Derivs - People and Markets

Short term option implied volatility for the Brazilian real rose to more than 23%, the highest level in some weeks, as the country prepares for the possibility of a presidential impeachment vote by April 17.

Listed futures and options activity growth in March was strongest in equity index and volatility-linked products.

Option premiums have been very high in sterling pairs for some time, but analysts are at odds over whether maturities before the United Kingdom's referendum on European Union membership are correctly priced.

Recent actions by the European Central Bank and US Federal Reserve, along with more buoyant commodity prices, have reined in a long running market dislocation, with the basis between credit default swaps and cash bonds having tightened during March.

The European Securities and Markets Authority (ESMA) has slammed the Depository Clearing Corporation’s Derivatives Repository on several counts for delays over data access, but served up a €64,000 fine for the breaches — a figure that amounts barely to an office whipround.

Investments into emerging market equity exchange traded funds have slumped this year, but this has left call structures and outperformance options looking cheap if Chinese capital outflows ease.

Monetary policy and declining oil prices caused unusual currency correlations in recent quarters, say bank analysts, but changes in sentiment around developed market currencies and the prospects for US inflation look set to send those measures back toward normal levels.

The US Securities and Exchange Commission (SEC) looks set for lengthy deliberation after critics lined up to savage its proposed rule on the use of derivatives. The rule would change the way that mutual funds, exchange-traded funds and other investment companies measure risk, and would limit their use of derivatives in ways that could have sweeping effects across the investment management industry.

ICAP, the interdealer broker, has launched a daily index that measures the effective cost of funding for sterling government bonds.

The International Swaps and Derivatives Association has warned that European supervisory authorities’ decision not to give ground on one day margin collection in their rules for uncleared derivatives will pose big challenges and costs for the buyside, while the deadline to comply in general with the regulation has become a ‘sprint’.

Critics have lined up to savage a proposed Securities and Exchange Commission rule that would change the way that mutual funds, exchange-traded funds and other investment companies measure risk and limit their use of derivatives in ways that could have sweeping effects across the investment management industry.

The US regulatory framework offers little insight into the riskiness of hedge fund option portfolios, claimed treasury researchers this week, even as the industry reels from its worst year since 2009.