Derivs - Credit

Investors have been taking profit on relative value trades with a bearish bias going by long risk the iTraxx Senior Financials (Sen Fin) index and short risk iTraxx Main index, while maintaining a bullish bias on Sen Fin ahead of September, when the launch of new credit default swap indices based on revised CDS definitions could see old Sen Fin contracts outperform.

Overall credit default swap notional that was reported to swap data repositories last week increased by 16% from the previous week, according to data from the International Swaps and Derivatives Association. This follows a sharp increase of 50% from the week prior. Overall interest rates derivatives trading that was reported, however, declined by 9%.

The International Organization of Securities Commissions has launched an information repository for central clearing requirements for over-the-counter derivatives, providing both regulators and market participants with a one-stop shop for consolidated information on the clearing requirements of different jurisdictions.

The Montreal Exchange could see more liquidity from US-based equity dealers wanting the benefits of exchange trading, while retaining the ability to protect their positions from front running by other market participants. TMX’s exchange rules allow dealers to hedge their positions before executing their trade, helping reduce delta risk - or the option’s price compared to the underlying stock.

CME Group saw record trading volumes on their S&P 500 options contracts late last week, with trading reaching over 1.1 million on the bourse’s e-mini contracts late last week.

A mid-sized fixed income asset manager-based in New York has been buying three-to-six month swap options on the Markit Credit Default Swap High Yield Index, in a bid to protect against expected higher volatility in the US markets.

Overall credit default swap notional that was reported to swap data repositories last week increased by 52% from the previous week, according to data from the International Swaps and Derivatives Association. This was a significant increase following a sharp decrease of 30% reported in the previous week. Overall interest rates derivatives trading that was reported, however, declined by 23%.

Investors have been trading short-dated risk reversals on high yield bond exchange-traded funds or big cap equity ETFs in a bid to hedge further declines in the US stock market.

The Chicago Board Options Exchange traded about 68,033 volatility futures contracts Thursday night, breaking a record it set in July for trading in non-US trading hours.

The International Swaps and Derivatives Association’s Americas Credit Derivatives Determinations Committee has resolved that a failure to pay credit event occurred in respect to Argentina.

Washington D.C.-based brokerage Matrix Capital Group is looking to launch a capped structured product that will track the Russell 2000 index via exchange-traded options, while using a unit investment trust-sponsored wrapper to help eliminate credit risk.

The International Swaps and Derivatives Association determinations committee will consider Friday whether a failure to pay credit event has occurred on Argentinian credit default swaps. The request came after Standard and Poor’s placed the country’s credit rating on selective default following a failure to pay interest due Wednesday.