Derivs - People and Markets

The Argentine credit default swap auction was resolved on Wednesday with restructured bonds on the sovereign valued at 39.5c on the dollar.

Swap documentation such as the International Swaps and Derivatives Association master agreements and credit support annexes — the contracts at the heart of so much wrangling between issuers and dealers in the supranational and agency bond market in recent years — are likely to be non-existent in the coming years for firms that only trade vanilla products. This is due to regulation that requires certain financial instruments to be cleared through central counterparty (CCP) clearing houses, writes Beth Shah.

Denver-based financial boutique IPS Strategic Capital is looking to launch soon a structured note strategy that will combine selling short futures positions on the CBOE Volatility Index, while using long call options as a hedge.

The need for credit support annexes may be reduced due to regulation that requires some financial instruments to be cleared through clearinghouses and traded on swap execution facilities, according to market officials.

Chicago-based CME Group and the Shanghai Clearing House plan to jointly develop products and services in the over-the-counter derivatives market and will cooperate in areas of risk management and market research.

High yield cash investors have been seen setting up new hedges in iTraxx Crossover, with popular strategies including bearish risk reversals and payer spreads.

The Korea Exchange is remodeling its futures and options market, introducing real-time limits on derivatives prices and reforming the system for fixing erroneous transactions as the bourse gears towards the introduction of futures on its Volatility-KOSPI200 index.

Hedge funds acting as clients of clearing members may delay clearing trades under the European Markets Infrastructure Regulation to allow the members to finanlise necessary documentation in a bid to save on costs.

Investors are increasingly buying options on the euro, particularly against the dollar and sterling, which is helping to push volatility up following months of low fx volatility.

Interest rate swap trading on US swap execution facilities fell about 16% from June-to-July this year, with dollar trades dominating 61% of the market.

John O’Brien, former managing director and head of New York derivatives sales at Bank of America Merrill Lynch, started at Deutsche Bank this week.

A recent no-action letter from the US Commodity Futures Trading Commission that provided swap execution facilities relief from certain data reporting requirements for uncleared derivatives should be extended to cleared contracts.