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James Newsome, chairman of the Commodities & Futures Trading Commission, sided with Alan Greenspan, chairman of the New York Federal Reserve, that Warren Buffett was wrong when he described derivatives as financial weapons of mass destruction. "I agree with Chairman Greenspan on this," said Newsome, at a breakfast meeting organized by the Futures and Options Association and the Futures Industry Association in London last week.

Major derivatives houses plan to start offering equity derivatives on Chinese A shares in the coming months. Citigroup and Morgan Stanley received licenses to trade the liquid A shares last week, following the granting of licenses to UBS and Nomura Securities last month. The licenses enable the firms to offer international clients exposure to China through equity derivatives, such as equity-linked notes, because the derivatives houses can now delta hedge derivatives positions via the underlying cash market. Previously they had been permitted to trade only B shares, which are illiquid. Firms have offered similar so-called market access products on other restricted markets, such as India, Taiwan and Korea for several years. "Access products will be a main driver for this market," said Justin Kennedy, managing director of Asia Pacific equity derivatives at Citigroup in Hong Kong.

One-month cable implied volatility jumped half a percentage point Monday to stand at 8.8%, up from 8.3% the same morning. The leap came on the back of an announcement by the U.K. Treasury that sterling needs to weaken in order for the U.K. to enter the European Union, according to a New York-based trader.

Matthew Cooleen, executive v.p. at Chubb Financial Solutions in New York, is preparing to debut a standalone insurance firm, labeled Sentient Capital, that will compete in the structured products arena. The move follows Chubb's decision to stop writing new credit derivatives business. Cooleen confirmed the plans, but declined further comment. He is in talks with banks about backing the project, which is expected to launch before year end.

Credit-default swap spreads on Ericsson tightened last week by around 75 basis points to 470bps even though the company's fundamentals have not improved. Traders attributed most of the tightening to yield hungry investors snapping up cross-over credits, adding that British Airways also came in to around 450bps from 575bps at the beginning of the month. Trading was light throughout the default swap market, with about USD10-15 million a day going through the broker market on both BA and Ericsson.

Deutsche Bank last week lost Masayuki Ishido, v.p. in integrated credit trading in Tokyo. He left the firm for personal reasons, according to officials at the bank.

Pierre Maliczak, former head of the fund derivatives business at Bank of America in London, and Kamal Fayad, former managing director in equity derivatives trading at Deutsche Bank in London, are considering starting a statistical arbitrage fund. The fund will be model-driven and market neutral, trading the Dow Jones EURO STOXX 50, according to market officials. Maliczak and Fayad declined comment.

Fitch Ratings plans to survey an additional 50 sellers of credit protection to fully asses the risks of the credit derivatives market. In March, Fitch published its first account of the risks in the credit derivatives arena. Ian Linnell, managing director in the credit policy group in London, said the first survey missed out some major names, such as Swiss Re and Abbey National, and the rating agency is going back to make it more comprehensive. The survey should be published next months.

FleetBoston Financial is considering entering two novel structured credit transactions to hedge risk. The firm is in talks with commercial banks about exchanging some of the risk in its corporate credit portfolio with another firm in a direct swap without the intermediation of a broker. This would be a low cost way of hedging risk and diversifying the book, noted Robin Lenna, managing director in credit capital management in Boston. If it goes ahead the transaction will likely have a notional size of USD500 million-USD1 billion, she said.

Armin Rothauser, former credit trader at Commerzbank Securities in New York, has joined Morgan Stanley as a credit derivatives trader while former colleague Marc Drozdz, also a credit default swap trader, has taken a similar position at Crédit Agricole Indosuez in London.

Mark Timmis, director and head of credit derivatives trading at Credit Suisse First Boston in London, has left the firm. He is thought to be jumping to Bear Stearns in London. Rebecca O'Neill, spokeswoman at CSFB in London, declined comment.