Derivs - Credit

The Financial Industry Regulatory Authority has launched a sweep looking at how broker/dealers handle spread-based structured products, giving compliance officers a warning that they need to make sure suitability, sales and training policies and procedures are up to scratch in this complex area.

Hedge funds, cash value added funds and asset managers have been buying out-of-the-money calls on iTraxx indices to hedge against tail risk event concerns in Europe.

The optimism that was evident last week dissipated rapidly as it became clear that the European Union had failed to deliver the “big bazooka” the markets had been hoping for.

Barclays Capital remains No. 1 in European fixed income in market share in overall institutional trading volume, according to Greenwich Associates.

Standard Chartered Bank has rolled out a synthetic USD2 billion collateralized debt obligation referencing corporate loans from its START securitization program.

Dealers are expected to sell volatility via vanilla put options over the next few weeks to hedge long volatility exposure built through selling tail risk hedges on euro/U.S. dollar.

Société Générale is recommending selling five-year credit-default swaps on Pernod Ricard and buying Diageo to on the former company’s positive outlook from ratings agencies and its continued push to deleverage.

Cautious optimism had been building throughout the week in the sovereign credit markets ahead of the European Central Bank meeting on Thursday and the EU summit on Friday.

The Royal Bank of Scotland is recommending investors buy credit-default swaps on a basket of Australian and Korean banks because of their exposure to European sovereign debt.

Guggenheim Investments has expanded its fixed-income strategies for mutual funds with three new offerings that previously were only available to institutional investors.

Hedge funds have been buying exotic window barrier puts on the euro/U.S. dollar cross over the past week.

Clearing is among the top concerns for financial end users, according to Luke Zubrod, director of regulatory compliance services at Kennett Square, Pa.-based risk advisory firm Chatham Financial.