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UBS is considering re-establishing an onshore interest rate derivatives operation for Brazil, potentially before the end of next year. "We've been cautiously looking at this," said Joonkee Hong, global head of emerging market derivatives in New York. It will likely wait until the economic outlook improves, which Hong is expects next year.

After two years in the doldrums the Japanese equity derivatives market started to perform again in the second half of the year and the major houses reacted by reorganizing desks, hiring staffers and offering new products.

Bunge, a diversified oil seed processor and supplier of soybean products, is considering entering an interest rate swap to turn a recent USD500 million five-year fixed-rate debt issue into a synthetic floater. Morris Kalef, treasurer in White Plains, N.Y., said the corporate typically enters swaps as a means of managing its fixed-to-floating asset and liability mix. The firm is not waiting on a specific event to determine whether it will pull the trigger, although Kalef noted that the decision would depend on whether Bunge spies an interest rate hike on the horizon.

2003 YEAR IN REVIEW ASIA

The credit derivatives markets lost a little of their shine in 2003 after several years of hogging the limelight as their older and less glamorous sibling, equity derivatives, made a comeback on the back of confidence returning to the underlying stock markets. Nevertheless, developments in credit derivatives indices and single-tranche CDOs ensured that credit derivatives continued to be highly profitable.

Jerome Jurschak, ceo of ACE Guaranty Corp. and ACE Capital Re, has resigned. Calls to Jurschak's office were referred to Anna Lowry, spokeswoman at ACE Ltd in Bermuda, who declined comment. The resignation comes amid a re-jig of the firm's insurance operations and ahead of a planned initial public offering of ACE Financial Services, which includes the two units Jurschak headed up.

Fund Derivatives Take Off, Leaving UCITS III In Their Wake

Two new types of investors have emerged this year to take advantage of the potentially huge rewards the secondary market in structured credit products has to offer. Hedge funds and principal finance desks have been popping up in both Europe and the U.S., keen to grab a share of the huge spreads on offer. At the start of the year, traders were reporting CDOs trading 25% below their theoretical value. The CDOs were trading at such low levels because there were only a handful of players willing to make markets, according to fund managers. Spreads have come in as more funds have set up, but liquidity has also increased and this is starting to be a fruitful market.

The credit derivatives market underwent a fundamental structural change this year with the launch of two credit-default swap indices, TRAC-X, founded by JPMorgan and Morgan Stanley, and more recently iBoxx, which was brought to market by a consortium of 11 dealers. Market makers pointed to the huge liquidity boost the indices brought the market, with most dealers trading at least one of the instruments. Disputes between the rival consortia behind the indicies, however, have split trading volumes with survival of both indices unlikely over the long-term, they said.

Default swaps referencing Citizens Communications flurried in an otherwise quiet week of trading. Strong demand for five-year default protection on Citizens caused the price to jump up over 100 basis points to 162 basis points-172bps as DW went to press on Thursday from 60bps the previous week. Citizens is not usually a widely traded name, but the last week has seen it in the top two-to-three most traded credits. Traders expect the spread to widen further if the uncertainty surrounding the company's future continues.

The credit derivatives market's amazing run of growth was thrown off course this year because protection buyers, such as KBC Bank, have scaled back, resulting in volumes falling from their first quarter peaks. There are no natural alternatives to replace these players, according to Chris Francis, head of international credit research at Merrill Lynch in London. The list of protection buyers that have pulled in their horns include loan houses and convertible bond arbitrageurs. In addition, funds' hedging models were telling them to warehouse credit risk rather than buy protection, he noted.

Recent corporate scandals, including the fall of Enron, have focused attention on the role of attorneys who represent public companies. The American Bar Association Model Rules of Professional Responsibility were amended in August to permit lawyers to reveal confidential client information to prevent the client from committing a financial crime or fraud and to require a lawyer to refer violations of law by employees of the client to higher authorities within the organization.