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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.

Lehman Brothers has added Mark Versey, U.K. equity derivatives salesman at Deutsche Bank in London, as a salesman in Lehman's fixed-income derivatives solutions team, reporting to Philippe Dufournier, head of the fixed-income derivatives solutions team. Jessica Shepherd-Smith, spokeswoman in London, confirmed the move. Dufournier did not return calls.

Merrill Lynch has hired Mitch Matharu and Sreenivasan Iyre, structurers in the emerging markets structuring group at Credit Suisse First Boston in Hong Kong, for similar roles in its strategic solutions group. "As the Asian market continues to mature, clients are increasing their appetite for derivatives," said Samir Atassi, director and head of the strategic solutions group at Merrill in Hong Kong, to whom the duo now report. The group handles interest rate, foreign exchange and credit structuring for institutional and corporate clients.

Nordic Investment Bank, a multilateral financial lending institution, has entered two interest rate swaps on a recent fixed-rate USD1 billion bond offering to convert the issue into two floating rate liabilities--one denominated in euros and one in U.S. dollars. Kari Kukka, head of funding in Helsinki, said the Nordic Investment Bank sold a dollar-denominated bond because it allowed the institution to achieve a favorable funding rate, but it converted USD500 million of the proceeds into euros because it has some lending requirements in that currency. Both swaps match the five-year maturity of the bond.

"There has been a lot of interest on the buyside for [synthetic convertibles] because the convertibles market is almost completely busted--there is a lot of money chasing very little issuance."--Pavel Verzhbitsky, convertibles research analyst at Lehman Brothers in London, commenting on why investors are starting to buy synthetic convertible bonds. For complete story, click here.

Scotia Capital has hired Miranda Zhao, v.p. in the structured products group at Deutsche Bank in New York, as a structured credit marketer in London in a new position to increase its profile among investors. "There are more and more investors [in collateralized debt obligations], but it is a challenge to meet their requirements as they have become more demanding," said Frank Ackermann, head of investor marketing in the credit derivatives and credit investments group in London. "At the same time, we are seeing spread tightening, which makes it harder to generate the pay outs to compensate for the risk."