Corporate derivatives groups are struggling to execute deals as corporates turn away from equity derivatives in the wake of corporate scandals and planned accounting changes. "Corporate derivatives [are] becoming extremely difficult," said one corporate sales official at a European bank.
The introduction of international accounting standards outside the U.S. in January is occupying corporate treasurers time. "Right now, [corporates] are looking at derivative transactions and are trying to work out how they will be accounted for under IAS," noted Cristina Garcia Peri, head of corporate derivatives at Merrill Lynch in London. "It's possible that once corporates get comfortable with volatility [in their accounts] normal activity may resume," she added.
For the time being, corporate sales groups will have to become a bit smarter, noted Garcia Peri. Salvatore Di Stasi, head of corporate equity derivatives at JPMorgan in London, agreed, "Trades are still happening, but they are more innovative, compared to the very large strategic transactions we used to see," he noted. Sales teams are also pinning their hopes on a revival of the mergers and acquisitions business, which could breathe life into corporate equity derivative sales, noted officials.
