Derivs - People and Markets

HQuant, an Ithaca, N.Y.-based quantitative advisory company that specializes in the hotel sector, wants to put together the first cash flow swaps on hotels.

Equity derivatives participants are jittery after an appeals court upheld a Securities and Exchange Commission decision to prosecute a pair of over-the-counter options users for what it said amounted to an indirect sale of restricted shares to the public—an illegal act. The case raises questions about whether the SEC will prosecute others who use derivatives to hedge restricted stocks.

The International Swaps and Derivatives Association has drafted a set of protocols to deal with margin call disputes, as promised in the July 2 Operations Management Group letter to the Federal Reserve Bank of New York. Comments on the protocols have been solicited through Aug. 7 so they can be finalized by Sept. 30.

Inovio Biomedical Corp., which is researching a swine flu vaccine, announced yesterday it had raised USD30 million from a pair of institutional investors by selling shares with embedded over-the-counter warrants.

Stephen Einchcomb, head of equity derivatives strategy at JPMorgan in London, has left the firm, according to an official.

Dealers in Australia and New Zealand have agreed to standardize credit default swaps, following in the footsteps of North America by opting for two fixed coupons—100 and 500 basis points.

Fuzzy language in the draft over-the-counter reform legislation revealed earlier today did little to quell concerns about the extent of forthcoming regulations, but there were some surprising nuggets in the concept paper.

Morgan Stanley Smith Barney and Wells Fargo are considering suspending the sale of leveraged exchange-traded funds. Spokeswomen for both firms said non-traditional ETF policies are currently under review mostly because of a notice from the Financial Industry Regulatory Authority last month that called leveraged ETFs unsuitable for long-term retail investors.

Standard Chartered recommended a relative value credit default swap trade in May, and then took a USD200,000 hit on its prop desk when the rationale behind the idea didn’t pan out.

House Financial Services Committee Chairman Barney Frank and House Agricultural Committee Chairman Collin Peterson are set to discuss the final outline of the OTC reforms this morning at 11am EST. You can read the draft of the reforms, obtained by Derivatives Week, here.

Cairn Capital is preparing to launch its second credit fund. The London firm is targeting a September launch in partnership with another, unknown investment firm.

Ambac Financial Group’s advisement that its principal operating subsidiary expects to take a USD1.6 billion second-quarter charge relating to souring credit derivatives—eliciting an 11 notch downgrade from Standard & Poor’s—has sparked a frenzy of shorting on monoline names.