Derivs - People and Markets

Regulators may ultimately look to have transparency into the over-the-counter derivatives market down to net exposures for each counterparty, according to Ananda Radhakrishnan, director of the division of clearing and intermediary oversight at the Commodity Futures Trading Commission.

Market jitters appear to have faded for now, but banks are seeing more interest in retail structured products that offer downside protection alongside enhanced returns.

A massive Aussie dollar put against the yen hit the market this morning. The notional was AUD2 billion (USD1.6 billion)—the biggest seen on the cross since the start of the year—and the size and positioning for a fall in the Aussie was dubbed a gutsy play by traders.

An equity version of the International Swaps and Derivatives Association’s Credit Determinations Committee is due to be discussed at ISDA’s upcoming equity steering committee meeting in two weeks.

Structured Investment Management is making a play for insurance clients, and to that end has hired Mark Graham, head of corporate solutions and hybrid capital for the Americas at Barclays Capital.

Nikki Tippins, a managing director in structured products at JPMorgan, has left and is tipped to land at Morgan Stanley.

The Securities and Exchange Commission and Commodity Futures Trading Commission have reportedly decided which parts of the over-the-counter derivatives market each will oversee, with the SEC getting jurisdiction over credit default swaps and equity derivatives.

The U.K. High Court is set to decide Tuesday on another case involving disputed payment rights relating to a Lehman Brothers Holdings Inc. collateralized debt obligation. At issue is whether a so-called flip clause—allowing noteholders first rights to repayments over a defaulted counterparty—is enforceable in the U.K.

The International Organization of Securities Commissions and the Committee on Payment and Settlement Systems have teamed up to review their 2004 recommendations for central counterparties.

Regulators defended the U.S. Treasury Department’s proposals to reform the over-the-counter market in a discussion hosted by the Chamber of Commerce in Washington, D.C., this morning. Among the corporates expressing their concerns were Post-it products maker 3M and medical supply firm Zimmer.

Credit default swaps referencing Lear Corp. were settled at 38.5%, Markit and Creditex determined in an auction today. The result means sellers of protection on the company’s bonds will pay out 61.5 cents on every dollar of protection sold. Loan-only CDS were valued at 66%, meaning buyers of protection will recover 34.

The U.S. Treasury Department is close to proposing legislation that would see Tier One financial holding companies—firms that could pose a threat should they fail—subjected to tougher reserving and risk management requirements. Treasury spokesman Andrew Williams told Derivatives Week Tuesday that the department plans to release proposed legislation on the Tier One portion of the financial reforms “very soon…[in] days or weeks.”