Derivs - Credit

Siobhan Pettit, global head of structured credit strategy at Royal Bank of Scotland in London, has been named global head of corporate credit research.

A bevy of Street firms has formed a coalition to fight criticism related to credit default swap trading— which has been tagged by some observers as a major contributor to the financial crisis.

A group of equity derivatives and structured products lawyers have left McKee Nelson in New York to join the securities and structured finance team at U.K. firm Ashurst in its New York and Washington, D.C., offices.

Multiple central counterparties for clearing credit default swaps are not a good idea. That’s according to research from Darrell Duffie, a finance professor at Stanford University, and PhD student Haoxiang Zhu, who also argue central clearing of only one type of instrument will bring about severe challenges when netting off exposures.

Six alumni from Citigroup have formed a start-up to advise Street firms on unsecured counterparty credit risk arising from over-the-counter derivatives. Down the track it plans to sell contingent credit default swap protection to dealers.

The cost of protecting against a default in U.S. sovereign debt broke the 100 basis point offer mark Friday for the first time.

An alternative to central counterparties and split coupons for credit default swaps being floated by NetDelta, a subsidiary of Knight Capital Group, appears to be gaining traction among some Street firms.

The CDS-bond basis for investment-grade names dipped below -200 basis points Wednesday for the first time since mid-October, settling at -194 bps.

Credit default swaps on the U.K. widened after the nation’s Office for National Statistics yesterday classified Lloyds Banking Group and the Royal Bank Of Scotland as public sector entities, shifting an estimated GBP1-1.5 trillion (USD1.44-2.16 billion) in liabilities to the British taxpayer.

Bank of New York Mellon formally launched its MarginDIRECT system Monday, a tool that helps derivative dealers manage margin requirements and provides additional liquidity.

Some London-based Dresdner Kleinwort staffers are preparing to take legal action after an expected EUR400 million bonus payout was slashed Wednesday. Derivative staffers are among them.

Credit default swaps on General Motors have been relatively unmoved since Tuesday, despite mounting uncertainty over further U.S. government aid. “There are a lot of complications around whether the deal gets done,” concluded one New York trader of the mood.