Derivs - Credit

Holders of UK sovereign credit default swaps are facing uncertainty in the event of a Scottish exit from the union, which could trigger a succession credit event resulting in outstanding contracts being split in two.

Benchmark provider FTSE launched Monday a series of so called frontier market tradable indices that could potentially be used as underlyings for structured products or exchange-traded funds.

Ed Steel, former managing director and global head of equity derivatives trading at Standard Chartered in Hong Kong, has joined Nomura in London.

Issuers hedging exposures to credit-linked notes using credit default swaps may find they are subject to higher capital charges after Sept. 22, when a new set of definitions governing the terms of a credit event come into play.

The Argentine credit default swap auction was resolved on Wednesday with restructured bonds on the sovereign valued at 39.5c on the dollar.

Swap documentation such as the International Swaps and Derivatives Association master agreements and credit support annexes — the contracts at the heart of so much wrangling between issuers and dealers in the supranational and agency bond market in recent years — are likely to be non-existent in the coming years for firms that only trade vanilla products. This is due to regulation that requires certain financial instruments to be cleared through central counterparty (CCP) clearing houses, writes Beth Shah.

Denver-based financial boutique IPS Strategic Capital is looking to launch soon a structured note strategy that will combine selling short futures positions on the CBOE Volatility Index, while using long call options as a hedge.

The need for credit support annexes may be reduced due to regulation that requires some financial instruments to be cleared through clearinghouses and traded on swap execution facilities, according to market officials.

High yield cash investors have been seen setting up new hedges in iTraxx Crossover, with popular strategies including bearish risk reversals and payer spreads.

The Chicago Board Options Exchange saw the most active month ever for futures on the CBOE Volatility Index this August, surpassing previous monthly volume and average daily volume records.

The Korea Exchange is remodeling its futures and options market, introducing real-time limits on derivatives prices and reforming the system for fixing erroneous transactions as the bourse gears towards the introduction of futures on its Volatility-KOSPI200 index.

Big asset managers and hedge funds are putting on steepeners in the iTraxx Main index, expecting steepening between the five and 10 year points of the curve when the index goes through its semi-annual roll over to its 22nd series on September 22.