Derivs - People and Markets

Asset managers are increasingly trading products that are based on the Chicago Board Options Exchange Volatility Index on the back of a spike in volatility. According to UBS, asset managers are looking to the VIX as a tool for hedging, in addition to a product that they can trade in their clients’ portfolios.

Issuers are behind the rest of the market in obtaining the legal entity identifiers (LEIs) required by the Markets in Financial Instruments Directive to comply with transaction reporting, according to Mark Davies, general manager of Avox, who said that many issuers are not even aware that they must obtain an LEI.

The UK Structured Products Association has introduced a new set of risk ratings to enable financial advisers to compare different structured products more easily and help select products that match their clients’ risk profiles more closely. Up until now, there has been no numeric risk value assigned to structured products.

Overall interest rate derivatives trading that was reported to swap data repositories last week decreased by 9% from the previous week, according to data from the International Swaps and Derivatives Association.

Investors were seen looking at puts on the Australian dollar against the US dollar with a reverse knock-out, ahead of Tuesday’s Reserve Bank of Australia meeting, where the central bank unexpectedly cut its key rate by 0.25% to a record 2.25% low, causing the Aussie to weaken almost 2% against the dollar.

Unpredictable trend reversals are causing investors to shy away from options and short-term hedging strategies on the Chicago Board Options Exchange Volatility Index, even though vols have been on the rise since December 2014, according to equity derivatives strategists.

The made-available-to-trade process is not fit for purpose and should be eliminated, according to Christopher Giancarlo, commissioner at the Commodity Futures Trading Commission.

Market liquidity is at stake if a balance is not achieved between rules imposed by regulators and codes of conduct from within firms, according to David Clark, chairman of the Wholesale Markets Brokers Association in London.

Interdealer broker Tradition has made three senior hires in London and New York in a bid to expand its hybrid and electronic business.

The European Securities and Markets Authority has raised concerns over the European Commission’s proposal for a three year exemption from clearing and collateral responsibilities for firms making intragroup interest rate derivatives transactions with third country entities, because such entities are not yet deemed to have regimes equivalent to the European Market Infrastructure Regulation.

More swaps trading being pushed onto exchanges and other venues will not eliminate the presence of volatility in derivatives markets. However, the move to electronic trading has increased matched trades and efficient sourcing of capital.

Volumes in market adjusted coupon swap trading are increasing due to margin efficiencies, increased liquidity and the ease of trading, according to speakers at the TABB Forum Fixed Income 2015 conference in New York on Thursday.