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GFI plans to start brokering Asian credit-default swaps out of its Hong Kong office in the coming weeks. The firm currently brokers the products out of its Sydney office, but is moving its operation to Hong Kong because increased volumes warrant having brokers nearer the clients. The Sydney office will still broker Japanese and Australian default swaps, said Michel Everaert, global head of product marketing in London.

Merrill Lynch has merged its U.S.-based strategic solutions group (SSG), a specialized group responsible for structuring and marketing derivatives-based transactions to U.S. corporations, into its derivatives sales division. As part of the integration process Merrill is looking to place Keith Jacobson, a managing director who headed the strategic solutions group, in another role within the firm. Ricus Van Der Lee, a managing director in the group who had reported to Jacobson, has left. Van Der Lee was unable to be contacted while Jacobson did not return calls. Michael DuVally, a Merrill spokesman in New York, would only say that Jacobson continues to be an employee in Merrill's debt division.

TD Securities plans to bolster its U.S.-based equity derivatives team following a recent reorganization of its global derivatives business. Joseph Hegener, vice chair in New York, said the firm is in talks to hire a head of equity derivatives and double its team of four structurers and traders. TD is hiring now because it is making money in this business and the current economic climate makes it a good time to hire, Hegener said.

Ambac Assurance Corp. has hired Michael Cush, director at Dresdner Kleinwort Wasserstein in New York, to work in the firm's interest rate and cross currency swap team. Steven Dymant, managing director at Ambac in New York, to whom Cush reports, said the firm hired Cush because its derivatives activities have increased in line with its insurance business.

AXA Investment Managers is planning to launch an offshore statistical arbitrage hedge fund that will use over-the-counter derivatives and is expected to grow to EUR250 million (USD245million). Antoine Josserand, director of structured and alternative investment management in London, said the fund will have seed capital of EUR15 million and be targeted at investors in the U.S. and Europe. However, it has not been determined when the fund will start trading or when it will open to investors.

The proposed Basel capital adequacy accord will likely close a loophole that allows structurers and investors to arbitrage rating agencies in order to get a desired rating for collateralized debt obligations. Rating agencies assign different ratings for the same obligations because their methodologies and projected default curves are different. Investors and structurers are aware of this and frequently ask Moody's Investors Service to rate the lower tranches of a deal and Standard & Poor's or Fitch Ratings to rate the higher tranches.

CIBC World Markets is planning to start offering synthetic collateralized debt obligations in Japan next year. Yasuhiko Kai, fixed income trader at CIBC in Tokyo, said the plans are in response to a growing number of domestic banks looking to remove credit risk from their balance sheets, in addition to more investors wanting higher returns than traditional fixed income instruments offer.

The Province of Ontario has entered two swaps to convert a USD250 million fixed-rate bond into a Canadian floater, and then into Canadian fixed-rate. Gadi Mayman, executive director in the capital markets group, said the province receives a fixed-rate and pays a LIBOR-based floating rate in the first swap. The LIBOR-based rate was then traded for Canadian bankers' acceptances, which were paid out in exchange for a Canadian dollar- denominated fixed rate, he said, declining to specify the rates.

A synthetic arbitrage collateralized debt obligation is originated by collateral managers wanting to exploit differences in yield between the underlying assets and that payable on the CDO. The generic structure is as follows: a specially-created special-purpose vehicle enters into a total-return swap with the originating bank or financial institution, referencing the bank's underlying portfolio. The portfolio is actively managed and is funded on the balance sheet by the originating bank. The spv receives the total return from the portfolio and in return it pays LIBOR plus a spread to the originating bank. The spv also issues notes that are sold to CDO investors.

Five-year credit protection on U.S. communications giants, including cable TV operator Comcast and Cox Communications, moved in by around 100 basis points last week, as the market experienced a renewed appetite for credit. Five-year default swaps on Comcast narrowed to 390 basis points last Wednesday, in from 515bps the previous week.

The Federal Reserve Bank of New York invited more than 60 representatives from the largest credit derivatives houses in the U.S., including Ambac Assurance Corp, Bank of America, Citibank and JPMorgan, to its Liberty Street offices for the first time on Oct. 24 as part of a review of whether banks need restructuring protection to get regulatory capital relief. Darryll Hendricks, senior v.p. at the Fed in New York, said the regulator has to take account of market implications in developing policy and is actively considering its stance on restructuring and capital relief, including its position on what should be included in the proposed Basel capital adequacy accord. However, he added that the main purpose of the meeting was to understand what is going on in credit derivatives, rather than to discuss regulatory proposals.