Banca d'Intermediazione Mobiliare is considering setting up a credit derivatives operation which likely will start trading in "the near future," according to Elizabeth Tot, head of relative value trading in Milan. The bank is looking at trading European investment grade credit default swaps on both a proprietary and customer basis, she said, declining to outline what factors will determine whether it goes ahead. She added that narrowing bid/offer spreads resulting from improved liquidity have prompted the bank to consider entering the burgeoning market. Tot declined further comment.
A credit derivatives trader in Milan said Banca IMI is a large player in other derivatives markets and could assume an important role in the development of the local credit market. However, it will only become a major player if it offers other credit derivatives products, such as synthetic collateralized debt obligations, he continued.
But breaking into the market may be an uphill task, warns Luigi Belluti, head of fixed income and foreign exchange trading at Unicredit Banca Mobiliare in Milan. Belluti plans to hire a team of credit derivatives traders in London because it is proving too difficult to hire experienced credit derivatives professionals for positions based in Milan. The bank first of all has to receive approval from the Financial Standards Authority to turn its London sales office into a trading operation. Belluti expects the operation to be up and running in the fourth quarter.
