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KBC Alternative Investment Management, a hedge fund manager with USD2.5 billion in assets, is planning to launch a quantitative statistical-arbitrage credit hedge fund. This would be one of the first hedge funds to pursue this strategy in the credit markets, according to hedge fund sales professionals. Statistical arbitrage is popular in equities but until recently the instruments for shorting credit, such as default swaps, have not been available at tight enough bid/offer spreads to take advantage of the arbitrage opportunities, according to Andy Preston, cio in London.

Last week's surge in implied volatility across Asian currencies on the back of comments from the Group-of-Seven most industrialized countries could spark a long-term boost to volumes. "The recent moves have definitely put the Asian currency market back on more players' radar," said Lee Chee Pin, head of foreign exchange at Bank of America in Singapore.

Tight security at the Roosevelt Hotel caused Robert Pickel, ceo of ISDA, to speculate that hotel staffers were taking Warren Buffet's comment that derivatives are "weapons of mass destruction" a bit too literally.

Standard & Poor's has hired Sue Harding, former head of global accounting strategy for the equity research group at Credit Suisse First Boston in London and former chair of the International Swaps and Derivatives Association's European accounting committee, as its European chief accountant. This is part of the rating agency's effort to build its accounting expertise in response to increasingly complex accounting rules, according to Clifford Griep, chief credit officer in New York. Derivatives is one of the more opaque areas, said Griep, adding that Harding's expertise in that will be helpful.

Bank of Tokyo-Mitsubishi has transferred its credit derivatives trading operation to its securities arm, Mitsubishi Securities, to offer a wider range of instruments to a broader client base. The move has been in the works since last year (DW, 5/4), but the securities firm did not receive a license from the Japanese Financial Services Agency until earlier this summer, according to Nobukazu Saeki, chief manager of the newly-created credit trading department.

TRAC-X North America, which follows the most liquid 100 credit-default swaps, widened 2 basis points to 64bps Wednesday morning before a flurry of trades pushed it back in line with the tightening trend that has gripped the credit markets over the last several months. The index finished the day at 62bps. James Parascandola, credit derivatives trader at Barclays Capital in New York, said the shift was a considerable one for the index, which is generally not volatile.

Credit derivatives traders have agreed not to include the restructuring credit event for default swaps that reference monoline insurance companies. Lawyers said major market players agreed to make the switch on Sept. 15, because of complications with how the trigger would work.

"So many of us have to pay for the sins of a few."--Ernest Patrikis, International Swaps and Derivatives Association board member and senior v.p. and general counsel at American International Group, commenting on the origins of recent legislation, including FAS 133. For Complete Story, click here.

Coventry Building Society, a U.K. mortgage lender, has entered a foreign exchange swap to convert part of its first five-year EUR500 million (USD574 million) floating-rate note into a sterling-dominated liability. Ian Palmer, risk manager in Coventry, said the thrift decided to issue a euro-denominated note to target a different investor audience.

Hamilton Investment Management will likely enter total-return swaps and purchase credit-default swaps when its nascent Hamilton Convertible Opportunities Fund increases its assets under management. Any decision on when the fund is large enough to make derivatives trades would be at the discretion of counterparties, said an official in New York, who was unable to estimate the size.

Five-year credit protection on Altria Group, the parent of tobacco manufacturer Philip Morris USA, snapped in last week on the back of positive news regarding the subsidiary's litigation troubles. Credit-default swaps were trading at 220 basis points last Wednesday, in from 320bps where they were bid the week before, said a New York-based trader.