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Derivatives

European Trading Halts After New York Plane Crash

Trading in the European credit derivatives and equity options market ground to a halt Monday afternoon following the crash of a Dominican Republic-bound plane in the New York City borough of Queens. One credit derivatives trader in London said his firm had ceased making markets in all names "for at least an hour, maybe more, depending on what happens," adding that the team was awaiting word on whether the crash was terrorist-related. He added the airline sector is expected to be slammed when the default swap market reopens, as confidence will have taken a further battering followed the latest plane crash. Prior to the crash, five-year protection was quoted at 220-225 basis points for Lufthansa, 150-200bps for Air France and 600-700bps for British Airways. "The sector will be a lot wider" when the market reopens, he added.

The equity options market suffered largely the same fate and was virtually shut down Monday afternoon in London. "The initial reaction was selling but the market has gone quiet now," said one trader, adding, "I tried to get an option price on the FTSE-100 and couldn't even get one."

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