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Kuala-Lumpur based MBf Unit Trust Management, with over MYR400 million (USD105.2 million) under management, is looking at using over-the-counter derivatives within 12 months. "It could be a mixture of products," said Philip Tan, senior fund manager, noting that it is looking at both equity and fixed income derivatives for hedging its investment portfolio as well as purchasing structured notes. The fund manager has been looking at reentering the domestic OTC market since capital controls were introduced in 1998, but is waiting for liquidity to return. "It's still a young market--we need much more participation from players," said Tan, noting that it could take over a year. "Liquidity is still the main stumbling block," he continued.

Household Finance Corp., a subsidiary of U.S. consumer finance giant Household International, has entered into a foreign exchange swap to convert a EUR750 million (USD791.4 million) bond offering into dollars. An official in Prospect Heights, Ill., said bringing the issue back into U.S. dollars aided the loan house in complying with Financial Accounting Statement 133 guidelines, which favors domestic currency debt. Household is maintaining the issue's fixed rate status in order to match funds in the firm's asset liability mix, he added.

KBC Financial Products is setting up a fund derivatives group and has appointed Sajeev Sirpal, managing director and head of Asia in Hong Kong, to spearhead the effort in London. "If you believe hedge funds are here to stay as an asset class then you can see the potential in this new field," said Sirpal, who will transfer to London in the coming weeks as global head of the newly formed structured fund products group.

Merrill Lynch is setting up a global equity structured products group to be based in New York and is sending Brent Clapacs, managing director and head of equity trading for the Pacific Rim in Hong Kong, to the Big Apple to head the venture. Michael DuVally, spokesman in New York, said the group is being formed to expand Merrill's share of the global structured equity derivatives market. DuVally declined to specify the firm's current share. By dedicating a specific group to the development of structured equity products Merrill envisages expanding both its origination and distribution capabilities for its global client base, he added.

Fabien Pictet & Partners, a London-based hedge fund boutique with USD200 million under management, is introducing a long/short fund dedicated to emerging market debt and will have the capacity to use any type of over-the-counter derivatives. The fund, called GEMs Bond Fund, will start trading next month and although it will not use derivatives extensively, will be likely to use instruments such as fx options, emerging market bond options, credit-default swaps and listed options, said Julian Jacobson, portfolio manager. GEMs is the firm's fourth fund, but the first dedicated to emerging market debt.

"This means no fussing and mussing over CDOs."--John Mullen, global head of structured credit markets at ABN AMRO in London, on making credit trading and asset-backed securities a joint venture. For complete story, click here.

National Australia Bank has hired its first two sales professionals to kick-start its commodities derivatives sales business in the U.S. and has added one staffer to its interest rate derivatives sales team. Robert Cone, senior v.p. and head of the markets division for the Americas in New York, said the firm has also entered into talks with U.S.-based distributors with a view to entering into a joint venture to distribute over-the-counter commodity derivatives products in the U.S., but he declined to name the firms.

SG Securities has transferred Frank Drouet, managing director and head of equity derivatives trading for Asia in Hong Kong, to Tokyo. As part of the move he has assumed additional responsibility for Japan. Drouet referred calls to the press office, where Huneeus Cristobal, spokesman in Tokyo, declined comment.

Five-year credit protection on communications giant AOL Time Warner narrowed to 165 basis points last Monday, from 185bps the previous Wednesday, on news that its chairman, Steve Case has resigned. AOL was one of the only firms which tightened last week as there was a general widening of protection prices. In fact, swap spreads on the multi-media company also moved wider later in the week trading at 195bps Wednesday as general market weakness impacted most corporates, said a trader in New York. The default-swap market had experienced a huge rally the week before and a pullback was due, added the trader.

TD Securities has signed on Mark Mullahy, exotic equity derivatives trader at JPMorgan in London, as a managing director in equity derivatives trading, working out of its New York office. Joseph Hegener, vice chair in New York and to whom Mullahy reports, explained that in spite of difficult market conditions, TD Securities' equity derivatives business has been making money, which has led to the new hire. General market malaise also makes it an opportune time to pick up good people, he added. TD Securities plans to hire an additional three equity derivatives traders and structurers, bringing the team up to eight, said Hegener. Mullahy started last week.

The price of U.S. dollar/yen options spiked last week as traders snapped up short-dated options after the greenback rallied to JPY118.30 in the spot market. Proprietary trading desks and hedge funds bought one-week and two-week dollar puts/yen calls Tuesday at strikes of JPY118 and JPY117.50, respectively. The trades caused one-month implied volatility to rise to 11.75% from 10.5% on Tuesday. By Thursday, however, volatility had dropped back down to 10.5%. Traders said a total of USD1 billion of dollar puts were executed.

Bankers got down and dirty at Fleet Capital's launch for Simplicity Manufacturing. After the meeting, disregarding their formal apparel, bankers took turns at driving the company's tractors on its 40-acre, Port Washington, Wis., test field. "It was a sight to behold," said Al Meier, executive v.p. at Fleet (see story, page 7).