Settlements, the complex undertaking that ensures money and securities properly change hands every time stocks or bonds are bought or sold, previously had to be completed within two business days of the trade itself. As of Monday, however, settlements now have a single business day to be completed.
While the shift from what was known as T+2 to the new T+1 regime might seem insignificant or even irrelevant for retail investors, experts argue the opposite is true. Sale proceeds will hit investment accounts faster as trades start settling more quickly and interest charges on any money borrowed to buy securities will kick in one business day earlier than before.
Ultimately, the move to T+1 will increase market efficiency and lower risks of trades failing to settle because of market volatility, which should allow for lower trading fees.
…
“A longer settlement period may have a particularly adverse effect in times of a steep market decline,” reads an excerpt from a 23-year-old Canadian Capital Markets Association report that advocated for a T+1 regime to be adopted. “Indeed, the earlier shortening of the settlement period from T+5 to T+3 was in part a response to the 1987 market decline.”
It’s about time. I’ve wanted T+1 for about 25 years now, but I suppose we had to wait for all the old guys who ran the settlements industry to die and make way for people more familiar with these new-fangled computer thingamajigs. And I love the way the article talks about the “complex undertaking” of settlements … it amazes me that an industry that routinely tells clients we can forecast the future has taken so long to modernize.
Oh, and I’ve just remembered an anecdote … back in the ’90’s I got a call from the (very big) trust company that had custody of one of the firm’s clients. They wanted us to try sending them a text file with settlement details rather than a fax, since they would then be able to save time getting the instructions into their system. The best part was that it wouldn’t cost us anything! The additional fee for electronic processing would be paid by the client – not real money at all!
The sales rep on the ‘phone was completely baffled as to why I would turn down the opportunity to reduce our processing time when it wouldn’t cost us anything.
An additional fee for electronic processing. That’s the Canadian financial industry for you! I won’t hold my breath waiting for the “lower trading fees” promised by the Globe’s article to trickle down to the client level any time soon.
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 | -0.3252 % | 2,341.3 |
FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.3252 % | 4,490.7 |
Floater | 10.28 % | 10.59 % | 66,999 | 9.00 | 1 | -0.3252 % | 2,588.0 |
OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2182 % | 3,450.8 |
SplitShare | 4.87 % | 6.63 % | 31,175 | 1.37 | 8 | 0.2182 % | 4,121.0 |
Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2182 % | 3,215.3 |
Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0878 % | 2,714.1 |
Perpetual-Discount | 6.32 % | 6.49 % | 53,285 | 13.18 | 27 | 0.0878 % | 2,959.6 |
FixedReset Disc | 5.19 % | 7.16 % | 123,926 | 11.93 | 54 | 0.2284 % | 2,605.5 |
Insurance Straight | 6.17 % | 6.37 % | 59,971 | 13.30 | 21 | 0.2666 % | 2,939.1 |
FloatingReset | 8.86 % | 9.10 % | 26,018 | 10.20 | 2 | 0.7435 % | 2,858.6 |
FixedReset Prem | 6.89 % | 6.38 % | 211,898 | 3.06 | 2 | 0.4521 % | 2,544.2 |
FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2284 % | 2,663.3 |
FixedReset Ins Non | 4.98 % | 6.78 % | 94,130 | 13.13 | 14 | 0.6742 % | 2,853.7 |
Performance Highlights | |||
Issue | Index | Change | Notes |
BN.PR.Z | FixedReset Disc | -8.73 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 19.35 Evaluated at bid price : 19.35 Bid-YTW : 8.64 % |
PWF.PR.S | Perpetual-Discount | -1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 18.65 Evaluated at bid price : 18.65 Bid-YTW : 6.52 % |
FTS.PR.G | FixedReset Disc | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 20.92 Evaluated at bid price : 20.92 Bid-YTW : 7.16 % |
FFH.PR.K | FixedReset Disc | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 21.45 Evaluated at bid price : 21.80 Bid-YTW : 7.90 % |
BN.PR.T | FixedReset Disc | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 16.75 Evaluated at bid price : 16.75 Bid-YTW : 8.45 % |
BN.PF.I | FixedReset Disc | 1.06 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 22.39 Evaluated at bid price : 22.90 Bid-YTW : 7.90 % |
TD.PF.A | FixedReset Disc | 1.19 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 22.97 Evaluated at bid price : 23.78 Bid-YTW : 6.24 % |
MFC.PR.L | FixedReset Ins Non | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 21.58 Evaluated at bid price : 21.92 Bid-YTW : 6.74 % |
TD.PF.J | FixedReset Disc | 1.22 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2028-04-30 Maturity Price : 25.00 Evaluated at bid price : 24.80 Bid-YTW : 6.15 % |
BN.PF.A | FixedReset Disc | 1.33 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 21.70 Evaluated at bid price : 22.05 Bid-YTW : 7.73 % |
NA.PR.E | FixedReset Disc | 1.53 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 22.81 Evaluated at bid price : 23.90 Bid-YTW : 6.49 % |
BMO.PR.T | FixedReset Disc | 1.59 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 23.38 Evaluated at bid price : 24.35 Bid-YTW : 6.10 % |
MFC.PR.K | FixedReset Ins Non | 1.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 22.75 Evaluated at bid price : 23.84 Bid-YTW : 6.33 % |
SLF.PR.E | Insurance Straight | 1.97 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 19.17 Evaluated at bid price : 19.17 Bid-YTW : 5.98 % |
GWO.PR.N | FixedReset Ins Non | 2.28 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 15.24 Evaluated at bid price : 15.24 Bid-YTW : 7.70 % |
CU.PR.C | FixedReset Disc | 2.43 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 7.11 % |
MFC.PR.J | FixedReset Ins Non | 2.74 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 23.05 Evaluated at bid price : 24.40 Bid-YTW : 6.42 % |
BN.PR.X | FixedReset Disc | 2.79 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 16.95 Evaluated at bid price : 16.95 Bid-YTW : 8.01 % |
Volume Highlights | |||
Issue | Index | Shares Traded |
Notes |
BN.PF.G | FixedReset Disc | 345,537 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 18.50 Evaluated at bid price : 18.50 Bid-YTW : 8.62 % |
POW.PR.D | Perpetual-Discount | 115,063 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 19.85 Evaluated at bid price : 19.85 Bid-YTW : 6.40 % |
PWF.PR.K | Perpetual-Discount | 107,734 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 19.32 Evaluated at bid price : 19.32 Bid-YTW : 6.49 % |
CU.PR.I | FixedReset Disc | 107,100 | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-12-01 Maturity Price : 25.00 Evaluated at bid price : 24.01 Bid-YTW : 7.32 % |
BN.PF.F | FixedReset Disc | 97,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 20.65 Evaluated at bid price : 20.65 Bid-YTW : 8.05 % |
BMO.PR.T | FixedReset Disc | 88,902 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2054-05-28 Maturity Price : 23.38 Evaluated at bid price : 24.35 Bid-YTW : 6.10 % |
There were 33 other index-included issues trading in excess of 10,000 shares. |
Wide Spread Highlights | ||
Issue | Index | Quote Data and Yield Notes |
BN.PR.Z | FixedReset Disc | Quote: 19.35 – 21.70 Spot Rate : 2.3500 Average : 1.6000 YTW SCENARIO |
BN.PF.J | FixedReset Disc | Quote: 22.51 – 24.10 Spot Rate : 1.5900 Average : 1.2565 YTW SCENARIO |
BN.PF.H | FixedReset Disc | Quote: 23.65 – 24.25 Spot Rate : 0.6000 Average : 0.3883 YTW SCENARIO |
GWO.PR.I | Insurance Straight | Quote: 18.30 – 18.77 Spot Rate : 0.4700 Average : 0.3192 YTW SCENARIO |
TD.PF.D | FixedReset Disc | Quote: 23.00 – 24.00 Spot Rate : 1.0000 Average : 0.8518 YTW SCENARIO |
FTS.PR.G | FixedReset Disc | Quote: 20.92 – 21.45 Spot Rate : 0.5300 Average : 0.3947 YTW SCENARIO |