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Chris Hodson, managing director and head of interest rate derivatives trading at Bank of America in Tokyo, one of the largest players in Japan's swap market, is transferring to Chicago in the coming months. "This is a step up for him," said Michael Thorson, head of proprietary trading in Tokyo, adding, "He's very good at what he does and as the U.S. is a larger market he'll be trading on a bigger scale." Thorson noted that the plan has been in the works since late last year but has been delayed due to the current restructuring in Japan.

Columbia University Investment Management Co., the investment management firm for the school's USD4.3 billion endowment fund, has hired Peter Holland, U.S. head of marketing and structuring of equity derivatives at JPMorgan in New York, as an executive v.p. The endowment fund uses over-the-counter derivatives including equity swaps and foreign exchange puts and calls, according to its financial statement.

Commerzbank Securities has let go four corporate equity derivatives marketers leaving it with no U.S. coverage. The sales team for high-net-worth individuals, meanwhile, has been halved to two, with hedge fund sales positions also being cut, according to an official familiar with the firm.

A December regulation change was the last in a series under which French managers have been given an increasing capacity to trade over-the-counter derivatives, well in advance of the implementation of the "UCITS III" directive, which is due to be implemented by member states within a year.

The cost of one-month dollar/yen options fluctuated last week before settling at 9.8% Wednesday, the same price as the previous week. Implied volatility had jumped to 10.2% Tuesday on the back of movements in the spot market, which saw the yen strengthen to JPY118.6 Wednesday, from JPY120.5 two days earlier, explained one New York-based foreign exchange options trader.

Volumes for credit protection referenced to Deutsche Telekom jumped 10 times last week after the German telecom issued a EUR2.3 billion (USD2.47 billion) mandatory convertible bond. Deutsche Telekom's credit-default swap spreads came in 15 basis points to 190bps on Wednesday when the convertible priced. One trader said volumes jumped to around USD300 million, versus about USD30 million trading on a typical day. Hedge funds were the major buyers of protection.

Morgan Stanley reportedly purchased USD150Ð250 million (notional) of one-month dollar puts/Mexican peso calls between Feb. 10-15. The options are struck at MXN10.60-10.70. Trading volumes on the currency pair more than doubling over the previous few weeks, said New York-based foreign exchange options traders. Spot was trading at MXN10.9 on Friday. Melissa Stonberg, spokeswoman at Morgan Stanley in New York, did not return repeated calls.

Merrill Lynch, Deutsche Bank and Lehman Brothers are structuring credit derivatives linked to European rates of inflation and predict this could become a major market this year. "Inflation is one of the key benchmarks for funds and insurance companies...The market is limitless," said Tony Main, v.p. in the global credit derivatives group at Merrill Lynch in London. Mike Tims, chief executive of medium-term note data provider mtn-i.com in London, said the increase in inflation products could be explained by inflation fears on the back of anticipated oil price spikes, coupled with bond investors looking for

Credit derivatives professionals have started to question whether credit-default swap (CDS) trading desks can remain profitable if the downturn in synthetic CDO issuance continues. A JPMorgan research report, published last week, says only two collateralized debt obligations have been issued so far this month and returns on CDOs have fallen to 20-25% from 30-40% at the end of last year. This, combined with fears about Iraq and credit quality uncertainty, has halved default swap trading volumes over the last weeks, according to traders. The current issuance of CDOs stands at about half of normal levels, according to researchers.

The International Swaps and Derivatives Association plans to draft user guides for the master agreement and the credit and equity derivatives definitions. Kimberly Summe, general counsel in New York, expects to have a first draft of the master agreement guide late next month, with the draft equity and credit guides coming out in April. These will then go through the various committees and should be finished in around nine months.

Japanese insurers are pushing dealers to drop the restructuring clause in credit derivative contracts on domestic names and have recently sent a position paper to the International Swaps and Derivatives Association. Tokio Marine & Fire Insurance, Mitsui Sumitomo Insurance, Shinsei Bank and Sompo Japan Financial Guarantee Insurance all signed the paper, which is available on DW's Web site (www.derivativesweek.com). Tomoko Morita, assistant director of policy at ISDA in Tokyo, said it is just a question of timing as to when the Japanese credit derivatives market drops the restructuring clause for credit-default swaps.

LG Card, one of Korea's largest credit card companies in terms of assets with over KRW33.7 trillion (USD27.9 billion) in assets, is preparing to complete a USD300 million cross-currency interest rate swap on the back of a recent asset-backed security transaction. "We're just waiting for approval," said Kim Jae Hyun, head of finance for debt related transactions in Seoul, noting that the insurer has applied to the Financial Supervisory Service to okay the swap. Kim said that he expects it to be signed-off in the coming days and should be able to enter the transaction by the end of the month. LG will convert the entire issue.