Derivs - FX

Senior sellsiders expect fx fund returns to pick-up this year fuelled by the potential for an increase in volatility, the sense the U.S. dollar/yen cross might be in for significant moves and continuing growth of the renminbi market.

One investment bank has been selling USD1.4 billion notional of short-dated U.S. dollar/yen calls this morning, according to traders. The calls have a Jan. 31 expiry and strikes at JPY91.00.

Corporates are switching to target redemption forwards from bonus non-deliverable forwards to hedge renminbi exposure for 2013.

BlackRock is looking to increase the amount of fx transactions that it settles via Continuous Linked Settlement, Chris Vogel, global head of fixed-income and currency trading for the USD3.67 trillion asset manager, told DI in an exclusive interview.

JPMorgan has launched a multi-asset class trading platform called JPMorgan Markets, bringing pre-trade, trade and post-trade functionality on one platform.

UBS in Tokyo has decided to halt trading of fixed income derivatives with U.S. counterparties and clients. A number of firms have taken similar steps to limit the chance of running afoul of the new Dodd-Frank rules, according to one market official.

It has already been an eventful start to the year with the U.S. having gone over the fiscal cliff, only to return after the midnight chimes on New Year’s Eve to see the U.S. Senate and House of Representatives pull it back by passing a bipartisan bill hours later.

Correlation products are tipped to be key trades in 2013 as investors look to increase yield.

Derivatives desks are scoping growth areas across asset classes for this year, but they’re targeting specific slices within the major underlyings.

An International Swaps and Derivatives Association service allowing buysiders and sellsiders to amend and share ISDA Master Agreements to be in compliance with Dodd-Frank business conduct rules is seeing a pick-up from buysiders, Robert Pickel, ceo, told DI in an extensive interview.

The establishment of clearinghouses in Asia Pacific will increasingly place greater pressure on the resources of major dealers, as investment banks attempt to negotiate the differing approaches in different markets.

On Nov. 16 the Department of the Treasury issued a determination that foreign exchange swaps and fx forwards should not be regulated under the Commodity Exchange Act and therefore should be exempted from the definition of swap under the CEA as amended by the Dodd Frank Wall Street Reform and Consumer Protection Act. The Determination is a wholesale adoption of the proposed determination issued by the Treasury last year and took effect immediately.