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Insurers and other sellers of credit derivatives protection thought Christmas had come early last week when they persuaded the International Swaps and Derivatives Association to back down on a proposed loosening of the burden of proof required to trigger a default swap. Kimberly Summe, general counsel at ISDA in New York, said, "The argument went full circle and we are now back to the 1999 definitions."

Casino Guichard-Perrachon, a French company that operates a wide variety of grocery and general retail stores, has entered an interest rate swap on a recent EUR500 million (USD510.42 million) bond offering to convert it into a synthetic Euribor-based floating-rate liability. Pascal Announ, group financial director in Sainte-Etienne, France, said it is company policy to convert all fixed-rate risk into floating-rate and then separately manage its interest rate exposure, using structured derivatives, such as caps and floors.

Royal Bank of Canada has hired Nicholas Wright, credit derivatives trader at Citigroup in London, as a credit derivatives and cash trader in London, and is currently conducting searches in North America and Europe for credit derivatives professionals. Walter Gontarek, managing director and co-head of global credit products, declined to disclose how many staffers the firm would hire, but said the plans are in place because of demand from customers for flow and structured credit derivatives. In May, RBC let go Simon Howard-Glossop, head of credit trading in New York, after the firm reportedly took a hit on WorldCom positions (DW, 5/27). Wright reports to Mike Quinn, head of credit trading. Quinn referred calls to Gontarek.

U.S. dollar/Swiss franc risk reversals moved further in favor of dollar puts/Swiss calls last week as dollar weakness dominated the market due mainly to fears of war with Iraq. The 25-delta risk reversal rose to 1.5 vol in favor of dollar puts/Swiss calls Tuesday from 1.2 vol a week earlier. Traders said about USD2 million in risk reversals went through the market on Tuesday afternoon and illiquidity ahead of the holiday week caused dollar/Swiss implied volatility to rise to 10.5% from 9.4% a week earlier. The greenback depreciated against the Swissie to CHF1.4250 in the spot market on Wednesday from CHF1.4770 the previous Friday.

TD Securities has hired Amir Berberian, emerging markets trader at Investec Bank in London, as a senior trader on the interest rate swap desk within the global foreign exchange business in London. Michael Sherman, spokesman in Toronto, said Berberian will be responsible for trading and development of the Eastern European market. Berberian will report to John Glover, managing director in the foreign exchange group in London.

Tokyo Mitsubishi International has appointed Shingo Ninomaru, group head of capital markets in New York, as head of financial derivatives and securitization in London. Ninomaru replaces Naoto Hirota, who is moving back to Tokyo to work in the treasury department at the Bank of Tokyo Mitsubishi, Hirota said. Hiroyoshi Sakamoto, head of derivatives marketing and trading in Asian currencies in Singapore, has replaced Ninomaru. Sakamoto started in New York last week.

Many institutional market participants enter into derivatives transactions through multiple affiliates. By designating these affiliates as "Specified Entities" for the purposes of Section 5(a)(v)--"Default under Specified Transaction"--of the 1992 International Swaps and Derivatives Association master agreement, a party is able both to book trades in the most advantageous location and to have maximum flexibility in the event its counterparty defaults.

"The argument went full circle and we are now back to the 1999 definitions."--Kimberly Summe, general counsel of the International Swaps and Derivatives Association in New York, commenting on proposed changes to credit derivatives documentation. For complete story, click here.

Five-year credit protection on U.S.-based cable and media firms rallied last week with default swaps on names such as Comcast Corp. and Cox Communications thinning. Five-year default swaps on Comcast saw the largest move, sidling to 265 basis points last Wednesday, having stood as wide as 325bps the week before, according to a New York-based trader.

Commerzbank Securities is restructuring its equity derivatives group from a region-specific focus to a sector-specific focus to manage risk in the same way as its brokerage, research and credit areas. Eduardo Bastida, global head of equity derivatives trading in London, said the move is spurred by a shift in market perception that has affected single-stock correlation with sector movement in the equity market. Bastida said it is too early to comment on how reporting lines would change because of the shift.

Structured Finance Advisors, a specialist asset-backed securities manager with approximately USD3.5 billion under management, is preparing its fourth collateralized debt obligation and is considering making the new issue synthetic, having previously issued cash deals.

Deutsche Bank Securities has issued a USD9 billion static collateralized debt obligation in the U.S. The deal, dubbed Rhombus, references a pool of asset-backed securities, according to Brian Wiele, managing director and head of the ABS syndicate in New York. The firm then executed credit-default swaps on the majority of the portfolio to transfer the risk to investors.