The start of the World Cup last Friday was being seen by derivatives dealers as an early start to the traditional summer slow-down. Structurers and sales officials across the globe are expecting issuance to drop off and liquidity to evaporate as the tournament, which drew 28.8 billion viewers last time around in 2002, brings countries to a halt.
A Citigroup research report in the spring suggested equity derivative players look into how the World Cup might bring down equity implied volatility ahead of the usual summer downturn. While recent equity market turbulence has forced a rethink of this theory, equity strategists are still expecting a drop off in volumes and liquidity to hit bid/offer spreads. City headhunters and over-the-counter brokers are already feeling the pinch. "The only people calling us now are bankers who want free tickets," said one recruiter. "And we don't have any," he added. A broker in Paris noted, "We're preparing for a bit of a drought--but that leaves us free to watch the matches too."
JPMorgan, ahead of the rest of the street, in January launched an equity derivative investment note linked to a basket of World Cup sponsor companies' stock. Other firms, meanwhile, have stuck to more traditional World Cup marketing strategies, buying up tickets to big games in order to impress important clients. Junior staffers have been hoping to get hand-me-down tickets. A salesman at a U.K. firm said he was offered a ticket to see Mexico v. Iran. "But I don't know who's got all the best tickets: senior management's all American," he added.
