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Dixons Group, a U.K. consumer electronics retailer, has entered a cross-currency interest rate swap to convert a recent GBP300 million (USD477.12 million) bond offering into a synthetic euro-denominated floating-rate liability and plans next to enter a basket of additional interest rate swaps to hedge the floating-rate exposure. Giles Newell, group treasurer in Hemel Hempstead, U.K., said doing the swap in two steps allowed for ease of execution since converting fixed sterling into floating-rate euros is a simple transaction.

Goldman Sachs has laid off around a dozen equity derivatives traders and researchers in New York, said officials familiar with the firm. Industry observers are predicting more cuts in equity derivatives over the coming months as Goldman fights to reduce its staffing costs. Jeremiah Williams, an equity derivatives trader, was among the victims of the cutbacks, a spokesman at the firm confirmed. The names of the other staffers could not be determined. Williams could not be reached for comment.

An important question for derivatives practitioners is whether an act that prohibits direct or indirect "personal loans" by public companies to their executive officers and directors outlaws an investment bank that has managed a public offering or offered other banking service, such as M&A advisory, from entering into total return swaps, collars or similar derivatives transactions with the executive officers and directors of the issuer. The act in question is section 402 of the Sarbanes-Oxley Act of 2002.

HSBC has hired Declan Tiernan, head of structured products at National Commerical Bank in Jeddah, Saudi Arabia, as a structurer in structured credit trading in London. Tiernan said he will report to Nobby Clark, head of structured credit trading, who did not return repeated calls. Aruna Amrania, a spokeswoman in London, was unable to provide comment by press time.

Goldman Sachs is believed to be considering merging its fixed income and equity derivatives operations in the U.S. Industry professionals speculated that one reason for the move could be under-performance of the equity group, given the wider market's malaise this year. Indeed, Goldman has recently been swinging the ax in its equity group (see story, page 3). Officials in the relevant departments did not return calls or declined comment. Ed Canaday, spokesman in New York, said the firm is increasing the level of cooperation between its equity and fixed income division but has no plans to merge the businesses.

Morgan Stanley plans to set up a fixed income derivatives operation in Korea and will likely start trading in the new year and Citibank is considering offering won-denominated credit-default swaps for the first time in Korea next year. Morgan Stanley is planning to apply for licenses that will permit it to trade won-denominated fixed income products onshore, such as interest rate derivatives, according to officials familiar with the move. Citibank already has a won fixed income desk, said S.W. Hwang, head of derivatives marketing in Seoul, adding, "We're now looking to see if there's adequate demand for local currency credit derivatives."

JPMorgan has recently seen an uptick in demand for principal protected commodity-based derivatives products for institutional investors, according to David Kitson, head of currency and commodity structuring in London. The firm is marketing these products because investors are seeking alternatives to the equity and credit markets to increase investment returns. JPMorgan began showing these products to investors three months ago, he noted, declining to specify how many deals it has completed.

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Aberdeen Asset Management Co. in Bangkok, with over THB7 billion (USD162 million) under management, is studying using interest rate derivatives for the first time in Thailand. An official in Bangkok said the fund is studying using baht-denominated interest rate swaps or purchasing structured notes such as inverse floaters for its fixed income operation. "We could be using these in the future," explained the official, noting that after the initial studying phase, Aberdeen could use the products within six to 12 months to enhance yield. Interest rate swaps would likely be used on the back of domestic bond positions, explained the official. The fund has recently started eyeing the products and has not contacted any counterparties. The official declined further comment.

Dixons Group is considering making its first foray into the credit derivatives market. Matthew Hurn, European treasurer in Hemel Hempstead, U.K., said the company is reviewing the possibility of buying credit-linked notes for its investment portfolio, which is domiciled in the Isle of Man. This so-called captive portfolio contains the premiums paid by retail consumers for guaranteed warranties on electronics products, according to a corporate treasurer at a U.K. company familiar with Dixons. Giles Newell, group treasurer, however, denied that the company is examining investing in CLNs and declined further comment.

U.S.-based auto part supplier AutoZone has unwound an interest rate swap on a USD115 million three-year unsecured bank loan. An official at the auto chain in Memphis, Tenn., said the firm decided to unwind the swap because it has paid down the loan early, which was due to terminate in December next year. He declined to name the banks with which AutoZone held the loan. The interest rate swap was used to hedge the auto supplier's floating rate exposure, converting the loan into a fixed-rate liability, the official said. He declined to specify the rate or name the swap counterparties.

U.S.-based derivatives professionals are bracing for a lean bonus season, with payments on average expected to be 25-30% down on last year. Even profitable departments, such as credit derivatives, likely will lose out as their bonus pools are raided to subsidize the abysmal performance of equity departments, noted one headhunter. Times are so hard that most firms will be forced to short change employees who have performed well, agreed another New York-based recruiter. In credit derivatives, a director in trading or sales at a tier one bank will be lucky to see much more than USD500,000 this year, versus a bonus of between USD750,000 and USD1 million last year, he added.