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The battle between two nascent indices of credit-default swaps is heating up in Japan as rivals race to sign up additional market makers to increase trading volumes. But this time it is not iBoxx, but the CJ50 that is taking on TRAC-X (DW, 11/3). With both indices having roughly equal trading volumes and partners the decisions of Nikko Citigroup and Merrill Lynch are likely to swing the balance. An official at Nikko said it will come to a decision early next year, while dealers at Merrill declined comment.

Fitch Ratings plans to expand its correlation modeling for structured credit referenced to both corporates and asset-backed securities to Asia. Matthias Neugebauer, associate director in the synthetic CDO team in London, said it will launch an updated Vector model before Christmas. The current model has industry and country correlation statistics for Europe and North America.

Martin Ferraro, head of institutional sales for foreign exchange, which includes derivatives, at BNP Paribas in New York has departed the firm. It could not be determined whether Ferraro, who could not be reached, has moved to a competitor. Mark Wisniewski, spokesman in New York, did not return calls.

The U.S. credit derivatives market was all but paralyzed last week as credit derivatives professionals waited on the outcome of a review by Standard & Poor's into its rating on Ford Motor Credit. While it is generally accepted that Ford will be downgraded to BBB minus, from BBB on CreditWatch negative, what is less predictable is whether the auto giant will gain a stable outlook or continue to be on negative watch, said traders. Keeping the firm on negative watch in addition to any downgrade would put Ford en route to junk status and the effect of this would bleed across all credits, they said.

Michael Connor has left UBS, where he was global co-head of credit derivatives in Stamford, Conn., to join Merrill Lynch as managing director and product manager for structured credit products and exotics in New York. Connor, who did not return calls, reports to Jeff Chandler, head of credit trading at Merrill in New York, said Michael DuVally, spokesman in New York. Chandler did not respond to messages. DuVally declined further comment.

Goldman Sachs has integrated its U.S. investment-grade bond and credit derivatives trading desks with its convertible-bond trading operation and tapped Gregg Weinstein, managing director and global head of convertibles, to oversee the enlarged unit. The three businesses will be able to work more closely together under the new structure, according to one official. Weinstein declined comment. Goldman combined its credit and convertible bond teams in Asia last year (DW, 10/27/02). A similar move for Europe is under evaluation, the official added.

Foreign derivatives houses in Korea, including Citigroup and Merrill Lynch, are preparing to trade derivatives directly with the multi-billion dollar investment-trust industry and domestic securities houses on the back of upcoming deregulation.

New York-based hedge fund manager R.G. Niederhoffer Capital Management will enter currency forwards and over-the-counter equity derivatives in its newly launched Roy G. Niederhoffer Negative Correlation Fund. Roy Niederhoffer, founder and president in New York, said over-the-counter foreign exchange and equity markets are liquid and this is particularly important due to the short-term trading horizon of the fund.

"We hope to get some new ideas."--Jae Kyu Bae, cio of index and alternative investment strategies at Samsung Investment Trust Management in Seoul, commenting on the fact that foreign houses are likely to be allowed to start dealing directly with Korean investment-management corporations. For complete story, click here.

UBS plans to step up its activity with corporate clients confused about how to hedge their liabilities under proposed accounting standards, such as IAS 39. The move follows Adrian Walkling, global head of the foreign exchange structuring group in London, joining the bank from Credit Suisse First Boston in the summer to ramp up fx corporate coverage. It will concentrate on advising corporates that want to hedge fx risk without suffering from swings in earnings volatility.

Collateralized debt obligation houses including Deutsche Bank and BNP Paribas expect demand for synthetic CDOs in Taiwan to take off in the coming months. "I expect to see a broad acceptance for CDOs by the first quarter of next year," said C.G. Lai, head of fixed income at BNP in Taipei, noting that CDOs have yet to receive widespread recognition domestically. "There is growing interest for dollar-denominated offshore CDO issuance," concurred an official at Deutsche Bank. "We've seen sporadic interest but there is now a general awakening and I believe that it will develop into a real trend next year," added Lai, noting the role of increasing investor education as clients seek higher-yielding alternatives over traditional fixed income products. BNP is working on closing its first transaction by year-end, said Lai, declining to further elaborate.