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BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

BondWeek is the leading news publication for fixed-income professionals, covering new deals, structures, asset-backed securities, industry and market activity.

KGI Securities, one of Taiwan's largest derivatives houses with assets totaling over TWD38.38 billion (USD1.14 billion), is setting up an over-the-counter equity derivatives business and has hired senior bankers from Morgan Stanley and Merrill Lynch to spearhead the effort. Jerry Wu, executive director and equity derivatives marketer at Morgan Stanley in Hong Kong, will start later this month as regional head of equity derivatives, and Howard Tong, former director of global equity markets at Merrill in Hong Kong (DW, 3/11/02), is taking the head of equity derivatives marketing role. "The management wants to reposition itself as a regional player and equity derivatives is a part of that," said Tong. He explained that the firm first focused on building up a fixed income operation in Taipei is now shifting toward the equity side.

The anticipated growth of a secondary market in collateralized debt obligations has thrown the legitimacy of trustee reports into question and brought up concerns about insider trading. Investors receive trustee reports about their positions, which are not automatically available to the rest of the market, and this could mean they have insider information, according to lawyers. Although the laws vary in each country, the principals are the same across Europe and the U.S., noted several lawyers.

BNP Paribas plans to hire three credit derivatives traders and a structurer as part of an expansion of its credit derivatives operation in Asia. Although overall volumes in credit derivatives are down Stephane Delacote, Asian head of credit trading in Tokyo, sees more demand for index-related products and this is the impetus for the hiring. "I'm confident that there will be more and more trading. The trend is for more transparency and more commoditized products, which will bring greater volumes," explained Delacote.

Singapore's largest derivatives house, DBS Bank, is setting up an onshore Korean interest rate trading desk in the coming months. The move follows that of several international and local firms, such as Bank One (DW, 2/23) and United Overseas Bank (DW, 9/23). "The derivatives market here is still getting bigger and bigger," said Young Cheon Kim, head of trading in Seoul.

Citigroup Global Markets has hired two staffers from Merrill Lynch to work in the firm's collateralized debt obligation group. Ted Husveth, a CDO structurer, and Geoff Gentile, a CDO marketer, are joining the firm, according to officials familiar with the move. Neither Husveth nor Gentile could be reached.

Deutsche Bank has hired Paul Andiorio and Angelo d'Urso, from Goldman Sachs and Banc of America Securities respectively, as analysts in the firm's credit derivatives operation. The new recruits report to Boaz Weinstein, managing director, according to Harriet Benson, spokeswoman in New York. Weinstein did not return calls. Andiorio and d'Urso could not be reached.

Banks, trading companies, leasing companies, and multinational corporations have currency convertibility risk even if they don't attempt to quantify the risk on their balance sheets. Buyers and sellers of currency convertibility protection must not only have a feel for pricing credit derivatives, they must be economists with a penchant for econometrics. These are negotiated transactions. Price, terms, conditions and size are all negotiated directly between counterparties. As there are so few counterparties for this type of protection, the broker market is usually ineffective. It is much more effective to contact well-known counterparties in the credit derivatives market and negotiate the transactions and market levels directly. This is a supply and demand driven market and prices vary from counterparty to counterparty.

Nine-month 25-delta risk reversals spiked to 3.2-3.3% in favor of yen calls/dollar puts over yen puts/dollar calls from 2.8% the week before. Although the dollar has depreciated to JPY108.80 on Thursday from JPY111.20 the previous week, one-month volatility remained almost unchanged at 12.1% last week.

Goldman Sachs is setting up a proprietary trading operation that will take positions in structured products including collateralized debt obligations and has tapped Greg Mount, global head of CDOs in New York, to head the desk. Bruce Corwin, spokesman in New York, said Goldman does not comment on proprietary operations. Mount did not return calls.

Mark Sanborn, former managing director in equities at Lehman Brothers in New York, has resurfaced at hedge fund giant Highbridge Capital Management, which manages over USD4.5 billion in assets. Sanborn, reached at the firm, said that he was working in "connection" with the fund manager, but denied having "joined" Highbridge. Sanborn is also listed with the firm on Bloomberg. He declined to elaborate. Glenn Dubin, co-founder at Highbridge in New York, did not return calls.