Derivs - Interest Rate

The U.K.’s insolvent pension scheme lifeboat, the Pension Protection Fund, over the last 12 months, has expanded its hedging strategy to reduce the swap spread risk.

The Japan Securities Clearing Corp.’s move to become the first Asia Pacific clearinghouse to register as a derivatives clearing organization—or DCO—under the U.S. Commodity Futures Trading Commission could be an expensive venture for the CCP, but is needed to be competitive in the emerging global clearing marketplace, according to lawyers and officials in Tokyo.

As the derivatives market moves towards central counterparty clearing, initial margin has increasingly become a subject of industry discussion. CCPs require firms to post initial margin when entering into derivatives to provide protection in the event of a default; however, concerns over how the margin is calculated are growing. Market participants are now looking at the potential for standardizing initial margin.

U.S. firms operating in Japan are losing trades to European and domestic counterparties, as complying with Dodd-Frank rules adds an extra 10 minutes to the trading process, according to Hiroki Tomiyasu, executive director at Morgan Stanley MUFG Securities in Tokyo.

The Japan Financial Services Agency plans to push regulators in the U.S., Europe and other regions to move forward with the implementation of mandatory clearing of over-the-counter derivatives.

The International Swaps and Derivatives Association has written the Commodity Futures Trading Commission a letter saying that the forwards exclusion requirements under Dodd-Frank are too strict.

Barclays strategists have highlighted interest rate option trades that would perform well should Republican candidate Mitt Romney win the U.S. presidential election.

Société Générale is advising investors to enter bear flatteners to take advantage of cheap JPY 10y tail volatility, by buying JPY1y10 at-the-money-forward payers and selling JPY 1y20y ATMF payers that generates a premium at inception for the investors.

Janney Capital Markets has hired Kevin Roche and Jeff Miller as managing directors as part of its move into structured product underwriting and origination.

The Singapore Exchange is actively seeking recognition from both European and U.S. regulatory bodies for its over-the-counter clearinghouse, Derivatives Clearing.

Derivative.com, the Zurich-based multi-dealer structured product platform, has begun offering discount certificates.

Local Japanese financial institutions are diversifying away from U.S. counterparties when entering into swaps contracts in a bid to sidestep or delay registration as a major swap dealer with the U.S. Commodity Futures Trading Commission, according to market participants.