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Credit derivatives traders have agreed not to include the restructuring credit event for default swaps that reference monoline insurance companies. Lawyers said major market players agreed to make the switch on Sept. 15, because of complications with how the trigger would work.

"So many of us have to pay for the sins of a few."--Ernest Patrikis, International Swaps and Derivatives Association board member and senior v.p. and general counsel at American International Group, commenting on the origins of recent legislation, including FAS 133. For Complete Story, click here.

Coventry Building Society, a U.K. mortgage lender, has entered a foreign exchange swap to convert part of its first five-year EUR500 million (USD574 million) floating-rate note into a sterling-dominated liability. Ian Palmer, risk manager in Coventry, said the thrift decided to issue a euro-denominated note to target a different investor audience.

Hamilton Investment Management will likely enter total-return swaps and purchase credit-default swaps when its nascent Hamilton Convertible Opportunities Fund increases its assets under management. Any decision on when the fund is large enough to make derivatives trades would be at the discretion of counterparties, said an official in New York, who was unable to estimate the size.

Five-year credit protection on Altria Group, the parent of tobacco manufacturer Philip Morris USA, snapped in last week on the back of positive news regarding the subsidiary's litigation troubles. Credit-default swaps were trading at 220 basis points last Wednesday, in from 320bps where they were bid the week before, said a New York-based trader.

BNP Paribas has hired two interest-rate derivatives marketers for its German and Austrian desk. Santosh Varghese, derivatives marketer at Citigroup in Frankfurt, will market derivatives and structured products to German and Austrian corporates and banks. Gregor Gruber, a former head of capital products at Morgan Stanley in London, is going to promote interest and credit derivatives as well as asset and liability management to German and Austrian insurance companies, noted Stefano Paschetto, European head of interest-rate and credit derivatives marketing at BNP in London. Gruber and Varghese will ultimately report to Paschetto and Mark Goldman, head of European fixed income in London.

AXA Investment Managers will shortly bring to the market two collateralized debt obligations, each with a 20% discretionary trading bucket. The discretionary bucket in the upcoming deals allows AXA to make portfolio changes without having to justify the trades to the rating agencies. Usually, trades are only permitted if there is credit deterioration or improvement and have to be rubber stamped by the ratings agencies.Laurent Gueunier, head of investment-grade CDOs at AXA, declined to comment.

Adrian Hyde, former U.S. head of credit derivatives trading at TD Securities in New York, has joined Banc of America Securities as managing director and head of the firm's U.S. credit derivatives flow trading operation. Hyde's appointment follows the move by Sean Bonner, who had formerly headed the desk, to Wachovia Securities earlier in the summer as managing director and head of high-grade credit-default swap trading. At BofA Hyde reports to Dan Caldwell, managing director and global head of credit derivatives trading in Charlotte, said Jeff Hershberger, spokesman in New York. Caldwell declined comment. Hyde, who left TD Securities last month (DW, 8/18), did not respond to messages.

The major credit derivatives houses, including JPMorgan, Merrill Lynch and Deutsche Bank are putting together a standard document for single-tranche collateralized debt obligations with the aim of increasing liquidity in the inter-dealer market. The largest stumbling block is which valuation method to pick, but lawyers involved in the process said the document would likely be finished before year-end.

Gustave Rieunier, foreign exchange options trader at Commerzbank, left the firm last week. He reported to Nozar Hussein an official on the global fx trading desk in London. Rieunier could not be reached by press time.

As part of its focus on special purpose entities, the Financial Accounting Standards Board (FASB) has undertaken several projects which re-define which party, if any, must consolidate the assets and debt of SPEs with which it is involved. FIN 461, released in January, applies to all actively managed financing structures including many commercial paper conduits. Proposed changes to FAS 1402, would apply to "passive" financial asset securitizations, including many mortgage and asset-backed transactions structured as qualifying SPEs (QSPEs).

Many speakers noted that derivatives continue to suffer from a public relations problem with mainstream attention on the instrument usually focusing on the instruments' role in scandals such as Enron. Kaushik Amin, ISDA board member and managing director and co-head of global interest rate products at Lehman Brothers, noted that much of the concern regarding derivatives points to the notional size of some USD140 trillion. This figure, however, does not take into consideration such things as netting, which if considered would lower the total size to around USD20 trillion. Such a size is comparable to the bond market and is not such a big deal, he said.