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BNP Paribas has agreed to make markets in JPMorgan's JECI 100 index. Antoine Chausson, head of structuring in the credit derivatives group at BNP Paribas in London, said the firms have agreed to a common term sheet and this should make the product more liquid. He stressed that clients are looking for independent products in which they know they can get tight bid/offers from competing firms.

Bear Stearns has hired Julien Petit, head of European derivatives sales at Bank of New York in London, as a managing director in the fixed-income derivatives marketing group, and plans to hire more sales professionals within the next few months. Morad Mahlouji, senior managing director and head of fixed-income derivatives marketing, said the hire is part of the firm's strategy to grow its fixed-income derivatives group in Europe. Petit started two weeks ago.

INVESCO Australia, an asset manager with AUD12.5 billion (USD6.81 billion) under management, is contemplating using credit derivatives for the first time. "It's something we're considering," said Lachlan Collander, investment manager of the interest rates group in Melbourne. Collander continued that the asset manager could be trading credit derivatives within six months. Currently, INVESCO has been following the development of the credit derivatives market in Australia and tracks where default-swaps trade in relation to bonds. He declined to comment further.

Pitney Bowes, an office equipment maker with roughly USD4 billion in annual revenue, is considering unwinding interest rate swaps to raise the proportion of fixed-rate debt in its portfolio. Dessa Bokides, v.p. and treasurer in Stamford, Conn., said the company plans to become more active in interest rate risk management given the likelihood that interest rates will not get much lower than they are now, and the company may unwind interest rate swaps to that end. "Pitney Bowes has always been risk averse, but the actual policy of actively managing the portfolio and changing the mix of fixed in floating is something new," she said, adding it is being done to protect the company against what she expects will likely be a trend toward higher interest rates.

Credit-default protection on German banks, including Commerzbank and Deutsche Bank has widened over the last two weeks because of rumors about the financial viability of Commerzbank and a negative ratings report from Moody's Investor Service on others. Traders said five-year credit-default swap spreads on Commerzbank blew out to 150 basis points/170bps on Wednesday compared with 80bps/85bps 10 days before. Five-year protection on Dresdner Bank blew out to 75bps/80bps from 50bps/60bps and swaps on Deutsche Bank moved to 60bps/70bps from 45bps/50bps over the past two weeks. Additionally, there were offers for protection on the subordinated debt of Hypovereinsbank at 200bps, with no bids. Weekly volumes have doubled in the past two weeks to approximately 20 trades for each credit. Spokeswomen at Commerzbank, Hypovereinsbank and Dresdner Bank in London declined comment. A spokesman at Deutsche Bank declined comment.

Interest in equity-linked notes in Japan has skyrocketed in recent weeks on the back of a slumping stock market, according to officials in Tokyo. "Issuance has picked up," said Jim Clark, head of equity trading at UBS Warburg in Japan. Equity derivatives professionals said as the Nikkei 225 has fallen below the 10,000 mark and recently hit 19-year lows at 8,983, more customers are looking to bet it is nearing its bottom. "A number of clients think the market will base around 9,000," said an equity derivatives sales head in Tokyo.

Bear Stearns and Lehman Brothers are pitching options trades which take a view on the severe drop in U.S. and European equity markets last week. Lehman is recommending a trade which is bearish on the Aussie dollar because it believes the currency tends to fall when there are uncertainties around global growth, since Australia is an export-driven economy. Bear Stearns, however, is suggesting a trade that predicts the U.S. dollar will weaken against the euro because of equity weakness, as well as other factors.

INVESCO Japan, an asset manager with over USD7 billion in assets, is considering selling cash and synthetic collateralized debt obligations to Japanese investors for the first time before year end. The asset manager's first deal is likely to be a cash CDO referenced to its own portfolio of U.S. asset-backed securities and loans, however, it will also consider structuring a synthetic CDO if there is demand. "It all depends on if we can find a buyer for the equity tranche," said Narabu Koga, ceo in Tokyo.

JPMorgan is examining its risk trading systems to avoid potential mismatches created by pending changes in the International Swaps and Derivatives Association's 2002 equity derivatives definitions. Tim Hailes, senior equities lawyer at JPMorgan, said if the systems that are used to hedge trades do not exactly match the counterparty contracts there is the potential for firms to lose money on trades. "This represents a real risk," Hailes said, explaining that until the problem hits the bottom line, as in a trader loses money, then no one takes notice. "It is no good implementing piecemeal bits of the jigsaw. There is a sufficient number of changes for us to feel it's important [to look at this area]."

The International Swaps and Derivatives Association has circulated what it expects to be the penultimate draft of credit derivatives definitions, which include a narrow definition of qualified guarantees. Kimberly Summe, general counsel in New York, said ISDA members have until Oct. 28 to comment, after which it will circulate a fourth and final draft in November. Go to DW's Web site (www.derivativesweek.com) to read the definitions.

Japanese credit derivatives houses are likely to write their own definition of restructuring as a credit event--which would be the third such definition simultaneously in use by the industry--if a global consensus cannot be reached on whether restructuring bilateral loans counts as a credit event, according to bankers in Tokyo. Approximately 60% of corporate debt in Japan is in the form of loans, most of which are bilateral, whereas in the U.S. bonds outnumber corporate loans by a ratio of 4:1. The U.S. market standard definition, the so-called "modified restructuring" definition, excludes restructuring loans held by less than three parties as a credit event and a new standard European players are developing would also exclude bilateral loans.