Derivs - FX

Buyside firms are largely unprepared for the post-Dodd Frank over-the-counter derivatives environment and need to work toward a more balanced relationship with the major dealers through technology buildouts and adherence to a new set of industry best practice standards, according to a report.

Barclays Capital strategists are recommending 10-year trades playing cheap Nikkei implied volatility off of relatively richly priced U.S. dollar/yen implied volatility.

Standard Chartered Bank has begun selling U.S. dollar/Hong Kong-deliverable Chinese yuan target redemption forwards to corporates looking to cover either currency depending on their exposures.

The International Swaps and Derivatives Association is aiming to shore up a provision allowing a non-defaulting swap counterparty to net out its position and terminate a transaction with a counterparty in default. The industry group has set up a working party to review the master agreement provision after aspects of it have been queried by recent litigation.

Corporates were looking to buy puts on the euro against the U.S. dollar this morning, according to traders, leading some to believe that the market will see a spike in risk reversals next week on the back of corporate hedging.

Scottish Widows Investment Partnership has launched a currency fund which uses forwards to gain exposure to G10 currencies.

A thicker shroud than usual surrounds the topic of bonuses this year as the banking industry waits to see how the European regulators’ ire will play out.

Euro spot levels spiked against the U.S. dollar early yesterday morning, partly on the back of news from Portugal’s bond auction late yesterday, which saw traders scramble for exits through unwinding put options on the currency, or taking opposite views, according to traders in London, New York, and San Francisco.

A host of officials working in Barclays Capital’s fx, equity and rates teams were cut over the last few days, including some senior employees working on the firm’s derivative desks, according to market officials.

BNP Paribas has hired Joe Abbatiello as director in sales across equity derivatives and cash for event-driven clients based in New York.

A euro/U.S. dollar European digital put option with a notional of around EUR500 million expired this morning at 10:00 a.m. EST, prompting market players to sell the single currency with an expectation that the pair would break USD1.30.

Hong Kong corporates have been the most active players in the over-the-counter fx market this week, hedging their currency risk for the year by using ratio forwards on the U.S. dollar/Hong Kong dollar and bonus forwards on the U.S. dollar/yuan.