Derivs - Credit

A protocol automatically upgrading credit default swaps from old definitions to an updated 2014 set came into force on Monday, after more than 1,400 market participants signed up by the deadline of September 17.

Credit analysts are recommending investors take profit on relative value trades playing the iTraxx series 21 index against equity markets, following the roll to series 22 on Monday. The roll has triggered significant outperformance of iTraxx indices relative to equity markets.

Credit markets are now accustomed to low volatility, but there have been signs over the third-quarter that the climate is changing.

Denver-based financial boutique IPS Strategic Capital is readying a novel out-the-money iron condor trade on the ProShares Short Volatility Index Short Term Futures Exchange Traded Fund, as a short term hedge against S&P500 drawdowns of between 5%-6%.

Index provider FTSE Group and Research Affiliates have jointly launched a low volatility series of benchmarks that can be used as underlyings for structured products and other financial instruments.

Fast money and pure volatility investors were seen selling volatility through a 60bp straddle trade on iTraxx Main as credit volatility reacted sharply to events this week.

New York-based financial boutique Exceed Investments is looking to launch a set of defined-outcome indexes based on structured investments that will give exposure to the S&P500.

Overall credit default swap notional reported to swap data repositories last week increased marginally by 4% from the previous week, according to data from the International Swaps and Derivatives Association. This follows three weeks of a consistent uptick in CDS notional, with a combined increase of 98%.

Significant basis has opened up between 2003 and the new 2014 credit default swap contracts on sovereign and financial names, just a week after new CDS definitions came into effect on September 22.

Overall credit default swap notional reported to swap data repositories last week increased marginally by 4% from the previous week, according to data from the International Swaps and Derivatives Association. This follows three weeks of a consistent uptick in CDS notional, with a combined increase of 98%.

Chicago-based CME Group has signed a market data provision agreement with the China Financial Futures Exchange, that country’s sole derivatives-focused bourse.

Fast money accounts are going long risk CDX High Yield and shorting the S&P500 hoping to play the decompression between the two.