Two minutes in the trading of RIM shares

In

some sports, like swimming

and track and field, gold medals can be won and lost in two minutes. It’s the same with stock markets as a group of investors in Research in Motion found out — initially to their detriment and later to their joy — last Friday. RIM is best known for the Blackberry — and for those who can’t live without it, the crackberry.

Consider the following, all of which has been drawn from the friendly Bloomberg terminal:

11:14.54 a.m. A headline says RIM “loses on Blackberry patent appeal” — story to follow. In market terms that is the news. There’s only one way to interpret it: It’s not good for RIM.

11: 15 a. m. Trading halted ( Nasd) meaning RIM’s shares have been halted on Nasdaq.

11: 17 a. m. Canada’s Market Regulation Services tells the world that trading in shares on RIM on the TSX has been halted, pending news. That message is conveyed at 11: 27 a. m.

So what happened over the period 11: 15 to 11: 17 am?

As expected, a ton of stock was traded on the TSX. And as expected, those trades took place at lower prices. For instance, at 11:15.01 a. m., 100 shares of RIM were traded at a price of $78.11. At 11:17.10 a. m., the time of the last trade prior to the halt taking effect, 100 shares changed hands at $ 71.

Over the two-minute period, 11: 15 a. m. to 11: 17 a. m., there were 282 individual trades in RIM shares. The largest trade was a block of 1900 shares (done at $72.74) while the smallest was a block of 1 share ($ 76.22 a share.)

On the surface the above facts look bad for Market Regulation Services, the regulatory body charged with policing the stock markets. Clearly some investors — especially those who had access to Bloomberg — were given the inside track. And the facts give a wider definition to the term — less-efficient capital markets — a term often used by foreigners as a reason for for investing in Canada.

Fortunately the above situation — a trading halt in the U.S., no trading halt in Canada until two minutes later and some investors having access to better information than others — didn’t persist.

RS decided to reverse the trades made over the critical twominute period.

Doug Maybee, director of communications and public affairs for RS, said: “ All the trades were BARRY CRITCHLEY

Off T h e R e c o rd wound back. They were all unwound, up to [the time of] the Nasdaq halt.” She added the decision to make such a move wasn’t publicly disclosed.

“But all the traders who were involved in the trades were aware of it,” said Maybee, who noted winding back trades is rare, occurring maybe two- three times a year.

Maybee said RS “imposed a halt as soon as we could” adding that wind-backs are made “in the interests of levelling the playing fields for all investors.”

Maybee added that, “in a perfect world,” trading in the shares of an affected issuer would have taken place at the same time on both Nasdaq and the TSX. Carfinco’s challenges

The life and times of Carfinco Income Funds — one of the few income funds to migrate from the TSX Venture Exchange to the TSX — continues to move in ways beneficial to unitholders.

The latest news concerns the decision to hike the fund’s distribution by 9% for October — the fund’s second distribution increase in the past six months. Unitholders as of Oct. 20 will receive 2.4¢ per trust. (Previously they got by on 2.2 ¢ per unit.) That distribution is payable on Oct. 31.

Unitholders — who in the past used to receive distributions on a quarterly basis — have so far this year received 19.3¢ per unit. In 2004, the fund paid out all its net earnings — of which 40%, or 7.3¢ per unit, was in cash. The rest was in extra units.

Carfinco defines itself as a growth-oriented income trust focused on providing consumer car loans to borrowers unable to obtain financing through traditional lending sources. It provides specialty consumer financing for vehicle purchases. Both the customers and the vehicles must meet Carfinco’s criteria.

Carfinco said the hike in the fund’s monthly cash distribution is “a reflection of the increased growth of the finance receivables with a corresponding increase in profitability.” In the third quarter, receivables grew by roughly 8.8% during to about $ 58- million.

Carfinco’s units closed yesterday at $3 — up 5¢ . Its market cap is around $ 55- million. FMF’s woes

On the subject of income trusts, FMF Capital hit a new low yesterday. FMF is a U.S. residential mortgage lender that Canadianized its structure and raised $197.5-million via the sale of $ 10 units last March. The units hit $5.01 yesterday, which means that they are down by about 50% since going public. The issuer is up to date with its distributions.

“ They, the lead under writer, BMO Nesbitt Burns made a colossal blunder and bagged everybody on the street,” said one upset investor. “ Where was the due diligence by both Nesbitt and the others in the syndicate?”

Financial Post

bcritchley@ nationalpost. com