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CIBC World Markets is structuring its first synthetic collateralized debt obligation and, unusually, over 50% of the credits come from its native Canada. David Allan, managing director and head of Canadian securitization in Toronto, said the CDO is referenced to a USD1 billion slice of the Canadian Imperial Bank of Commerce's CAD80 billion (USD51 billion) corporate credit portfolio.

Highly-rated bank credit derivative counterparties are set to benefit from the collapse of Enron, which was a top 20 credit derivatives market maker, said traders in London and New York. Firms in both countries were busy liquidating positions this week, which could total USD6 billion of gross notional exposure to Enron as a counterparty, according to some estimates. A tier one house typically executes USD50 billion a year.

Deutsche Bank sold EUR2-3 billion (USD1.8-2.7 billion, notional) of two-month out-of-the-money U.S. dollar calls/euro puts on behalf of a customer in the London fx market last Wednesday, causing implied volatility to slip almost a full percentage point. "That is just a massive move," noted a trader in London. A currency derivatives trader at Deutsche Bank confirmed the transaction, declining all further comment.

U.S. energy companies took the brunt of the fall out from the Enron collapse last week as credit-default swap spreads on major energy suppliers, such as El Paso Energy and Williams Co., widened more than 100 basis points after Enron's decision to file for Chapter 11 bankruptcy protection. A New York-based trader reported that five-year credit-default swap spreads on El Paso widened to about 325bps last Wednesday from about 225bps a week earlier. Williams also got hit hard with its spreads widening to 295bps Wednesday from about 180bps a week earlier. "Most of the market feels pretty tight, but the energy sector is a real pocket of weakness," the trader said.

One-week Swedish krona/euro implied volatility shot up a full percentage point last week as several hundred million euros worth of euro calls/krona puts hit the European foreign exchange options market. The krona tends to appreciate on the back of global equity gains, particularly in the tech sector, because Ericsson is a major component of the Swedish stock market. "The krona is dependent on the stock market, so when the market goes up, so does the krona," said a trader. As a result, one week implied vol rose to 9.5% Thursday from 8.5% a week earlier. He said a wide variety of corporates entered trades between EUR20-50 million (USD18-44 million) and that the several hundred million euros that traded represents approximately twice the normal volume for the currency pairing. Strikes ranged between SEK9.35-9.45, mostly with short-term tenors out to two months. Most of the options were entered when spot was SEK9.5 early last week. It was SEK9.35 last Thursday.

The Toa Reinsurance Co., one of Japan's largest reinsurers with over JPY338 billion (USD2.7 billion) in assets, plans to purchase its first synthetic collateralized debt obligation. "We see strong profitability in investing in this product," said Tomonori Ono, assistant manager in the fixed income and loan team in Tokyo. It plans to invest in up to five synthetic structures next year.

To benefit from the next bull-run, investors are on the lookout for the bottom of the market. Historically speaking, an upward trend has nearly always followed major shocks, such as the Cuban Missile crisis, JFK's assassination, the Kuwait invasion and the Russian crisis. It is possible that the trend over next year may also be upwards as major central banks cut interest rates and most countries implement fiscal easing policies in the aftermath of the Sept. 11 attacks. However, many analysts believe that further dips in the equity markets and continued high volatility may be seen next year before the upward trend becomes obvious.

Macquarie Bank, has hired Martin Lalor, a credit structurer in the financial markets group at the Commonwealth Bank of Australia in Sydney, in a similar role. Lalor will join Macquarie in a new position next month, reporting to Gary Vassallo, head of derivatives risk in Sydney. "We see opportunities for growth in this part of the business," said Vassallo, adding that with the expansion of the Australian credit derivatives market, it was looking for a dedicated structurer to handle the product range. Macquarie's interest-rate structuring team currently covers credit derivatives. Lalor could not be reached for comment.

Rhicon Currency Management, a fund manager with operations in Singapore, Geneva and Toronto, launched its first fund two weeks ago and it will trade over-the-counter foreign exchange options. Peter Jacobson, managing director in Toronto, said the fund's capacity is USD300 million. It is aiming to reach USD50 million within the first six months and USD100-150 million after its first-year results. "We'll use OTC currency derivatives for managing profits," said Christopher Brandon, managing director in Singapore. The firm will use the derivatives for both hedging and taking profits. For example, it may purchase currency in the spot market and when the pair has reached a target price it will sell the currency and purchase short-dated options to capitalize on further gains, while it has locked in some of the profits. However, Brandon continued that the firm will primarily invest in the Group of Seven currencies, mostly in the spot market and will occasionally trade short-dated options.

Five of Merrill Lynch's Singapore-based currency trading and sales team opted to take voluntary redundancy packages rather than move to Tokyo, according to Richard Mei, spokesman at in Tokyo. Toby Williams, director and head of foreign exchange trading, Chanelle Hughes, foreign exchange sales and Fidelis Oruche, currency options trader, as well as two spot traders, all accepted redundancy packages, added an official at the firm. They reported to Masayoshi Takegawa, director and head of foreign exchange in Tokyo. Takegawa did not return calls and Mei declined comment on which employees accepted the package.

CDC Ixis Asset Management is considering launching a convertible arbitrage fund next year that will use over-the-counter derivatives and employ three times leverage. Dahlia Marteau, head of alternative fund management in Paris, said CDC is pondering the move to appeal to clients looking to take on leveraged exposure to the sector and is currently studying whether there is demand.

Green Property, a property developer, is considering whether to enter a swap to convert a recent fixed-rate bond into a synthetic floating-rate liability. Danny Kitchen, finance director in Dublin, said the property developer "may look at a [swap] on the bond in due course to bring down the cost." He declined to be more specific. The company raised GBP150 million (USD214 million) through a 15-year 7.25% bond offering late last month. The proceeds are being kept in sterling as the Irish company has substantial interests in the U.K.