Derivs - Equity

Expertise in cross-asset products, a concise understanding of cross-border regulatory issues and a proficiency in both local and global market demands are the requirements for any senior executive to succeed in the derivatives markets. Bob Ray, ceo of CME Europe, possessed all of those qualities.

Hedge funds in the US are buying three-month out-of-the-money put spreads on emerging market underlyings, such as the Vanguard FTSE EM exchange-traded fund and the iShares MSCI EM index, in a bid to hedge greater outflows from EM markets.

The switch to swap execution facilities in the US has already brought new participants to the credit default swap market, raising hopes that five year CDS could provide a flashpoint of liquidity in the SEF-regulated market.

From time to time, an investment opportunity presents itself as a “sure thing”–highly likely to deliver above-average returns. If you’re skilful, or lucky enough to be provided with such insights on a regular or systematic basis, a lucrative career in asset management beckons. If not, invitations to access the insights of others are easily procured, albeit in exchange for a fee.

ABN Amro Clearing has launched a new global execution platform, AMG Global, which aims to provide the firm’s clients with routing capabilities between Asia, US and Europe for equities and futures trading via a single FIX connection.

Hedge funds have been diving into tactical cross-asset relative value trades aimed at profiting from the normalisation of the iTraxx Main relative to Spanish government bonds.

A total return swap has emerged in a novel situation: a power industry pre-packaged bankruptcy. Under the TRS, a unit of private equity shop Energy Capital Partners will have voting power in bankrupt power generator MACH Gen after entering a contract with Deutsche Bank, which holds second-lien debt in MACH Gen.

UBS has begun marketing capped outperformance certificates, also known as speeders, on the Eurostoxx Banks index. The issuance comes as the index continues to see upside call option flow as investors look to take advantage of the outperformance of eurozone banks.

Peter Fung, managing director and senior equity derivatives trader, and Guillaume Kaminer, director and index flow trader at Bank of America Merrill Lynch in Hong Kong, have left the firm.

European banks may move their market making activities in equities and debt securities outside the US to stay under the $50bn threshold for new capital requirements agreed by the US Federal Reserve at the end of February, lawyers said.

Institutional investors are increasingly entering at-the-money put spreads on the S&P 500 in a bid to protect against further declines in US equities while profiting from the current high level of convexity in the volatility market.

The increasing likelihood of the five-year CMS rolling down in two years’ time, driven by inflation and potential quantitative easing from the European Central Bank, has opened up the opportunity to sell two-year in-the-money digital caps on the underlying.