 3.80 % |
| MFC.PR.M | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.48 Bid-YTW : 3.86 % |
| BAM.PR.C | Floater | 1.35 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 15.73 Evaluated at bid price : 15.73 Bid-YTW : 3.16 % |
| FTS.PR.H | FixedReset | 1.47 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 16.60 Evaluated at bid price : 16.60 Bid-YTW : 3.61 % |
| IFC.PR.A | FixedReset | 1.86 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2025-01-31 Maturity Price : 25.00 Evaluated at bid price : 21.39 Bid-YTW : 5.14 % |
| TRP.PR.A | FixedReset | 2.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 20.17 Evaluated at bid price : 20.17 Bid-YTW : 3.66 % |
| BAM.PR.K | Floater | 5.62 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 15.49 Evaluated at bid price : 15.49 Bid-YTW : 3.21 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| CM.PR.Q | FixedReset | 898,300 | New issue settled today. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 23.07 Evaluated at bid price : 24.80 Bid-YTW : 3.60 % |
| TD.PF.D | FixedReset | 212,820 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 23.12 Evaluated at bid price : 24.94 Bid-YTW : 3.58 % |
| TD.PF.B | FixedReset | 45,881 | Nesbitt crossed 40,000 at 24.60. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 23.07 Evaluated at bid price : 24.60 Bid-YTW : 3.29 % |
| ENB.PF.A | FixedReset | 31,759 | Desjardins bought 15,800 from Nesbitt at 22.00. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 21.65 Evaluated at bid price : 22.00 Bid-YTW : 4.31 % |
| ENB.PF.C | FixedReset | 30,493 | Nesbitt crossed 20,000 at 21.95. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2045-03-11 Maturity Price : 21.59 Evaluated at bid price : 21.93 Bid-YTW : 4.31 % |
| CM.PR.G | Perpetual-Premium | 26,357 | Called for redemption effective 2015-4-30. YTW SCENARIO Maturity Type : Call Maturity Date : 2015-04-10 Maturity Price : 25.00 Evaluated at bid price : 25.29 Bid-YTW : -1.50 % |
| There were 38 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAG.PR.A | Deemed-Retractible | Quote: 24.15 – 24.58 Spot Rate : 0.4300 Average : 0.2784 YTW SCENARIO |
| PWF.PR.T | FixedReset | Quote: 25.01 – 25.40 Spot Rate : 0.3900 Average : 0.2536 YTW SCENARIO |
| SLF.PR.E | Deemed-Retractible | Quote: 23.71 – 24.08 Spot Rate : 0.3700 Average : 0.2389 YTW SCENARIO |
| GWO.PR.S | Deemed-Retractible | Quote: 26.27 – 26.61 Spot Rate : 0.3400 Average : 0.2193 YTW SCENARIO |
| ENB.PR.Y | FixedReset | Quote: 19.76 – 20.13 Spot Rate : 0.3700 Average : 0.2668 YTW SCENARIO |
| GWO.PR.I | Deemed-Retractible | Quote: 23.84 – 24.40 Spot Rate : 0.5600 Average : 0.4618 YTW SCENARIO |