Levine on Wall Street: The Costs of Trading
It's expensive to trade municipal bonds.
According to S&P Dow Jones Indices, the average spread on a $100,000 municipal bond trade is 1.73 percent, versus 0.87 percent for corporate bonds, due either to lower liquidity in municipal bonds (as the dealers say), or to lack of disclosure about trading prices (as critics says), or to something else (more odd-lot muni trades? I don't know, I have not seen the study). It does sort of stand to reason that a product aimed mainly at retail investors -- who own 45 percent of all muni bonds -- would not have the same efficiencies, or get the same volume discounts as it were, as a more institutional product. But if you'd like to read about how regulators should give "mom and pop" investors "a fairer shake" this is your place, today.
Ooh hedge fund ETFs .
"More client-hungry hedge fund managers are looking to put their investment strategies to work in exchange-traded funds," but ask yourself why they're so hungry for clients. Has no one been feeding them clients? Why not?
ChiquitaFyffes will soon be a real company name.
Unless it's held up by antitrust. "This is a milestone transaction for Chiquita and Fyffes that brings together the best of both companies," says the chief executive of Chiquita, but both companies are mostly about bananas. There's not really a "best of" either, it's kind of a commodity business. But you can differentiate yourself with a name and boy are these two good ones. Also the "Top Banana" in this headline is a little obvious but, still, respect.
Price to Comply
might more aptly have been named 'Price to Circumvent.'"
This is one of those if-you-like-this-you'll-like-this sort of links, this one about order types and high-frequency trading; Haim Bodek is a somewhat polarizing figure and this is on the technical side. But I enjoyed this discussion of Nasdaq's "Price to Comply" order type, which was designed to let traders lock markets without running afoul of Regulation NMS's rule against locking markets.
"Has Automated Trading Promoted Efficiency in the FX Spot Market?"
Yes, says the New York Fed. Does this teach us anything about (much more prevalent) automated trading in the equities markets? Meh.
Corporate governance is worth something .
Here is an academic paper that studies foreign companies that cross-list on U.S. stock exchanges. Those companies can opt out of U.S. exchange corporate governance rules (about things like independent directors. The authors find that "For cross-listed firms based in countries with weak governance rules, a dollar of cash held inside the firm is worth $1.52 if the firm fully complies with U.S. exchange rules but just $0.32 if it is non-compliant."
Don't use a
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(Matt Levine writes about Wall Street and the financial world for Bloomberg View.)
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