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HSBC, often considered to punch below its considerable weight in the financial markets, is preparing a major push into foreign exchange that it expects will see its structured fx business double to USD50 billion (notional) in the next 12 months. Mike Powell, treasurer and head of global markets-Europe, said it will roll out structured products that have worked in Asia and broaden its global product range.

Korea First Bank, with KRW37.1 trillion (USD32.2 billion) in assets, is planning to enter an interest rate swap on the back of a recent 10-year USD200 million bond. John Shin, assistant manager in the trading and sales department in Seoul, said the bank plans to convert the fixed rate issue into a synthetic floater, likely within three months.

JPMorgan sent an e-mail to its credit-default swap index clients last week which laid out the firm's opposition to a rival default swap index. "Competing indices are bad for clients, as they cannibalize liquidity," the e-mail stated. The e-mail was in response to an agreement by 11 dealers to launch an index of 125 investment-grade North American credit-default swaps, dubbed iBoxx N.A. I.G. A JPMorgan official confirmed the e-mail.

Liquidity in seven to 10-year credit-default swaps has picked up recently, with one dealer seeing long-dated protection being traded on a daily basis compared with only a few times a month earlier this year. Alex Reyfman, U.S. credit derivatives strategist at Goldman Sachs in New York, said interest in long-dated swaps is largely driven by real money-accounts wanting to match duration risk in their portfolios. Longer maturity default swap contracts offer credit spread hedgers greater sensitivity for the same level of instantaneous default risk relative to five-year contracts, he added.

Merrill Lynch is bringing aboard Li Dong Sun, assistant v.p. in the treasury department at Citigroup in Beijing, as a marketer in the strategic solutions group in Hong Kong. Li, who starts in the coming weeks, reports to Samir Atassi, director and head of the strategic solutions group in Hong Kong. Atassi confirmed the hire but declined further comment. Li could not be reached for comment.

Merrill Lynch is making another push into the Japanese equity derivatives market and has transferred responsibility for the desk back to Tokyo. Yasuhiro Fujiwara, former head of equity capital markets in Tokyo, has assumed control of the desk. Merrill scaled back its commitment to the Japanese equity derivatives market at the beginning of the year and moved management of the operation to Hong Kong because of the dismal outlook for the Japanese market. Fujiwara declined comment.

Saul Kattan, a director in structured credit marketing at Merrill Lynch in New York, has jumped to Citigroup Global Markets to work in a similar role. Kattan, who could not be reached for comment, is following former colleagues Geoff Gentile, also in structured credit marketing, and Ted Husveth, a credit structurer, who recently made the jump (DW, 10/12).

"We've been underinvested."--Richard Cohen, Asia-Pacific credit derivatives trader at Morgan Stanley in Hong Kong, explaining the motivation for upcoming transfers and hires. For comlete story, click here.

Morgan Stanley is looking to expand its nascent Hong Kong-based credit derivatives operation in the coming months with a mix of transfers and hires. "We generally believe the Asian market will continue to grow," said Richard Cohen, Asia-Pacific credit derivatives trader in Hong Kong. "We've been underinvested," he added. Cohen joined earlier this year from Merrill Lynch, where he was head of Pacific Rim credit derivatives in Tokyo, to establish a non-Japan Asia trading desk (DW, 5/4). "The building blocks have been here--it's just a matter of slotting it in," he added, explaining that the desk intends to leverage Morgan Stanley's fixed income presence in the region.

National Australia Bank sold EUR1 billion (USD1.163 billion) of deep in-the-money euro calls/dollar puts last week, which led traders to speculate that it was to achieve cheap funding. The options, due to mature Dec. 2, had strikes at USD1.0490. The premium on the option was 10.8%, according to traders. Euro/dollar spot traded at USD1.169 on Wednesday. Majella Allen, spokeswoman in Melbourne, declined comment. Traders estimated that they only see trades like this once or twice a year.

Imagine a speculative trading strategy that is guaranteed to make money 98% of the time. Are you interested? There are many ways to accomplish this. Here is a stylized example: You draw a card from a 52 card deck. If it comes up any card other than the ace of spades, you earn a million dollars. If it comes up as the ace of spades, you lose 52 million dollars. On average, you will lose just over USD19,000 each time you play, but you will win 51 out of 52 hands. This is what is known as a skewed trading strategy.

Schroder Investment Management has developed an alternative way of guaranteeing asset managers' portfolios while maintaining upside participation. John McLaughlin, head of structured investments, in London, said this method is cheaper and more flexible than using zero-coupon bonds and options and less path-dependent than traditional Constant Portfolio Proportion Insurance.