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Merrill Lynch plans to launch an onshore interest rate trading operation in Seoul early next year. "We should get our license in the first quarter," said H.H. Choi, head of debt in Seoul. Choi transferred from Merrill's Hong Kong hub late last year to build up the firm's debt and investment banking businesses (DW, 10/28/02).

Long-term buyers of credit protection are expected to suffer more pain next year as spreads on default swaps and bonds stay tight. Michael Cloherty, market strategist at Credit Suisse First Boston in New York, said that while buyers of long-term protection suffered from the rally this year credit volatility worked to reduce some of the pain.

Macquarie Bank has teamed up with Royal Bank of Scotland to offer global commodity risk management services to the latter's client base. The agreement covers oil and oil products, natural gas, precious and base metals and agricultural products, according to a Macquarie spokeswoman in London. The partnership is in its early stages, she added, declining further comment. Simon Grenfell, head of the energy markets group at Macquarie in London, declined comment. Calls to RBS bankers were not returned.

San Francisco-based Tricera Capital is considering purchasing equity derivatives to hedge the firm's recently launched Tricera Asia Fund, which is expected to hit assets of USD5-10 million in the coming months. Raymond Lin, founder, said the firm is looking at buying out-of the-money puts on Asian indices for the long/short fund, which would offer diversified protection on stock volatility.

The credit-default swap market was starting to prepare for a Parmalat credit event last week. Traders made the switch from quoting prices in basis points to charging a cents-in-the-dollar figure as DW went to press on Thursday. The move was triggered by Standard & Poor's downgrading the Italian dairy producer six notches to CC/C.

Credit-default swap spreads on U.S.-based supermarket chains including Safeway, Albertson's and Kroger were pushed out further last week after a West Coast protection buyer snapped up around USD100 million of default swaps on the grocers. The names were already reeling from drastic cuts in earnings because of ongoing labor strikes.

SAC Capital Management has hired Colin Rust, former proprietary equity derivatives trader at Lehman Brothers in New York, in a similar role. Rust declined comment. Peter Nussbaum, legal counsel in Stamford, Conn., did not return calls. SAC is the world's 33rd largest hedge fund manager, according to Institutional Investor's hedge fund rankings.

Pricing-orientated payoff computer languages form the vast majority of existing financial product language implementations, but they face serious limitations for valuing structured products on past, present, and future dates. A new class of context-neutral contract computer languages offers key properties to overcome the challenges of time travel.

"We are not launching futures. We are licensing an exchange to do this."--Lars Hamich, executive director at Dow Jones Indexes, commenting on the firm's strategy for developing a credit derivatives futures markets, for complete story, click here.

The two major credit derivatives index providers, TRAC-X and iBoxx, are both attempting to launch futures, but are attacking the project in opposite ways. iBoxx is setting up two consultative groups, one for dealers and one for investors, to come up with the ideal future, whereas Dow Jones Indexes, the administrator of TRAC-X, plans to leave the product development to licensed exchanges. Both groups have a similar timeframe, with iBoxx going for the first-half of the year and Dow Jones looking at either the June or September roll date for credit derivatives transactions. Neither, however, would name exchanges they might use or detail likely contract specifications.

Nationwide Building Society has entered interest rate swaps to convert two recent fixed-rate U.S. dollar notes into synthetic floating-rate liabilities. Sarah Hill, senior trader in the treasury, declined to reveal how much of the issues it converted, but said, "The two fixed rate issues were swapped back into floating to fit our current funding profile."

It may be too early in the game, but the trend currently seems to be one of "calendar creep."