Hedge funds are buying structures that allow them to position for increased U.S. interest rates and currency appreciation simultaneously.

This year, regulatory reporting requirements introduced under the Dodd-Frank Act—impacting financial institutions engaged in cross-border derivatives transactions with US counterparts—have brought attention to the management of client data. The U.S. reporting requirements form part of the global effort to reduce systemic risk and improve transparency in the derivatives markets, and in a few short months, Europe will follow suit with similar but not identical rules that necessitate the reporting of listed and OTC derivatives transactions to a trade repository. Notwithstanding some of the technical nuisances in the reporting mandates of various jurisdictions, the increased focus on trade reporting provides some thematic similarities with which institutions should consider when reviewing the impacts and action plans for compliance. Namely, more than ever before, client or counterparty data management is becoming a critical function of the new derivatives markets, increasing the focus on this area well beyond the current client on-boarding function, and Know-Your-Customer processes. In the context of the increased burden of reporting requirements, ineffective management of counterparty data has the potential to disrupt client relationships. To mitigate this, the different functions within an institution—including the front, middle and back office—will have to demonstrate a more integrated approach to client data management in order to support the compliance function, ensure successful and streamlined implementation and in turn, minimise impact on the customer experience.

Interest in light exotic options on equity indices is increasing as institutional investors opt for the instruments in an effort to increase yield in the current low-yield environment. Light exotic options are so-named as they have an exotic payoff but can be statically replicated by a vanilla instrument.

Credit default swaps have gained popularity in Latin America following the debt default of Ecuador in December 2008 and CEMEX, the Mexican building materials and cement supplier, in October 2009.

Equity derivatives and structured product volume on Hong Kong and Chinese equities has been depressed over the last three months due to the shift in allocation to Japanese assets and investor concerns over the slow pace of Chinese regulatory reform, according to traders.

Stephen O’Connor has left his position as managing director at Morgan Stanley to take up the position of full-time chairman at the International Swaps and Derivatives Association.