Bank One, the sixth-largest bank holding company in the U.S. with more than USD270 billion in assets, is setting up a weather derivatives desk in New York to broker plain-vanilla weather derivatives, according to market officials. The firm has hired Scott Matthews, director of weather derivatives marketing at United Weather in Jersey City, N.J., to set up the desk. Matthews joined its New York office three weeks ago. He confirmed the move, but declined further comment.
The firm's weather desk is expected to begin brokering plain-vanilla derivatives, such as heating degree-day and cooling-degree day contracts, within the next three months. The firm is not looking to be a market maker but rather broker deals to its large commodity fund customer base, one market official said. The operation will focus on the U.S.
Several market professionals said they consider Bank One's planned entry as a boon to the U.S market for weather risk management. "It's going to add further credibility to this market," said one weather derivatives trader. Currently, insurance and energy companies dominate the weather derivatives market in the U.S., while investment banks continue to shy away from the business.
While at United Weather Matthews reported to Colt Heppe, partner. Heppe said it plans to replace Matthews as soon as possible.
