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Lawyers are warning that traders will have to be educated in the intricacies of the proposed equity derivatives definitions as depending on which clauses they choose the price could differ and the firm could be left unhedged. The proposed International Swaps and Derivatives Association's 2002 definitions are expected to replace the 1996 definitions later this year and are far more precise than their predecessor, meaning that there is less room for confusion but more room for trader error.

Interest rate swappers were left guessing last week whether Fannie Mae had already entered the swaps market to rebalance its portfolio or if it would still need to receive approximately USD10 billion in swaps. The agency recently announced its assets have a 14-month shorter maturity than its liabilities. Some traders claimed swap spreads had widened last week as dealers unwound 10-year swaps, in which they received fixed and paid floating, because they think Fannie Mae had already executed its swaps plan. However, other traders said the agency still has to enter swaps and the widening is due to corporate credit weakening and the fear of war with Iraq.

TFS, a physical and derivative products inter-dealer broker, is planning to add a weather derivatives broker to its London office. The firm, based in Stamford, Conn., has had a weather derivatives business in Europe for about a year and a half, run by Fritz Siebel. Kendall Johnson, managing director and head of weather derivatives in Stamford, said the new hire will report to Siebel.

"We have decided to suspend writing new business with the standard Restructuring language, even at the "super AAA" level."-- Michael Schozer, managing director and head of structured finance and credit derivatives at Ambac Assurance Corp. in New York, commenting on the fact that Ambac has suspended writing credit protection on pools of corporate obligations that include standard or modified restructuring. For complete story, click here.

The cost of dollar/yen options rose last week on mounting concerns that the Bank of Japan's plan to buy stocks from the country's ailing banks will lead to further instability in the world's second-largest economy. The move higher in implied volatility coincided with the dollar strengthening against the yen, bucking the recent trend that has seen vol fall when the dollar strengthens. Traders said one-month implied volatility rose to 11.5%, a full percentage point higher than the previous week, and the dollar jumped to JPY124 from JPY121.50.

This winter's volume of weather derivatives traded in Japan looks likely to be double last year as more end-users enter the fray and new products are developed. Toshihiko Aizawa, head of the product development group at Tokio Marine and Fire Insurance Co. in Tokyo, said, "The Japanese weather derivatives market is still young but we expect rapid growth in this market." He continued that corporates have recently started entering contracts in Japan to hedge their exposure to the weather in the coming winter months, using derivatives linked to temperatures or snowfall.

Ambac Assurance Corp. has suspended writing credit protection on pools of corporate obligations that include standard or modified restructuring language because it does not think its concerns over the definitions are being satisfactorily addressed. In an e-mail to the International Swaps and Derivatives Association's end user committee, Michael Schozer, managing director and head of structured finance and credit derivatives at Ambac in New York, said, "We have decided to suspend writing new business with the standard Restructuring language, even at the "super AAA" level."

September is the six-month anniversary of the introduction of the new Australian laws for financial services. The law is now much wider than before and covers all aspects of financial services and markets. While the new laws impact all over-the-counter markets, the hardest hit products are the global financial transactions, such as foreign exchange derivatives, where the rules were previously supra national.

George Polychronopoulos, senior managing director and head of interest rate trading at Bear Stearns in London, has left the firm. Polychronopoulos reported to Sean Hamidi, head of fixed-income trading. John Knight, spokesman in London, would not comment on why Polychronopoulos left or if he would be replaced. Hamidi did not return calls. Polychronopoulos could not be reached for comment.

Commerzbank Securities has hired Henry Flowers, director in equity derivatives structuring at SG Cowen in New York, in a new role as a senior structurer on the firm's cross-asset structuring desk in New York. Flowers, who started earlier this month, reports to Ted Madara, head of what is now a five-person U.S. derivatives structuring team.

Deutsche Bank has hired Dylan Brooks, associate and credit default-swaps flow trader at Banc of America Securities in Charlotte, N.C., as a credit derivatives trader in New York. At Deutsche Bank, Brooks will report to Boaz Weinstein, managing director and head of North American credit derivatives trading in New York. Weinstein referred calls to Ted Meyer, spokesman, who confirmed the hire.

Credit Lyonnais Securities is planning to become a market maker in listed and over-the-counter equity derivatives in single name U.S. options to generate revenue amid the current downturn in global equity markets. The French bank has hired Tim Youssef, director and senior equity derivatives trader at Merrill Lynch in New York, to spearhead the effort. Youssef started last Monday, officially kicking off the new initiative, said Christian Lengelle, managing director and head of equity derivatives at Credit Lyonnais in New York, to whom Youssef reports.