Derivs - FX

The Japan Financial Services Agency plans to begin taxing over-the-counter derivatives used by individual investors the same way as their listed counterparts, meaning gains will get charged a flat 20% instead of being lumped into general income where gains could be taxed as much as 50%.

The recently-approved new over-the-counter derivative rules from the China Banking Regulatory Commission will open the derivatives market to asset managers as well as dealers, according to a report by Allen & Overy lawyers.

Low realized volatility levels relative to implied volatility levels on the U.S. dollar/ yen has stagnated fx activity this week, and spurred fx structurers to pitch options that allow investors to pay for implied volatility that is more closely aligned with realized levels.

Morgan Stanley strategists are pitching equity/fx over-the-counter hybrids on Taiwan equity indices and the Taiwan dollar against the U.S. dollar as they take bullish views on both asset classes in the coming year.

The market value of derivatives in bank trading books rose 9% across all regions in the third quarter, according to The Bank for International Settlements. “The evolution of the dollar during the quarter probably played a significant role in this increase,” said one market official, commenting on the currency’s strengthening.

Powers of the European Securities and Markets Authority to decide which over-the-counter derivatives can be cleared are being trimmed even before the pan-European regulator has had a chance to formerly weigh in on the issue.

Australian paper company PaperlinX has reported an AUD17 million (USD16.92 million) valuation loss on a 2.5-year currency option purchased in Dec. 2009, according to a market update from the company.

Some U.S. funds have been buying options and option spreads against the euro, driven by the idea Germany could exit the single currency in the next two years, according to fund managers and structurers on both sides of the Atlantic. The structures have received a spurt in interest as funds zero in on sovereign debt concerns in the region.

An all-to-all format of pricing and trading over-the-counter derivative swaps could lead to a flash crash in the interest rates market, according to Peter Fisher, vice chairman at BlackRock.

Regulators need to allow derivative endusers the opportunity to opt-out of utilizing an omnibus style clearing account with its clearinghouse in a swap post-Dodd-Frank, said Roger Liddell, ceo of LCH.Clearnet at TabbForum’s Derivatives Reform: Preparing for Change conference yesterday in New York.

The European Securities and Markets Authority has written to the heads of the Securities and Exchange Commission and the Commodity Futures Trading Commission to express fears over plans for the registration of non-U.S. swap data repositories.

The Taiwan Financial Supervisory Commission plans to evaluate creating an over-the-counter derivative central counterparty.