Derivs - People and Markets

The Japanese Securities Clearing Corp has completed the first compression cycle for cleared yen interest rate swaps using TriOptima’s triReduce service, to eliminate notional principal and reduce risk.

Overall credit default swap notional that was reported to swap data repositories last week increased by 33% from the previous week, according to data from the International Swaps and Derivatives Association.

Market participants have been buying put options on the euro against the Swiss franc as potential quantitative easing from the European Central Bank could signal some downward movement in spot on the currency pair, raising speculation over the Swiss National Bank's floor at Sfr1.20.

The European Commission has extended the mandatory capital standards for exposures to central counterparties under the Capital Requirements Regulations. Recognising that CCP authorisation and compliance requires more time to complete, regulators have extended the deadline by six months.

Institutional investors have been picking up protection via options on energy-linked stocks driven by a decline in energy markets. Market participants were seen both selling calls and/or buying puts.

The US Congress is scheduled to consider a proposal included in the government funding bill which would allow banks to keep swaps trading units, rescinding a provision in Dodd-Frank that forces banks to spin off certain derivatives trading activities into another legal entity.

Kay Swinburne, Conservative co-ordinator for economic and monetary affairs, has hit back at the idea that the more controversial aspects of the Markets in Financial Instruments Directive can be fixed when the European Securities and Markets Authority writes its technical standards.

The Chicago Board Options Exchange (CBOE) has partnered with MSCI to offer options trading on six MSCI indices. The move comes with broad based asset managers devoting more of their portfolios to non-US exposure for diversification purposes.

Investors have been taking profit on FX options trades that were entered into ahead of the OPEC meeting that took place on November 27.

Asset managers, including hedge funds and others, are increasingly using equity index derivatives and futures to better allocate capital, minimise transaction costs and execute international exposure strategies, according to a report by market research firm TABB Group.

Retail investors and asset managers have been shorting volatility via exchange-traded funds and exchange-traded notes, building up a short position of more than $135m in vega, the highest short net position in ETFs and ETNs to date. That is a potential source of instability.

Trad-X, the interest rate swaps trading platform run by Tradition, has reached record trading volumes for dollar IRS, with volumes exceeding $1 trillion since their launch and the number of trades executed hitting 25,000.