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The academic debate over whether Marconi has defaulted, potentially triggering hundreds of millions of dollars of credit-default swap protection, recently ran up against hard reality when Ace Guaranty Re, a major seller of credit protection, said it would not yet pay out on Marconi protection. Major credit derivatives houses unanimously agreed Marconi had triggered the bankruptcy credit event in default swaps--and their position is backed by a Linklaters opinion--and started sending out notices in October. But some sellers of credit protection disagree. Officials at Ace declined comment.

Unibail, a French commercial property company, has entered an interest rate swap on a recent EUR300 million (USD297.6 million) bond offering to convert it to a floating-rate liability. The company is paying 77 basis points over Euribor and receiving 4.75%, the coupon on the bond. Julie Fagart, an official in the treasury management office in Paris, said the company entered the swap to maintain its fixed-to-floating rate debt ratio. The company typically keeps 5-10% of its debt portfolio with floating-rate exposure because the majority of its rental income has a fixed rate of interest.

The price of euro/dollar options fell by around 1% last week as trading activity slowed in the run up to the U.S. Thanksgiving holiday. Last Tuesday one-month implied volatility was 7.4%, having stood at 8.4% the previous week and been as high as 9.6% in the weeks leading up to the holiday, noted a New York-based trader. The euro tripped under parity, trading at USD0.99 last Tuesday, down from USD1.0025 where it had sat the previous week. Trading activity has been lackluster, with most traders willing to wait until after Thanksgiving to take on new positions, said the trader. There was little speculative or corporate interest in any dollar pairs, which is what generally drives upward movement in volatility, he added.

The International Swaps and Derivatives Association has circulated the final draft of the new credit derivatives definitions and market players have set Feb. 1 as the date when the definitions go live. The trade association has opted to go for a compromise on the most contentious issue of defining a restructuring by including three definitions. Users can opt for either the so-called "modified modified" restructuring proposed by the European dealers, modified restructuring used in the U.S. and old restructuring Protection buyers can also opt to leave out restructuring altogether.

The price of credit protection on France Telecom tightened five to 10 basis points early last week on the back of rumors the French government was considering lending the company EUR9 billion (USD8.93 billion) in the form of a mandatory convertible that it would purchase. Mid-market swap spreads tightened to 295bps on Wednesday morning from 305bps Monday as investors perceived the potential cash infusion as a positive for the credit. Convertible arbitrage fund managers were not out in force purchasing protection because the rumored convertible is not guaranteed to materialize but even if it does, it would have a mandatory conversion.

Luigi Grasso, managing director and head of Italian credit derivatives sales at Bank of America in London, has left to join Nomura International as a senior derivatives marketer to Italy in London. Grasso said he resigned because BofA reorganized the global derivatives sales group along product, from regional lines. "The reason why I'm moving is that Nomura will allow me to pursue the way the business should be developed in Italy," he said.

The Philippines regulator is examining allowing derivatives houses to trade foreign exchange products onshore for the first time since the Asian crisis of 1997/8. Firms, including ABN AMRO and HSBC, are getting ready as they expect the products to prove popular with importers and exporters. "We have an atmosphere of liberalization toward these kinds of products," said Ciriaco Dator, head of banking group sector two, which regulates foreign banks, at the Bangko Sentral ng Pilipinas in Manila. The regulator could allow banks to trade the products in the coming months.

Nomura International has established a hedge fund sales business for Asia and hired Steve Liu, head of research at boutique fund house EGS Asia in Hong Kong, to spearhead the effort. "Nomura's always had hedge fund coverage but they wanted to beef up the operation," said Liu, now head of hedge fund sales in Hong Kong. Previously fund coverage was handled from the equity sales desk.

BTP Capital plans to invest in Treasury and agency futures, as well as enter interest rate swaps in its new BTP Tax Advantaged Trading Fund. Chris Dillon, partner in New York, said it will use the derivatives to mitigate interest rate risk.

KBC Alternative Investment Management, a hedge fund manager with USD1 billion under management, is launching a credit arbitrage hedge fund and will use cash and derivative instruments. Andy Preston, cio in London, said the fund will be market neutral and incorporate elements of capital structure arbitrage.

Pablo Salame, partner and head of credit trading for Europe and Asia at Goldman Sachs in London, is believed to have landed the new position of co-head of global credit derivatives. The move is thought to underscore Salame's status as a rising star at Goldman and puts him on par with Ron Tanemura, partner and global head of credit derivatives. Salame referred calls to the press office. Rebecca Nelson, a spokeswoman at Goldman, said Tanemura is moving to New York in January but declined further comment. Tanemura did not return calls.

Josh Penner, co-head of index options trading at Salomon Smith Barney in New York, has left the firm. Bret Engelkemier, Penner's co-head in New York, has taken over Penner's role, according to firm officials.