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Banks have been comfortable taking on large amounts of risk in trading options on the dollar versus the offshore renminbi. As liquidity, hedging and volatility increase with the currency’s rising popularity however, new market entrants, new derivatives products and confidence in the Chinese liberalisation programme will drive growth in coming months, according to speakers at a panel hosted by CME Group and the Treasury Markets Association.

Concern is growing over the European Securities and Markets Authority’s process of establishing definitions and thresholds in the Markets in Financial Instruments Directive – a critical part of which is the process for determining whether an instrument is liquid. If thresholds are calculated incorrectly, market makers may be less willing to provide liquidity to clients, prompting concerns that other market participants may use public data to trade against them, according to the International Swaps and Derivatives Association.

The Intercontinental Exchange has added five new currency contracts to its suite of FX contracts, highlighting investor demand for more access to currency risk management and hedging strategies via emerging market currencies.

New futures on a 10 year US Treasury Note Volatility Index, which allow investors to hedge interest rate volatility with a single product for the first time, are gaining traction. As the US is ending quantitative easing, market participants are tipping volumes to surge in the first quarter of 2015 as investors look to hedge their fears over looming rate hikes. Beth Shah reports.

Market participants have been trading risk-reversals on the euro against the Swiss franc, effectively betting that the Swiss National Bank will have to lower its floor following renewed eurozone troubles, despite implementing negative deposit rates in December.

Downside trades, such as puts and put spreads, on the iPath S&P 500 VIX short-term futures exchange-traded note (VXX) are expected to increase in popularity as a way to mitigate the risk of volatility spikes in 2015.

Talks over a European Financial Transaction Tax have been revived since 2014’s European elections. The tax is now being deliberated between 11 key EU member states. Although the scope of its coverage appears to have shrunk, the uncertainty may lead to unforeseen costs for derivatives market participants. Gabriel Suprise reports.

An institutional investor was seen picking up call options on the Chicago Board Options Exchange Volatility Index on Monday as market participants look to close out volatility positions that were sold in December.

The start of the Shanghai-Hong Kong Stock Connect pilot is helping to drive up offshore renminbi futures volumes, particularly from international investors, as market participants look to manage currency risk from growing A-share exposure.

Overall credit default swap notional that was reported to swap data repositories last week increased by 44% from the previous week, according to data from the International Swaps and Derivatives Association.

Harmonisation and crossborder issues are key concerns for the International Swaps and Derivatives Association as markets enter 2015. As Scott O’Malia, CEO of ISDA and former commissioner at the Commodity Futures Trading Commission, tells Beth Shah, regulators need to ensure that crossborder oversight is based on risk and not location.

A report from the Commodities Futures Trading Commission on central clearing for non-deliverable forwards warned of possible problems if a mandate is applied incorrectly, urging coordination and standardisation of practices, according to lawyers