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Morgan Stanley and JPMorgan are separately preparing to offer derivatives referenced to their joint TRACX credit-default swap indices, which could revolutionize the market. Traders at major rivals said options on the index could lead to a new market in volatility trading in credit-default swaps.

JPMorgan has appointed Ashley Bacon, head of Asian interest rate trading in Tokyo, and Michael Davie, head of non-euro interest rate swap trading in London, as co-heads of European interest rate trading in London as part of a reorg of its rates group. Previously, there was a business head for European interest rates in London, Rob Standing, who oversaw the entire group, including trading. Standing left in February and his departure caused a reassessment of the organizational structure, said Sarah Oppler, spokeswoman in London. Bacon declined comment and Davie did not return calls.

ISDA's collateral committee is finalizing the first-ever standardized collateral asset definitions. The document will provide definitions of various types of commonly exchanged products to help speed up the negotiation stage of collateralization agreements, according to officials. "It's a step to reducing operational risk," said Robert McWilliam, head of counterparty exposure management at ABN AMRO in London. Common collateral instruments for derivatives transactions include government securities, such as U.K. Gilts. The definitions are expected to be released in May.

Lehman Brothers has hired Adrian Valenzuela, head of hedge fund marketing at Morgan Stanley in London, to manage the equity derivatives flow sales business in London. In addition, Michael Ward, equity derivatives salesman at Deutsche Bank, will join Lehman to market equity derivatives in London and report to Valenzuela, said Mary Matthewson, spokeswoman in London. Valenzuela will report to David Bizer, European head of equity derivatives sales and research in London, who declined comment. Valenzuela confirmed the move.

Jonathan Laredo, former head of structured finance for Europe and Asia at JPMorgan in London, is planning to launch a structured credit fund that will use over-the-counter derivatives. The fund will invest in a range of structured credit products, including secondary market collateralized debt obligations and credit-default swaps, according to officials familiar with the plans. Laredo declined comment.

Merrill Lynch has reorganized its structured equity derivatives sales group to give it a client focus rather than a regional focus. The firm is making the move now because there be increasing demand from institutional clients for structured equity products and these clients demand that the sales force be familiar with the structure of their firm, said an individual familiar with the firm.

"We may be able to trade barriers and digital options as part of our pension funds. I'm looking forward to that."--Bernd Broker, head of foreign exchange for Europe at Bear Stearns in London, on his predictions for the direction of the fx options market over the next decade. For complete story, click here.

MMC Enterprise Risk is structuring a range of derivatives designed to protect companies' balance sheets from potential fines or loss of business from CO2 emissions regulation. Partho Ghosh, senior v.p. in new products in New York, speaking at the 2nd Annual GreenTrading Summit in New York, said MMC is developing insurance type products using over-the-counter derivatives including swaps, forwards, calls, puts and collars.

News Cuttings

The European Securitization Forum plans to estimate the size of the synthetic collateralized debt obligation market. Fitch Ratings, Moody's Investors Service and Standard & Poor's are supplying data for both private and publicly rated deals to give the synthetic CDO sector more transparency, said Simon Collingridge, director in structured finance ratings at S&P in London.

Almost 500 derivatives professionals met at Tokyo's Four Seasons Hotel for the International Swaps and Derivatives Association's annual general meeting. Hong Kong reporter Matt Tremblay reports.

Conference speakers highlighted the importance of non-Japan Asia, and especially China, for future increases in derivatives volumes. "This is the most exciting market in terms of growth potential," said Michele Faissola, managing director and global head of over-the-counter derivatives for global markets at Deutsche Bank in London.