Derivs - Equity

Large global institutional investors are increasingly rolling their call positions up-and-out on the Nikkei in a bid to switch short-term exposure to long-term exposure on the index as the Japanese equity market continues to spike.

Jonathan Moldovan, head of index volatility flow trading for Asia at BNP Paribas in Hong Kong, has switched to the firm’s proprietary trading desk.

From 1 April 2013, a new financial regulation framework took effect in the U.K. The Financial Services Authority (FSA) is replaced by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), the Bank of England is to have overall responsibility for financial stability and a new Financial Policy Committee (FPC) of the Bank of England is being created. However, the Financial Services Act 2012 does more than just give effect to these regulatory reforms.

Institutional investors are showing increased demand for convexity on the S&P500 instruments such as wing options or buy buying a variance swap and selling a volatility swap on the index, Roger Naylor, head of global equity derivatives at UBS in London, told DI in an exclusive interview. Volume has yet to increase sharply, but requests are up given cheap convexity.

Hedge fund have been buying short-dated at-the-money put spreads on the Kospi at 2% with a 90% strike, in a bid to profit on a recent change in skew due to escalating political tensions on the Korean peninsula.

Institutional investors and hedge funds are increasingly considering buying calendar call spreads on the VIX as it provides the most cost-effective way to hedge a potential spike in volatility.

Foreign synthetic exchange-traded fund providers will not be allowed to directly list or market their ETFs in South Korea’s soon-to-be-launched synthetic market.

Ronan Connolly, head of equities trading for Europe, the Middle East and Africa at Citigroup in London, has left the firm. Connolly could not be reached. A spokeswoman declined to comment.

Barclays has issued a delta one certificate on a Dynamic VSTOXX index—a move underscoring increased investor appetite for more innovative European volatility structures to hedge their equity exposures or generate yield.

Nomura Securities in Tokyo is preparing to list the region’s first exchange-traded notes linked to an Asian volatility index.

Market participants, and particularly buyside firms, are looking to standardize derivatives products which will accelerate the move to electronic trading, according to panelists at the Futures Industry Association’s Expo in New York this morning.

Central counterparties that accept non-cash variation margin are taking on significant risk, according to Daniel Maguire, head of SwapClear U.S at LCH.Clearnet.