Derivs - FX

Chinese banks and state-owned enterprises are trying to restructure U.S. dollar/yen swaps that will have them paying out millions of U.S. dollars if the cross breaches JPY80 barrier and the yen continues to appreciate.

Korea has vowed to support financial markets and ensure sovereign credit default swap spreads and non-deliverable forward rates recover. The two rose sharply after the North Korean attack on Yeonpyeong Island.

A lack of liquidity in the fx options market as a result of the Thanksgiving holiday, accompanied by a sharp drop in euro spot prices over the past two days, has raised gap-risk concerns in options volatility.

A new stress test for systemically important financial institutions has been outlined by risk academic Darrell Duffie, professor at Stanford University.

Fewer swaps than Congress and the public expect may end up getting traded on exchanges or through swap execution facilities, according to a Securities and Exchange Commission official.

Centrally clearing over-the-counter derivatives trades will raise costs for established asset managers, at least in the short run, said panelists at the Osney Media Optimising OTC Derivatives Operations in Fund Management conference in London this morning.

The International Swaps and Derivatives Association has kicked off a working group devoted to updating its Financial products Markup Language software’s reporting view.

Empire Capital, a Beijing-based asset manager, is prepping three new Qualified Domestic Institutional Investor funds, Roy Penn, managing partner and chief investment officer said at the Derivatives Asia 2010 conference in Beijing this week.

Fx option flows were thin this week as the market zeroed in on the talks to bailout out Ireland. Some euro strength on news of the talks had structurers working up pitches.

Sebastien Galy, senior fx currency strategist at BNP Paribas in New York, has left the bank.

A key component of the China’s derivative market development plan is avoiding mistakes seen in the U.S., Xuecheng Jing, the former deputy director of the research bureau at the People’s Bank of China said at the Derivatives Asia 2010 conference in Beijing this week.

Zack Ling, a managing director in public market investment at China Investment Corporation, one of China’s largest sovereign wealth funds, said that derivatives are a necessary part of every institutional investor’s portfolio.