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The Kredittilsynet, Norway's financial regulator, has drafted new legislation that would allow Norwegian fund managers to invest in over-the-counter derivatives for the first time and free up as much as EUR4.5 billion (USD4 billion) for OTC instruments. Ellen Jakobsen, advisor to the regulator in Oslo, said it has put out a draft of the revised securities rules and is now taking recommendations from the industry. The regulator expects to submit a final draft of the derivatives-specific legislation, which would allow asset managers to invest up to 10% of their portfolios in unlisted securities, to the Ministry of Finance for approval by spring, she said. Funds can currently use only exchanged-traded equity derivatives.

The Stock Exchange of Hong Kong is set to re-launch its warrant market next week and equity derivatives pros expect stiff competition as they look to issue warrants on the largest corporates. "It will be a war of attrition," according to Eddie Tam, director of equity derivatives at Credit Lyonnais in Hong Kong, who added, "historically, the warrant market in Hong Kong can feed five to seven houses. There will initially be 13 houses issuing." Tam expects the smaller firms who he said have been the most active in previous years, including Credit Lyonnais, Macquarie, Société Générale and KBC Financial Products, to win market share from the larger firms, such as Merrill Lynch." U.S. houses have waxed and waned on their commitment," according to Tam. James Rodríguez de Castro, managing director of global equity-linked products at Merrill Lynch in Hong Kong, declined to reply to Tam's remarks.

Credit-default protection on The Dow Chemical Co. widened 100 basis points on Wednesday after Fitch downgraded the science and technology company, with USD30 billion in annual sales, to A from A plus and put it on negative outlook. Credit spreads on Dow widened to about 150bps last Wednesday from 50bps a week earlier as bulge bracket firms looked to buy protection.

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Trading volumes on the U.S. dollar/Argentina peso non-deliverable forward market started recovering last week. Foreign exchange options traders in New York reported NDF volume growing to about 10 trades a day from zero around year-end when market players were backing away in the wake of the country's political and economic chaos (DW, 12/24). The average notional size of last week's trades was USD1 million.

Barclays Capital plans to hire two interest-rate derivatives strategists for its relative value group in London. The strategists will translate the firm's macro view into trades and sell the ideas to the firm's traders and customers, according to John Maskell, director of European relative value strategy in London. He added typical strategies would include volatility plays and convergence trades.

Barclays Capital and Goldman Sachs are separately planning to set up onshore interest-rate derivatives desks in Korea in the coming months, according to officials at both firms.

BNP Paribas has pulled out of the weather derivatives market. "The long-term profitability of this business is not at a level that our shareholders necessarily expect," said Jonathan Mullen, head of corporate communications at BNP Paribas in London. He was unable to give details of the French bank's profitability projections. The move will not result in any redundancies, he added.

BNP Paribas has hired Jeremy Adam, foreign exchange options salesman at ABN AMRO in London, to work in a similar capacity, replacing Karim Wilkins who left last month. A BNP official said Wilkins is taking a break and traveling in New Zealand.

BNP Paribas is bulking up its credit derivatives desk in Tokyo, as it looks to hire two senior credit derivative traders as well as bring aboard junior staff. "We've got too much business with too few people," explained Stephane Delacote, head of credit derivatives in Tokyo, commenting on the seven-strong desk which reports to him. Delacote plans to bring the new recruits aboard within the next two months.

BroadStreet Financial Products is structuring a USD500 million collateralized fund obligation on Bucephale's fund of hedge funds. The CFO is referenced to a portfolio of 18 hedge funds, diversified across sectors and regions, according to Andrew Smith, partner at Bucephale in New York.

Caltex Australia, Australia's largest oil refining and fuel distribution company, with over AUD3.2 billion (USD1.6 billion) in assets, is planning to enter interest-rate swaps on the back of its AUD1 billion floating-rate liability portfolio which consists of bonds and bank debt. Currently, 40% of the portfolio is hedged via synthetic fixed positions and the firm is looking to increase the amount to 50% of the portfolio as it anticipates an interest-rate hike over the course of the year, according to Seong Lim, treasury manager in Sydney. "We think rates have bottomed out," said Lim.