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Kenneth Farrar, managing director in the fixed income capital markets group at Citigroup Global Markets, has moved to AIG Financial Products in Westport, Conn. Farrar specialized in the technology, media and telecom sectors, and his brief included derivatives, according to a market official.

Veritas DGC, a gatherer of seismic data, has entered an interest rate swap to convert around USD80 million of a recent USD195 million floating-rate note sale into a fixed-rate liability. Matthew Fitzgerald, cfo in Houston, said the firm only hedged part of the total issue into a fixed-rate, paying 1.85% and receiving LIBOR, in order to maintain its fixed-to-floating debt mix. The swap has a two-year maturity, compared with the four-year issue of the note, in case Veritas seeks to buy back the debt early and refinance the issue, he said. Deutsche Bank was the lead manager and Wells Fargo Bank executed the swap, said Fitzgerald. Veritas sought quotes from both firms and settled with Wells Fargo, with whom it has a long-term relationship, after getting slightly better bids, according to Fitzgerald.

The Council of Europe Development Bank has entered a cross-currency interest rate swap to convert a recent fixed-rate USD500 million bond offering into a synthetic euro-denominated floating-rate liability. Arturo Seco, deputy funding manager in Paris, said the company always converts dollar-denominated debt into euros--its funding currency--and also maintains a floating-rate debt portfolio.

Goldman Sachs and JPMorgan are pitching opposing trades based on recent falls in European equity volatility. JPMorgan is expecting single-name vol will continue to fall, but Goldman is predicting a rebound. Aldous Birchall, research analyst in quantitative relative value research at JPMorgan in London, said the firm is recommending investors sell volatility on single name stocks, while buying credit protection. Implied volatility typically falls as credit spreads tighten, Birchall explained, but volatility is currently lagging the comparable move in credit spreads.

One-month euro/dollar option volatility spiked to 9.7% last Wednesday up from 8.9% the previous week. The jump was largely influenced by movements in the spot market with volatility increasing as spot approached USD1.1, where several options players hold short positions, according to a trader in New York. Spot traded at USD1.096 Wednesday afternoon up from USD1.083 the week before.

Market participants are becoming increasingly impatient as they await the much-delayed release of guidelines on the Chinese derivatives market. "Many people were too optimistic last year. It's been a slow process," said a trader at a bulge bracket house in Hong Kong. Guidelines for non-renminbi derivatives were widely expected to be released by last December (DW, 9/1) but the process has been held up, explained Li Fu An, deputy director general at the People's Bank of China in Beijing. "It's been slowed down by the recent [Chinese leadership] transitions," said Li. A new entity, dubbed the Regulatory Commission of Banking Industry, will be set up in the coming weeks to handle such issues as the guidelines. "This is one of the most important issues the new institution will handle once it's established," added Li. He declined to comment on a likely timeframe for the release.

Credit derivatives volumes in Japan have dropped by 30-40% year-on-year and there seems little chance of an immediate pick up, bucking a global trend of huge growth in the derivatives markets' hottest product. The rest of Asia was recording a jump in trades before the SARS virus cut volumes across all products.

JPMorgan has hired Simon Prest, cash and credit derivatives trader at Commerzbank Securities in London, as an industrial cash bond trader. Guy America, European head of corporate credit trading at JPMorgan in London, said Prest would initially be trading cash bonds, but may eventually trade credit derivatives as well.

Investors globally are starting to buy synthetic convertible bonds for the first time because corporate issuance of the cash instruments has fallen by around a third year-on-year. Tom Wills, derivatives specialist at Morley Fund Management in London, said it bought its first synthetic convertibles in the past couple of months for a USD270 million long-only convertible fund. And derivatives houses, including Deutsche Bank, Citigroup, UBS Warburg and Société Générale, are starting to push the product.

Goldman Sachs has hired Dustin Kuo, director and head of index arbitrage at Barclays Capital in Tokyo, for its Hong Kong equity derivatives desk. David Voon, managing director and head of equity derivatives at Goldman in Hong Kong, said Kuo is a replacement for Boon Lim, equity derivatives trader in Hong Kong.

Asset managers of synthetic collateralized debt obligations are increasingly taking on mezzanine exposure in their own deals to pacify CDO investors and lead managers seeking to forge a more explicit alignment of interests between asset managers and their product as notes take over from equity as the hardest part to sell. Canadian giants RBC Capital Markets and CIBC World Markets are both independently in talks with third-party managers with a view to creating their respective first externally managed synthetic CDOs globally, said officials. In both cases the manager will be expected to buy mezzanine tranches, they added.

Maria Baum, senior trader in volatility arbitrage and other strategies on the proprietary desk at Commerzbank Securities in New York, has headed to Lehman Brothers. Baum could not be reached. Mark Sanborn, managing director at Lehman in New York, to whom Baum likely reports, did not return calls. Baum is understood to be filling a new position, with Lehman reportedly seeking to beef up its proprietary trading operation, said an official familiar with the hire.