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Derivatives

Traders In Taiwan Expect Swaptions To Take Flight

Traders at interest-rate derivatives houses in Taipei, including Citibank, Deutsche Bank, HSBC andCredit Lyonnais, expect an interbank swaptions market to develop in Taiwan this year on the back of the launch of an interest-rate futures contract. Currently, a few caps and floors have been executed but traders have not seen any swaptions.

Joe Chen, head of interest-rate derivatives trading at HSBC, said the main driver for the growth of a swaptions market is the launch of interest-rate futures on the Taiwan Futures Exchange. "If there's good liquidity in the futures contracts, hedging swaptions will be easier," he added. Chen expects monthly trading volumes will reach TWD5 billion (USD142 million) within 12-14 months. An official at TAIFEX in Taipei said interest-rate options will likely be launched in the first quarter of next year.

Traders at Citibank, Deutsche Bank and Credit Lyonnais said they would offer the product once the future is listed.

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