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BlueStar Capital, a U.S.-based fund of hedge funds manager, will short healthcare and biotech exchange traded funds if its BlueStar Life Sciences fund of funds net equity holding sinks below preset targets. Jonathan Lack, ceo and portfolio manager in Westport, Conn., said shorting healthcare or biotech ETFs would allow the fund of funds' asset allocation to be rebalanced within its investment objectives.

Foreign exchange derivatives professionals met last week at a City seminar to discuss the future of the industry and predicted Main Street would start trading barrier options in their pension funds and computers would take over risk management. "We may be able to trade barriers and digital options as part of our pension funds. I'm looking forward to that," said Bernd Broker, head of foreign exchange for Europe at Bear Stearns in London. He continued that the main change in foreign exchange derivatives is likely to be in the way they are sold. "Most of the good innovative ideas have appeared already and people don't want to go much further, because then only about 2% of investors will want to be involved."

John Mullen, ABN AMRO's London-based global head of structured credit, has left the firm after only a year in the position. It could not be determined what prompted his departure. Mullen, who left last week, could not be reached for comment.

John Mullen, ABN AMRO's London-based global head of structured credit, has left the firm after only a year in the position. It could not be determined what prompted his departure. Mullen, who left last week, could not be reached for comment.

Barclays Capital has hired Michael Brian, head of prime brokerage sales at Merrill Lynch in London, as head of European equity prime brokerage sales in London. Brian will report jointly to Martin Malloy, responsible for global equity finance trading in New York and Alasdair Hodge, regional managing director of the collateralized finance business in London. Malloy confirmed the hire. Kerry Goodwin, spokeswoman at Barclays in London, said Brian's hire is part of the firm's plans to expand the desk.

The economic crisis of 1998 left the Russian financial markets in shambles. One of the areas most affected was the young yet, at the time, sprawling derivatives market. In the aftermath of the crisis, courts declared non-deliverable forwards to be a form of gambling--thereby negating judicial protection of claims. This made it possible for Russian parties to international derivatives contracts, especially banks, to refuse settlement without having to face the consequences. The following article addresses what has and has not changed since 1998 and describes the current practice of derivatives trading in Russia. It then points out current promising developments, and discusses a likely future scenario.

Credit Suisse First Bostonhas denied a widespread rumor that it has been offloading large unsold collateralized debt obligation positions in the secondary market. CSFB has been a net buyer of CDOs in the secondary market, according to Kristofer Kraus, director in CDO trading in New York. He added that CSFB continues to issue CDO paper in the primary market, which would be difficult to achieve from a risk management perspective if it were holding large undistributed positions.

The annual general meeting was dominated by issues surrounding the credit derivatives market. "This was the year of credit," said Robert McWilliam, head of counterparty exposure management at ABN AMRO in London, adding, "whether it was on collateral, non-performing loans in Japan, CLO transfers or credit derivatives, credit-related issues came up in nearly every session."

Credit protection on British American Tobacco blew out last week in reaction to a widening of default swaps spreads on Philip Morris U.S.A. the week before. Traders said five-year mid-market credit protection on BAT widened to 190 basis points last Monday from 130-140bps the previous Friday. Although spreads tightened slightly to 160-180bps midweek, the default swaps were trading at 190bps again by Thursday. Philip Morris default swaps spreads jumped to around 620bps at the end of March from 300bps earlier that week, traders said. Philip Morris protection was trading at 500bps Thursday.

Derivatives powerhouses UBS Warburg and Deutsche Bank are setting up desks in Europe to structure derivatives wrapped as mutual funds. "[These products] are one of the most rapidly growing...within the asset management business and is therefore a new market that derivatives firms are now looking to tap," said Johan Groothaert, global head of structured products sales and origination at Deutsche Bank in London. Deutsche Bank plans to work on the products with DWS Investments, its asset management sister company with EUR115 billion (USD124.07 billion) in total mutual funds under management.

DWS Investments has entered an innovative derivative structure to offer European investors capital protected exposure to global equity markets. In the structure, DWS buys cash bonds and converts the coupons to a floating rate. It then uses that floating rate to pay an option premium to Deutsche Bank in which it receives capital guaranteed participation in the equity index, according to Benedict Peeters, director in the structured products origination team at Deutsche Bank in London.

Prominent derivative houses in Asia, including JPMorgan, Credit Suisse First Boston and UBS Warburg have implemented drastic measures to safeguard their staff against the deadly SARS virus. "Our firm has instituted an internal quarantine procedure for folks coming in from the SARS high-risk regions," said one trader at JPMorgan, noting that staff traveling in afflicted regions are required to stay away from the office for one week and that business travel to visit clients in the region has been discouraged. CSFB recently split its Hong Kong equity derivatives desk, moving some of the staffers to Sydney. UBS has also quarantined traveling staff.