Egypt bourse plans to launch derivatives market in ’09

June 25, 2006

From Gulf Times:
The Egyptian Exchange will operate under a new, faster trading platform from next month and plans to launch a new derivatives market next year, its chairman said on Monday.

These moves form part of its plan “to enhance the liquidity (in the exchange) and provide more instruments and more sophistication to our market,” Maged Shawky Sourial told Dow Jones Newswires.

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Daiwa turns the tables with derivatives foray

June 23, 2006

From Financial Times:
Daiwa SMBC, the Japanese investment bank, is setting up a derivatives business in London and Asia in an effort to expand its global reach and take advantage of western banking woes.

The move highlights the degree to which Japanese institutions wish to capitalise on the strength of their financial health relative to US and European counterparts hit by the credit crunch.

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All about currency derivatives

April 30, 2006

From The Hindu:
Indian companies have, in recent times, grabbed headlines for all the wrong reasons. Swaps, options, exotic derivatives, structured product…the list is endless. As a shareholder, one has seen companies booking losses owing to ‘currency derivatives’. Naturally, everybody is petrified at the mention of currency derivatives.

Business Line sent some posers to Mr M. Sitarama Murty, an expert who worked in SBI, Paris in-charge of forex and money markets during the critical years of 1990-93. Before that Mr. Murthy headed the International Division of State Bank of Hyderabad at Chennai for more than 6 years (1984-90).

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Banks will have to keep aside more capital for credit derivatives exposure

April 30, 2006

From Economic Times:
The Reserve Bank of India (RBI) has finally broken its silence on the huge derivatives books run by banks which resulted into corporate booking huge losses due to unexpected movements in the currency market. Even though the regulator made no reference to recent losses suffered by corporates and banks, it has spelt out that banks will soon need to set aside more capital for off-balance sheet exposures, which include credit derivatives. In its annual policy review, the central bank said that it would now review banks’ off-balance sheet exposures.

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Libor to Rise as Banks Stay Wary, Derivatives Signal (Update3)

April 24, 2006

From Bloomberg:
Interest-rate derivatives are signaling that the rate banks charge for loans in dollars in London may rise further as financial institutions remain reluctant to lend.

The difference between the rate of three-month loans in London relative to the overnight index swap rate, known as the Libor-OIS spread, is 87 basis points. The gap reached 90 basis points on April 21, the widest since Dec. 12.

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US regulator lambasts FSA over derivatives oversight

April 24, 2006

From FTAdviser.com:
The FSA has rebuked claims from across the pond critical of its oversight in the derivatives markets.

Speaking before the Futures and Options Association in London, Bart Chilton, a commissioner at the US regulator Commodity Futures Trading Commission, told his audience: "I am generally concerned about a lack of transparency and the need for greater oversight and enforcement of the derivatives industry by the FSA.

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Derivatives by daylight

April 2, 2006

From Investors Chronicle:
Ben Bernanke! Mervyn King! Alistair Darling! Stand by for the answer. Not to securitised debt. Not to institutionalised greed. Not to "other people's money". And not to sheer bloody stupidity. For those answers, you will have to come back in future weeks. Today's answer addresses derivatives.

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Equity derivatives open interest nears 1-yr low

April 2, 2006

From Reuters India:
Open interest positions in the equity derivatives market are near 12-month lows, suggesting the main indexes are close to bottoming out as investor interest remains low, analysts said on Wednesday.

The outstanding open interest on National Stock Exchange was in a range between 840 million and 1.05 billion shares for stock and index futures at the end of the expiry of March contracts, data compiled by Reuters from four broking firms showed.

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Sell Side To Spend $70 Million On Derivatives Processing in ’08, Buy Side Far Less, Says Tabb Group

March 18, 2006

From Wall Street & Technology:
In a research note published today, "OTC Derivatives Processing: Blazing a Trail to Automation," the Tabb Group says that although top-tier, sell-side broker dealers have invested millions of dollars since the mid-1990s developing best-of-breed processing for their burgeoning OTC derivatives businesses, many other counterparties, including mid-tier banks, hedge funds and other trading firms have yet to implement any kind of automated solution, a problem that has not gone unnoticed by the Federal Reserve.

According to Kevin McPartland, senior analyst at TABB Group and author of the note, "When the Fed first instructed major dealers in 2005 to catch up on unconfirmed trades, additional personnel provided most of the ammunition for shrinking the confirmations backlog. As recent credit market turmoil has shown, simply adding staff to solve a problem is insufficient." He goes on to explain that during a three-month period, June to August 2007, the total number of backlogged confirmations jumped 250%.

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Banks' derivatives exposure may be capped

March 16, 2006

From Business Standard:
The Reserve Bank of India is planning to overhaul the norms for all foreign currency derivatives. The move could increase the provisioning requirements and restrict banks' exposure to credit derivatives and currency and interest rate structures.

Sources familiar with the developments said the central bank has sought data from banks to assess their total exposure to foreign currency derivatives, both in the domestic and in the overseas markets.

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Derivatives the new 'ticking bomb'

March 10, 2006

From MarketWatch:
"Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown.

"We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

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Overlooked – SocGen’s clever derivatives toys

March 2, 2006

From Financial Times:
With all the furore surrounding Jérôme Kerviel’s allegedly fraudulent trading activities at Société Générale, it is easy to forget about the French bank’s brilliant inventiveness when it comes to equity derivatives, the division where Kerviel toiled away.

If SocGen’s equity derivatives activities go down in history as just the place that housed the rogue of rogues, it would be a deeply unfair development. Particularly because the fallout had nothing to do with the area where the bank has outshone its competitors for years, namely extremely complex structured products. Mr Kerviel dealt only with the plainest of vanilla equity derivatives, and belonged to a low-profile, low-risk group.

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Morley buys UK property derivatives, eyes slump end

February 29, 2006

From The Economic Times:
One of Europe's biggest real estate investors, Morley Fund Management, is betting on an end soon to Britain's post-summer slump in commercial property by buying property derivatives, a firm official said on Friday.

In an interview, Morley's head of property strategy Nick Mansley told Reuters the firm bought "significant volumes" of UK property derivatives earlier this year and wanted to buy more if prices continued tumbling.

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Nord Pool eyes derivatives push with Nasdaq help

February 29, 2006

From Guardian.co.uk:
Norway-based electricity exchange Nord Pool seeks to expand its power and carbon derivatives markets with the reach, financial muscle and technology of its new strategic partner Nasdaq OMX, its boss said on Friday.

Chief Executive Torger Lien said Nord Pool would soon feel the benefits of the $440 million sale of its clearing and consulting operations and international derivatives products to Swedish operator OMX, bought by U.S. giant Nasdaq.

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Derivatives Push Reliant Energy Profit

February 26, 2006

From Forbes:
Reliant Energy Inc. said Tuesday it swung to a profit far higher than Wall Street had expected in the fourth quarter as strong derivatives gains led to better margins at both wholesale and retail operations.

The electricity provider posted a net income of $227 million, or 66 cents per share, from a loss of $53.7 million, or 17 cents per share, a year earlier. Revenue rose 13.2 percent to $2.65 billion from $2.34 billion.

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Derivatives usage drives up staffing

February 25, 2006

From Financial Times:
Fund management companies operating in the UK have expanded the size of their operational risk and compliance staff by 50 per cent over the past three years, and will continue increasing headcount by 10-15 per cent a year, according to a survey by Investit Intelligence , an industry forum.

The figures come just weeks after the Financial Services Authority warned that the increasing use of derivatives by asset managers "poses a range of risk" and called for "enhanced risk-management systems, controls and processes".

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BNP plugs new equity derivatives post

February 12, 2006

From FinancialNews-US.com:
BNP Paribas has created a new position to oversee strategy for equities and derivatives in the Americas and appointed its US head of corporate development to fill it.

Christian Roch, who has been at BNP Paribas for more than 15 years, has been appointed head of strategy and corporate development for equities and derivatives in the Americas. He will report to Todd Steinberg, who leads the EQD in the Americas business.

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AIG discloses hole in derivatives valuation

February 11, 2006

From Guardian.co.uk:
American International Group Inc disclosed potential losses in its derivatives portfolio, raising fears it would become the latest casualty of the credit crisis and pushing its shares down almost 12 percent to a 5-year low.

AIG's disclosure, in a regulatory filing on Monday, is the latest sign that credit worries sparked by the subprime mortgage crisis are feeding through to insurers. Swiss Re, the world's largest reinsurer, last November stunned markets with a 1.2 billion Swiss franc ($1.1 billion) write-down related to credit default swaps.

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Derivatives is an industry tainted by its side-effects

February 4, 2006

From Financial Times:
At times like these, spare a thought for derivatives salesmen. It has been clear for a while that their wares can prove toxic. But it must be dispiriting for the poor devils that almost every time a fresh chasm opens in the financial landscape, derivatives are at the bottom of it.

Most obviously, the harm inflicted on the investment banks has been derivative-based, as last week's further losses from UBS reminded us. So too, of course, was the Société Générale affair.

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New equity derivative worries add to investor jitters

January 30, 2006

From Guardian Unlimited:
Equity markets could be in for yet more volatility as investment banks sift through billions of dollars in derivative dealings, adding another new worry for investors on top of fears about credit and recession.

Following Societe Generale's disclosure last week of a $7 billon equity derivative loss, investment banks are scrutinising their risk management systems, potentially including a root and branch look at their holdings.

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Gulf derivatives market could touch $300b

January 22, 2006

From GulfNews.com:
The Gulf's derivatives market could potentially be worth around $250-$300 billion in five years, according to Arqaam Capital, a pioneer in derivative structuring, brokerage and trading in the region.

Based in Dubai International Financial Centre (DIFC), Arqaam Capital started derivatives structuring and trading through its capital markets business.

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Traditional markets turn to derivatives in quest for profits

January 22, 2006

From FinancialNews-US.com:
Traditional North American stock exchanges are thinking beyond equities, adding derivatives partners and new instruments to prosper in an increasingly competitive market.

Pressured by shareholders since demutualization to increase profits and with market share threatened by proliferating alternative trading systems, the biggest expansion has been in derivatives.

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Growth of made-to-measure derivatives

January 14, 2006

From Financial Times:
An off-the-peg suit is cheaper than a bespoke suit but is unlikely to fit as well, while a bespoke suit may look beautiful but there will be a tight limit to how many a tailor can produce. So tailors, keen to make more suits but keep their customers happy, have developed the "made-to-measure" concept: the suit is made to a set pattern, using the customer's own measurements. In the world of derivatives a similar development is taking place.

Over-the-counter derivatives are so named because each is designed to suit the particular needs of counterparties. "An OTC derivative is a contract between two parties," says Hans Hufschmid, chief executive of GlobeOp Financial Services, which provides technology solutions for the middle and back office. "Each counterparty and each contract has unique details."

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New derivatives exchange seeks more shareholders

January 14, 2006

From FinancialNews-US.com:
A derivatives exchange that claims it can break the CME Group’s monopoly on US Treasury futures trading is seeking up to five more shareholders for its consortium, according to a source close to the deal.

Broker eSpeed, owned by Cantor Fitzgerald, has a 25% equity stake in the platform. It is understood that other consortium members have a total 5% shareholding, leaving scope for others to join.

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Credit Derivatives May Lose $250 Billion, Gross Says (Update3)

January 8, 2006

From Bloomberg:
Credit-default swaps, used to help protect against the risk a company won't pay its debt, may cause losses of $250 billion this year, helping send the U.S. economy into a recession as corporate defaults rise, Pacific Investment Management Co.'s Bill Gross said.

"Credit-default swaps are perhaps the most egregious offenders'' in today's banking system, Gross wrote on the company's Web site today. ``Our modern shadow banking system craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage, based in many cases on no reserve cushion whatsoever.''

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Singapore derivatives trading market hits record in 2007

January 7, 2006

From Xinhua:
Singapore Exchange Limited (SGX) announced Monday that its Futures and Options market saw another record year in 2007. Its derivatives volume exceeded 44 million contracts, surpassing its previous annual record volume in 2006 by21 percent.

SGX said in a statement that the strong increase in overall volumes was fueled by soaring growth in some of its key contracts including the Nikkei 225, MSCI Taiwan and the MSCI Singapore Index Futures contracts, which also hit new record highs this year.

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Credit Suisse to boost equity derivatives in Middle East

January 2, 2006

From FinancialNews-US.com:
Credit Suisse is expanding its equity derivatives business in the Middle East to bring in both institutional clients and high-net-worth individuals in the region following a year of rapid growth in cash equities and derivatives trading volumes.

Simon Yates, head of global equity derivatives said: “The Middle East is one of the highest growth areas in equity derivatives globally. The region is desirable as it has a lot of wealth ready to be invested, plus the investors there are increasingly sophisticated.”

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Mini derivatives gets lukewarm response

January 2, 2006

From Yahoo! India News:
The series for the mini-derivatives contracts proposed by the Securities and Exchange Board of India (Sebi) on December 27 made its debut on the major stock exchanges, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on January 1. The response, however, was rather lukewarm with trades worth Rs 65.1913 crore reported on the NSE and Rs 116.18 crore on the BSE.

The announcement of the mini-derivatives product is seen as a first step from the Sebi to move markets onshore and encourage retail participation in the derivatives markets and provide a method of hedging to small investors. Experts believe that the mini-derivatives contract will soon catch atttention as investors can use this as a an arbirtrage tool to minimise portfolio risk.

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SEBI allows mini equity derivatives contracts

December 27, 2006

From Reuters India:
India's market regulator on Thursday allowed introduction of mini derivatives contracts with a minimum contract size of 100,000 rupees.

The mini derivative contract will start on BSE 30-share index and NSE 50-share index, the Securities and Exchange Board of India (SEBI) said in a statement.

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Crazy crises may herald the end of derivatives folly

December 24, 2006

From Financial Times:
It is far too early to tell how the credit crisis will play out, but the year end is a good time to reflect on the lessons so far.

Most of the follies committed in successive credit cycles are depressingly repetitive. This time, though, there have been some genuinely new ones, which - with luck - ought not to plague us again.

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OMX Buys Part of Derivatives Exchange

December 21, 2006

From Yahoo! Finance:
Nordic stock exchange operator OMX AB, target of a takeover offer from Nasdaq Stock Market Inc. and Borse Dubai, said Friday it is buying parts of Norwegian power derivatives exchange Nord Pool ASA for about $412 million.

Under the deal, OMX will buy Nord Pool's clearing and consulting operations as well as its international derivatives products. It will also establish a business unit for international energy derivatives.

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Sallie Mae Shifts $1.6 Billion in Derivatives to Citi

December 20, 2006

From CNBC:
Sallie Mae said Thursday that banks have transferred a series of its derivative contracts to Citigroup signaling that the student loan company is close to paying off an estimated $1.6 billion obligation linked to the derivatives.

Sallie Mae could raise new capital to help pay off the contracts known as equity forwards, said Sameer Gokhale, analyst at Keefe, Bruyette & Woods. On Wednesday, Morgan Stanley said it was selling a $5 billion stake to China.

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Standard Chartered in derivatives offensive

December 17, 2006

From TheLawyer.com:
Standard Chartered Bank is bulking up its in-house derivatives expertise across the globe.

The bank snared derivatives associate Belle Jan Moffatt from Stephenson Harwood for its London team at a time when most banks are cutting staff rather than recruiting.

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Derivatives bring big profits – and big risks

December 15, 2006

From The Courier-Mail:
SLOW and steady wins the race, or so the mantra goes. But what if, financially speaking, you're more Carl Lewis than Robert de Castella and you feel the need for speed?

Then maybe you should consider some performance enhancement through derivatives, which can catapult your returns to the stratosphere.

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BIS says credit market problems fuelled record activity in derivatives

December 9, 2006

From Forbes:
The Bank for International Settlements said the summer's credit market troubles led to record activity on derivatives exchanges but weighed heavily on bond issuance.

In the derivatives market, short term interest rates instruments were particularly popular. Combined turnover in listed interest rate, currency and stock index derivatives rose by 27 pct to 681 trln usd between July and September after remaining stable in the previous quarter, BIS said.

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How derivatives work

December 3, 2006

From GulfNews.com:
Perhaps nothing symbolises the sophistication of modern finance like derivatives - the power tools for people who wear pinstripes.

They are the family name for investments that are based on, or derived from, more traditional investments, like stocks or currencies. So, instead of buying a stock, sophisticated investors can buy, say, an option, which allows them to buy or sell that stock at a set price on a specific day in the future.

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Risk concerns delay derivatives' expansion in China

December 3, 2006

From Reuters:
A rapid expansion of China's economy is begging for the launch of more commodities and financial derivatives, particularly stock index futures trading, but the process is being delayed by risk concerns. Industry executives and regulators said at an annual derivatives forum here on Monday that conditions were getting ripe for China to launch its long-awaited stock index and gold futures, and more commodities contracts such as live hogs. Those new derivatives are important for China to build a bigger and more sophisticated futures market, lending the country more pricing power as its trade booms on the back of 10-percent-a-year economic growth, and giving its companies more effective hedging tools.

"Policymakers should develop an international perspective. Without a developed derivatives market, it would be difficult for China to become an economic power," said Zhou Zhengqing, a former head of the China Securities Regulatory Commission (CSRC) and now a member of the Finance and Economics Committee of China's parliament.

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Investors increasingly use derivatives

November 27, 2006

From Global Pensions:
North American institutional investors are routinely using equity derivatives as a method of obtaining desired exposures and hedging positions, according to Greenwich Associates.

The study revealed it was becoming common practice at North American institutions for cash portfolio managers to work in conjunction with traders and equity derivatives specialists to achieve investment goals.

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TSX on lookout for deals, CEO says

November 27, 2006

From The Globe and Mail:
TSX Group Inc. is building a strong base in both equities and derivatives trading so that it can better compete in a rapidly consolidating market, chief executive officer Richard Nesbitt says.

"I see the consolidation of exchanges as somewhat inevitable, both within marketplaces as well as cross-border," Mr. Nesbitt said yesterday after making a presentation to the Canadian Club of Montreal.

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Swiss Re takes a £525m hit on credit derivatives

November 20, 2006

From The Independent:
Swiss Re, the world's biggest reinsurer, became the latest victim of the sub-prime meltdown yesterday as it announced a SFr1.2bn (£525m) loss on two credit default swaps.

Shares of the world's biggest reinsurer dropped more than 10 per cent on the news, which weighed on the European insurance sector. The insurer sold the complex credit instruments to clients seeking to protect themselves against falls in mortgage-backed investments.

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Digging Into Derivatives

November 19, 2006

From Forbes:
Many fixed-income participants seem to be speaking in code. They use terms like ABX, CMBX, CDX and LCDX. What on earth are they talking about?

To understand credit-derivative index products, you first need to know what a credit derivative is. A derivativeis a security in which the price depends on or is derived from one or more underlying assets. Therefore, a credit derivative is a security in which the price is dependent on the credit risk of one or more underlying assets. (For background reading, see "The Barnyard Basics Of Derivatives.")

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Is it time to start an OTC derivatives market?

November 13, 2006

From Business Standard:
Over-the-counter (OTC) derivatives and exchange-traded derivatives coexist in healthy competition in most developed markets. It is true that standardised and highly liquid contracts are best traded in organised exchanges because of the enhanced transparency and lower systemic risk. However, new contracts are often best incubated in OTC markets until they achieve a critical mass of liquidity and widespread participation at which point they can be moved to the exchange traded format. Competition between OTC markets and exchanges forces each market to lower costs and to adopt the best practices of the other market. The most important candidates for OTC equity derivatives are long-dated equity options. Exchange-traded options in India go out to a maturity of only three months and liquidity is concentrated in the near month. Longer-dated options are not viable at present because of the extremely low liquidity. However, in OTC markets, options with maturities of three to five years are quite viable because of the large ticket size (notional values of $10 mn are quite common).

Participatory Notes are essentially an OTC market in Indian equity derivatives. Indian regulations have driven this important market outside India and the result is a loss of liquidity, a loss of income for Indian financial services firms and a loss of access to OTC derivative markets for Indian securities and investment firms. Bringing this market back to India should be a significant regulatory priority. The SCRA should be amended quickly to allow OTC equity derivatives in India.

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NYMEX Buys Into Norway's IMAREX for European Push

November 12, 2006

From Reuters UK:
NYMEX Holdings Inc, the world's biggest commodities futures exchange, snapped up 15.1 percent of Norwegian sea freight derivatives exchange IMAREX ASA for $52 million to gain a springboard into Europe.

NYMEX (NMX.N: Quote, Profile , Research) Chairman Richard Schaeffer said: "This investment and partnership in one of Europe's leading derivatives exchanges advances our strategic goal to expand our product distribution and clearing into the European market."

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Bank of Italy launches inquiries into 4 more banks over derivatives UPDATE

November 6, 2006

From Forbes:
The Bank of Italy has in recent months launched a series of further inquiries into derivatives trading involving four banking groups, Bank of Italy managing director Fabrizio Saccomanni said in a parliamentary hearing.

The new investigations come on top of those launched into three banking groups in 2006.

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Buffett Scores With Derivatives

November 5, 2006

From The Wall Street Journal Online:
Billionaire insurance salesman Warren Buffett has been selling more derivatives recently.

This year, Berkshire Hathaway Inc., the Omaha, Neb., holding company headed by Mr. Buffett, has collected premiums of about $2.5 billion from selling insurance on stock indexes and bonds in the form of derivative contracts, which guarantee payment to the buyer in the event of a specific loss in an underlying entity of the contracts.

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Capstone buys part of RV Capital's distressed derivatives

October 31, 2006

From Reuters:
U.S. asset management and proprietary trading firm Capstone Holdings has acquired part of the distressed derivatives portfolio of RV Capital, the UK options broker declared in default by Liffe last week, Capstone said on Wednesday.

New York-based Capstone declined to give a value or size of the positions acquired in the market maker declared in default by the London-based financial and commodities derivatives exchange, citing Financial Service Authority rules.

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PBOC Official Seeks Credit Derivatives

October 31, 2006

From InstitutionalInvestor.com:
A Chinese banking expert has called on the state to attach great importance to prompting credit and structural derivatives on the domestic financial derivatives market in addition to traditional derivatives products.

Mu Huaiming, director of the Financial Market Department of the People’s Bank of China (PBOC), the central bank, made the remark at a recent forum on the Development of OTC Financial Derivatives.

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CME's Net Nearly Doubles Following CBOT Acquisition

October 24, 2006

From The Wall Street Journal Online:
CME Group Inc. posted a 94% jump in third-quarter net income the first quarter following its $12 billion acquisition of CBOT Holding, as the derivatives exchange was boosted by the summer's market turmoil.

The owner of the Chicago Mercantile Exchange and Chicago Board of Trade reported net income of $201.6 million, or $3.87 a share, compared with $103.8 million, or $2.95 a share, a year earlier. Assuming both companies' results were combined for both periods, net income rose to $235.8 million, or $4.31 a share, versus $140.8 million, or $2.56 a share, a year earlier.

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India Should End Offshore Derivatives, Mobius Says (Update1)

October 23, 2006

From Bloomberg:
India should scrap the $88 billion of offshore derivatives used for investing in stocks and improve direct access to markets for overseas investors, said Templeton Asset Management Ltd. managing director Mark Mobius.

New rules proposed by the capital markets regulator to curb the issuance of derivatives won't stop record inflows into Asia's third-largest economy, Mobius, who oversees $48 billion in emerging-market stocks, said at a conference today in Mumbai.

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Derivatives demystified

October 15, 2006

From The Bangkok Post:
Mention the derivatives market and a lot of people will immediately switch off and not bother to listen to what's being said. Its perceived complexity is a huge barrier but there is money to be made for those who care to dig deep and comprehend.

Very simply, derivative is a generic term for a variety of financial instruments but unlike stocks and bonds, a derivative is usually a contract rather than an asset. Essentially this means you buy a promise to convey ownership of an asset rather than the asset itself.

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Dresdner derivatives head steps down

October 15, 2006

From Credit:
Marc Michallet, head of the financial solutions group for Europe at Dresdner Kleinwort, has left the bank.

It is understood that Michallet, who was based in London, left over the weekend.

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Banks respond to demand for climate change derivatives

October 8, 2006

From eFinancialNews.com:
A surge in investor appetite for green funds is leading to a boom for investment banks creating bespoke indices and structured products related to them.

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Property derivatives may debut in S'pore next year: Goldman Sachs

October 6, 2006

From Channelnewsasia.com:
Investors here in Singapore may soon be able to invest in property derivatives, which are based on a property index of real estate assets.

According to investment bank Goldman Sachs, a residential index is being compiled – paving the way for the first property derivatives to be launched in Singapore.

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CreditMatch improves derivatives processing

October 1, 2006

From FinancialNews-US.com:
Significant advances in straight-through processing in the past year earned GFI Group’s credit derivatives trading platform CreditMatch the title of Best Over-the-Counter Trading Venue.

The number of sellside traders who integrated CreditMatch into their middle and back office systems grew by 100%, according to Francesco Cicero, head of electronic trading, Europe and Asia at GFI.

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How Derivatives Give Shelter

September 26, 2006

From The Wall Street Journal Online:
Uncertainty over global financial markets and a predicted downturn in commercial property could be the catalyst for a significant increase in property-derivatives trading in the U.S. and the United Kingdom.

In the U.K., derivatives trading has been growing, with £3.9 billion, or about $7.9 billion, in trades in the first six months of this year matching the total for all of 2006. In contrast, the U.S. market has struggled to take off. While there are no formal data, experts suggest that trades total in the hundreds of millions of dollars rather than billions.

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In Defense of Credit Derivatives

September 24, 2006

From Portfolio.com:
You can always tell when the newsflow slows down in the financial world, because invariably some columnist will trot out another brave reëvaluation of credit derivatives. Here's Scott Patterson:

The power of these derivatives -- most of which were launched just in the past few years -- is scrambling the way some investors think about financial markets. Brian Reynolds of M.S. Howells & Co. says he would be more bullish about stocks, except for pesky credit derivatives.
They "add a whole level of complexity" to the market, he says, due to the ability of bearish investors to make bets that credit markets will deteriorate. If they start to turn lower again, that could reignite fears of a credit crunch, hitting stocks.

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Caution on derivatives

September 22, 2006

From The Bangkok Post:
The Bank of Thailand has cautioned banks to exercise caution in marketing derivative products to clients.

A circular signed by Bandid Nijathaworn, a deputy central bank governor, urged local banks to consider possible reputational risk in selling complicated structured products and derivatives to clients who may not fully understand the terms of the contracts.

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Are relaxed derivative norms for FIIs ok?

September 17, 2006

From The Economic Times:
The proposal by Sebi to allow FIIs to use AAA-rated foreign government securities in lieu of cash for payment of margins against positions in derivatives is a move in the right direction. The measure would allow FIIs to use their holdings in, say, US government securities to take position in the Indian equity derivatives market. There would be several benefits from the introduction of this facility.

The first benefit would arise from the fact that the FIIs would now be able to alter their positions in the derivatives market without having to change their holdings in the cash market. As a result, the volatility in the cash market that is caused by sudden withdrawal and infusion of funds by FIIs would decline.

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Euroclear Bank Moves Into OTC Derivatives

September 17, 2006

From Mondo Visione:
Euroclear Bank will launch an exposuremanagement service for over-the-counter (OTC) derivatives trades before the end of the year. Euroclear Bank’s ‘DerivManager’ service will reduce valuation and collateral disputes, operational costs and errors in exposure calculations.

DerivManager will provide trade matching and daily portfolio reconciliations between counterparties, helping clients ultimately to determine, match and manage exposures resulting from OTC derivatives transactions. Based on client-provided valuation data of their bilateral derivatives contracts, Euroclear Bank will automatically standardise and compare the two sets of data, detect and report any discrepancies in the mark-to-market values for these trades. In so doing, both counterparties will avoid potential valuation disputes. In addition, DerivManager will net total exposures to reduce collateral requirements to cover exposures.

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Subprime contagion fueled by derivatives: Yellen

September 10, 2006

From MarketWatch:
Complex derivatives, such as mortgage-backed securities and collateralized debt obligations, have probably helped subprime problems spread across much of the financial sector, possibly affecting economic activity, Federal Reserve official Janet Yellen said on Monday.

Mortgage-backed securities (MBS) are packages of home loans that are sliced up into different bits and sold to institutional investors. Collateralized debt obligations repackage MBS and other asset-backed securities into yet more securities for sale.

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Derivatives for higher returns

September 9, 2006

From The Economic Times:
One segment of investment market generally ignored by individual investors is derivatives. The word derivative evokes powerful emotions in the hearts of many. Stories of a large and powerful bank collapsing due to the actions of a derivatives trader and the role of derivatives in the sub-prime crisis have given derivatives a notorious reputation. It invokes a sense of fear in the minds of investors.

But, are derivatives all that bad? There must be something very attractive in it because the turnover of derivatives is more than three times that of the cash segment in the National Stock Exchange (NSE). The derivatives market has grown exponentially in the last 6-7 years. The average daily turnover in the NSE derivative segment is to the tune of Rs 39,638 crores in 2007-08.

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Derivatives Exchange Boon For Structurers

September 5, 2006

From InstitutionalInvestor.com:
The China Securities Regulatory Commission looks set to approve exchange-traded equity index futures, and derivative officials say this could help them structure more over-the-counter investments linked to Chinese equities. According to a report in the South China Morning Post, the regulator may allow futures on the Shanghai-Shenzhen 300 index as early as this month. OTC structurers would be able to use the futures to hedge structured equity investments linked to the index. At the moment, structured funds linked to Chinese equity are based on Chinese A-shares.

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Northern Trust names EMEA derivatives head

September 5, 2006

From Credit:
Northern Trust has appointed Allan Watson head of derivatives operations for Europe, the Middle East and Africa. He joins from Bank of America, where he was a manager in the exotic rates middle office, and will work in London, reporting to global head of derivatives operations, Stephen Andress.

In his newly created post Watson will manage the teams responsible for over-the-counter and exchange-traded derivatives and for providing collateral management services for buy-side clients who outsource those processes to Northern Trust.

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Derivatives expert chosen to manage Sentinel operations

August 30, 2006

From TheSouthern.com:
A former chief executive of the Hong Kong futures exchange has been appointed to oversee operations of Sentinel Management Group Inc., a $1.5 billion money-management firm that's facing fraud allegations by the Securities and Exchange Commission.

Frederick J. Grede, chairman of the consulting firm Vega Financial Engineering Ltd., was appointed to manage Sentinel, which sought Chapter 11 protection from its creditors on Aug. 17.

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Morgan Stanley pioneers exotic property derivative

August 30, 2006

From Reuters:
Morgan Stanley (MS.N: Quote, Profile, Research) has completed the UK's first residential property derivative trade with an embedded exotic option, the company told Reuters on Thursday.

Morgan Stanley and an undisclosed counterparty have agreed an exotic swap based on the Halifax House Price Index, the UK's definitive index for trading movements in UK house prices, Morgan Stanley told Reuters.

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RBI to launch platform for derivatives

August 23, 2006

From Reuters India:
The Reserve Bank of India (RBI) said on Thursday it would launch an electronic reporting platform for rupee derivative products such as swaps from Aug. 30, a move analysts said would bring more transparency to a fledgling market.

Within 30 minutes of a deal, banks and primary dealers will have to report the trade on the platform, which will be managed by the Clearing Corp of India.

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US credit derivative indexes rally

August 22, 2006

From Reuters:
The U.S. investment grade credit derivative index rallied 6.85 basis points on Wednesday to 65.75 basis points, according to data by CMA DataVision.

The high volatility credit derivative index, which comprises mainly "BBB"-rated credits, also strengthened by 10 basis points to 149.5 basis points, while the high yield index was up half a cent at 95.63 cents on the dollar, from 95.05 cents on Tuesday, CMA said.

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ICICI corners 23% of derivatives mart

August 17, 2006

From Business Standard:
ICICI Bank has made inroads into the complex world of financial derivatives, which till not long ago was the exclusive domain of foreign banks.

In about three years, the bank says it has captured a 23 per cent market share in the derivative business, helped by its relationships with Indian companies which are growing their operations globally.

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Moody's, S&P Lose Credibility on CPDOs They Rated (Update1)

August 14, 2006

From Bloomberg:
Moody's Investors Service and Standard & Poor's, the arbiters of creditworthiness, are losing their credibility in the fastest growing part of the bond market.

The New York-based ratings firms last month gave a new breed of credit derivatives triple-A ratings, indicating they were as safe as U.S. Treasuries. Now, investors are being offered as little as 70 cents on the dollar for the constant proportion debt obligations, securities that use credit-default swaps to speculate that companies with investment-grade ratings will be able to repay their debt.

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Calyon, ING to Increase Corporate Loans, Derivatives in Brazil

August 6, 2006

From Bloomberg:
Calyon, the investment banking unit of Credit Agricole SA, and ING Groep NV plan to scale up credit operations in Brazil, where customers are borrowing at a record pace to expand locally and overseas.

Calyon will double commitments for loans and derivatives in Brazil to at least $4 billion in 2008, said Pierre Debray, its head of Latin America operations. ING will begin structuring loans from Sao Paulo in early 2008 to meet demand for larger credit lines, said Deiwes Rubira de Assis, the top executive in Brazil for the biggest Dutch financial-services company.

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USFE joins rush to offer credit derivatives

August 6, 2006

From FinancialNews-US.com:
The US Futures Exchange is poised to allow investors to trade futures based on fixed income indices, despite a lukewarm reception for listed credit derivatives launched by its rivals.

USFE signed a licensing agreement with Lehman Brothers to list cash-settled futures contracts based on the bank’s fixed-income benchmarks. The product will launch in the third quarter.

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Derivatives cloud U.S. economic outlook: IMF

August 1, 2006

From MarketWatch:
The growth of derivative markets is making it more difficult to assess the vulnerabilities of U.S. financial markets and the risks to underlying economic activity, according to the latest report on the U.S. economy released Wednesday by the International Monetary Fund.

The report is an update to an IMF paper on the U.S. economic outlook released in June, and concluded that a soft-landing remains the most likely scenario, although there were risks of slower growth as growth remained near a stall speed. See full story. The updated report included comments from the IMF executive board members.

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Fortis Launches Commodity Derivatives Operations in New York and Expands London Team

August 1, 2006

From EarthTimes.org:
Fortis is delighted to announce the establishment of a Fortis Commodity Derivatives operation in New York, and a significant expansion of its team in London.

To improve the service provided to its global customers, Fortis Commodity Derivatives has hired eight senior base metals dealers in London and New York.

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Italian Shopkeepers Blame Banks for Derivative Losses (Update1)

July 27, 2006

From Bloomberg:
iera Levo and her husband, who run a 15-employee plumbing supply company in northeastern Italy, bought ``insurance'' against interest rate increases from UniCredit SpA in 2000.

Six years later, they paid 85,000 euros ($117,000) to extricate themselves from a derivative known as an interest-rate swap that is normally sold to large companies and fund managers. Derivatives are contracts whose value is based on that of another security, index or commodity, or linked to events such as changes in interest rates.

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BNP Paribas boosts commodity derivatives team

July 23, 2006

From Reuters UK:
BNP Paribas (BNPP.PA: Quote, Profile , Research) has hired nine new staff for its commodity derivatives team, in a further expansion of the business, the French bank said on Monday.

The new hires will join Jose Cogolludo from JP Morgan (JPM.N: Quote, Profile , Research), who started last week as global head of sales and marketing in commodity derivatives at BNP Paribas.

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UPDATE 1-US corporate credit derivative indexes hit records

July 20, 2006

From Reuters:
U.S. credit derivative indexes backed by corporate debt reached record wides on Friday on investor nervousness about weakness in residential home loans and some disappointing company earnings.

"Markets are very skittish at present," said Edward Marrinan, head of high-grade strategy at JP Morgan in New York.

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Derivatives Banks Concerned by Hedge Fund Leverage, Fitch Says

July 17, 2006

From Bloomberg:
Hedge funds are borrowing too much to finance investments in credit derivatives, contracts based on debt, which may magnify volatility in a market downturn, according to a Fitch Ratings survey of 65 banks, insurers and money managers.

Hedge funds' influence on credit derivatives and debt markets has continued to grow at a ``dramatic pace,'' Fitch said in today's report. The funds are responsible for 60 percent of all trading in credit-default swaps and about 33 percent of collateralized debt obligations, securities that package debt, the ratings company said, citing data from Greenwich Associates.

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Guidelines knock global derivatives into shape

July 16, 2006

From The Lawyer.com:
A set of guidance principles that could revolutionise the global derivatives market was published last week (10 July), ahead of the Financial Services Authority (FSA) report on the matter, which is expected soon.

The principles, which address how retail structure products (RSPs) are delivered to retail investors, were devised following an 18-month discussion period between market participants.

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OTC energy derivatives face tighter regulation

July 10, 2006

From Financial Times:
Years of US congressional efforts to bring the vast over-the-counter energy derivatives markets under tighter regulation started to pay off yesterday when the country’s futures watchdog warned it was “nearing the outer limits” of its authority to oversee energy futures markets.

Walter Lukken, acting chairman of the Commodity Futures Trading Commission, told a senate hearing into alleged “excessive speculation” in energy derivatives last year by hedge fund Amaranth that it was “appropriate to have this open dialogue . . . about what other tools are needed to adequately oversee” the markets.

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Chicago credit derivatives fail to trade

July 9, 2006

From FinancialNews-US.com:
Credit products launched by the three Chicago derivatives exchanges have yet to attract any trading volume since their launch last month.

Credit default swaps allow buyers to hedge against potential credit losses while sellers assume credit risk in exchange for payment. They are traded over the counter but are the fastest-growing segment of the derivatives market with approximately $30 trillion (€22.2 trillion) outstanding and so have attracted the interest of exchanges.

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Italease Shares Drop as Company Unwinds Derivatives (Update2)

July 2, 2006

From Bloomberg:
Shares of Banca Italease SpA fell to their lowest in 19 months after the company paid 610 million euros ($829 million) to unwind more than 80 percent of its derivative contracts with bank counterparties.

Italease's stock, which has dropped 59 percent this year, declined 1.59 euros, or 8 percent, to 18.39 euros in Milan. The company has a market value of 1.68 billion euros.

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Myth that could undermine credit derivatives

July 1, 2006

From Financial Times:
There is a rather dispiriting resemblance between the latest credit crunch and the bursting of the dotcom bubble.

Ahead of each, there were plain warnings not just of what would happen but how and why. All that was missing was when.

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Banking stocks on a roll in derivatives market

June 26, 2006

From The Financial Express:
There are just three days left for the expiry of June derivative contracts, and despite apprehensions about another interest rate hike by the Reserve Bank of India (RBI) looming large, banking and finance sector stocks have logged a high rollover in the derivatives market.

Market experts say the counter of banking stocks have posted a high rollover with long position seen in SBI, IDBI, HDFC, ICICI, Bank of India, Kotak Bank, PNB, UBI and also in other financial service companies like IDFC, IFCI, LIC Housing Finance.

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CBOT seeks share of credit derivatives boom

June 24, 2006

From The Financial Times:
The Chicago Board of Trade is set to launch a new credit derivative contract on Monday, making it the latest exchange to challenge the dominance of big dealer banks in the booming credit derivatives market.

New credit contracts unveiled by two rival Chicago exchanges last week have failed to attract any trading activity so far, underlining the difficulty of competing with very large, heavily traded, over-the-counter market in which banks trade directly with their customers.

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Automation aimed at reducing derivatives backlog

June 21, 2006

From FinancialNews-US.com:
Markit Group, the over-the-counter derivatives trade processing firm, has launched a new system to check trades after a large backlog in processing led to a joint effort by regulators to tackle the issue.

The new service electronically matches deals between traders prior to confirmation allowing clients to reduce processing errors for all over-the-counter derivatives. It allows both sides of a trade to approve the details of a deal.

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BNP Paribas sees strong growth in derivatives division

June 20, 2006

From Gulf Daily News:
France's biggest listed bank BNP Paribas said yesterday it was targeting strong growth in its derivatives division and aimed to hire 1,200 staff for its corporate and investment banking unit this year.

BNP Paribas was holding a presentation to investors in London on its corporate and investment banking business.

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‘Credit derivatives must cover loans too’

June 15, 2006

From LiveMint.com:
India has opened the door to credit derivatives after years of debate, but the market could sputter if trading is restricted to bond derivatives alone.

Last month, the central bank said it would permit commercial banks and primary dealers to trade credit default swaps— insurance-like contracts that protect against default and restructuring—as a first step in introducing credit derivatives, the fastest growing financial tools in the world.

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UBS expands Canadian equity derivatives group by hiring RBC veteran

June 14, 2006

From Globe and Mail:
UBS has one of the world’s largest derivatives operations. The investment bank took steps to expand that platform in Canada Thursday by hiring Allan Maclean-Howard away from the equity derivatives desk at RBC Dominion Securities.

Mr. Maclean-Howard will be Toronto-based head of Canadian equity derivative sales at UBS. He will run the team that sells global equity structured products to domestic clients, and moves Canadian derivatives to UBS’s global clients.

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CBOE latest to add credit derivatives

June 8, 2006

From FinancialNews-US.com:
The Chicago Board Options Exchange has become the second US market this week to receive regulatory approval to list and trade credit derivatives.

The CBOE is going to launch credit default options on five individual companies on June 19 - General Motors, Ford, Lear, Hovnanian Enterprises and Standard Pacific - with Jane Street Specialists as the designated primary market maker.

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ITG moves into derivatives with RedSky buy

June 8, 2006

From Pensions & Investments:
Investment Technology Group is acquiring RedSky Financial, a multiasset broker and futures commission merchant, for $22 million in cash, according to a news release. The deal will give agency broker ITG an entry into derivatives at a time when they are increasingly part of diversified portfolios. ITG plans to integrate RedSky’s R3 trading platform, which also connects to foreign exchange and fixed-income markets, into its execution management systems, Triton and Radical.

“RedSky will be an excellent conduit for ITG’s algorithms in a variety of other asset classes, including futures,” Brad Bailey, senior analyst at consultancy Aite Group, said in a research note.

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Tokyo Stock Exchange to Bolster Derivatives Trading, Saito Says

June 1, 2006

From Bloomberg:
The Tokyo Stock Exchange Inc. plans alliances and takeovers to strengthen its derivatives capacity and win a bigger share of global investments, said Atsushi Saito, adviser of the exchange and its next president.

"We must prepare a full line of derivatives and exotic products'' to become more competitive, Saito, 67, said in a group interview with media in Tokyo. "Starting from scratch is difficult,'' he said, adding the exchange will look for a partner that has such products. ``The best is to find one who's willing to work with us even by coming under our organization.''

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CBOT launches into credit derivatives

May 31, 2006

From FinancialNews-US.com:
The Chicago Board of Trade is launching its first product in the fast growing world of credit derivatives with an investment grade index futures contract for credit default swaps.

Credit default swaps are over-the-counter derivative contracts that allow buyers to hedge against potential credit losses, while sellers assume credit risk in exchange for payment. Market participants include banks, hedge funds and other institutional investors.

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Derivatives contracts prosper in '06

May 21, 2006

From InvestmentNews:
Over-the-counter derivatives contracts flowered to $415 trillion in notional amounts during the second half of 2006, a 12% gain, the Bank for International Settlements said.

The issuance of synthetic collateralized debt obligations and other structured finance products raised activity in the credit default swaps market, which grew 42% to $28.8 trillion in notional amounts.

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Super Derivatives tops "Inside Market" provider rankings

May 20, 2006

From Globes Online:
SuperDerivatives, a developer of software for multi-option asset pricing and risk management has won the “Best Data Provider for Derivatives” rating by financial institutions and corporations in investor news magazine "Inside Market" Data Awards for 2007. The company's competitors included global news agencies such as "Reuters" and "Bloomberg."

SuperDerivatives provides real-time and historical derivatives data as part of its interactive web-based applications as well as dedicated data feeds for use in 3rd party risk management systems. The company's systems are based on a mathematical model conceived by its founder and CEO David Gershon.

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Credit derivatives still untested -Fed's Minehan

May 15, 2006

From Reuters:
Boston Federal Reserve Bank President Cathy Minehan on Tuesday said that credit derivatives have become more robust and can help spread risk, but remain untested by a major financial upheaval.

"Credit derivatives are largely untested in times of stress," Minehan told a conference on the public policy implications of the exposive growth in this market being hosted by the Atlanta Fed.

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Garth Mackenzie: Head of derivatives trading, BoE Private Clients

May 15, 2006

From MoneyWeb:
MONEYWEB: Garth Mackenzie joins us to talk single-stock futures. Garth, this is something that we've discussed many times in the past but, as we found out, you can never educate too much. Single-stock futures, I guess, for a trader have got to be, well, one of the best inventions of recent years.

GARTH MACKENZIE: Ja, thanks, good evening, Alec. You're right. It has been one of the best inventions. Certainly in this bull market we've seen an explosion of these single-stock futures onto the market, and I think their attraction really comes from the added leverage which it gives to the average investor, which he wouldn't have otherwise had, had he just been playing in ordinary shares.

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Buffett On Derivatives: 'A Fool's Game'

May 7, 2006

From SeekingAlpha:
Warren Buffett, the billionaire investor and long-time chairman of Berkshire Hathaway Inc. (BRK.A), is a man who speaks his mind. I'm not sure whether he's always been that way, or whether it is his exceptional wealth or his age -- or both -- that emboldens him to cut through Wall Street B.S. like a hot knife and expose the bloody truth about the foibles of modern finance.

Whatever the case, his comments on derivatives, in particular, have been always been especially enlightening -- and entertaining -- because they expose this supposed risk-sharing panacea for the house of cards it has become. In Derivatives Cause 'Mass Destruction', the Wall Street Journal reports on the 'Oracle of Omaha's' latest thoughts on the subject.

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ITG sees push into equity derivatives

May 7, 2006

From Reuters:
Growth for trading services provider Investment Technology Group Inc. (ITG.N: Quote, Profile, Research could come from a push into related markets such as equity options, the company's chief executive said on Monday.

"We want to focus on contiguous asset classes: from equities to equity derivatives, to FX, and then beyond," Robert Gasser said at the Reuters Exchanges and Trading Summit in New York.

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Living with derivatives: Riskier financial systems

May 7, 2006

From The Economic Times:
The Reserve Bank of India (RBI) in its latest Annual Policy Statement has finally given the green signal for the introduction of credit derivative swaps, a kind of credit derivative instrument.

Ironically, the move comes just as there is renewed debate worldwide among regulators about the implications of the rapid growth of derivatives for the safety of the financial system. So how should the central bank proceed? Are there any takeaways, any research findings RBI could keep in mind as we enter what has so far been virtually uncharted territory?

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MICEX could launch derivatives market in mid-June

April 25, 2006

From Interfax:
MOSCOW. April 25 (Interfax) - The Moscow Interbank Currency Exchange (MICEX) could launch a derivatives market in the middle of June, Alexei Rybnikov, the exchange's general director, said at an investment conference on Wednesday in Moscow.

The only thing now connected with launching the derivatives market is mutual relations between organizations within the MICEX Group and introducing clearing and settlement systems on the MICEX's derivatives market, he said.

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Dong Derivatives May Double; Investors Enter Vietnam (Update3)

April 23, 2006

From Bloomberg:
Vietnam's currency is starting to capture the attention of derivatives traders as Southeast Asia's fastest-growing economy accelerates.

DBS Group Holdings Ltd. and Australia & New Zealand Banking Group Ltd. have begun offshore trading in contracts tied to the future value of the currency, the dong. The $50 million of Vietnamese contracts that trade monthly may double in a year, Standard Chartered Plc estimates. More than $1 billion of Chinese yuan forwards change hands daily in an overseas market that didn't exist 15 years ago, according to HSBC Holdings Plc.

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Trichet Warns of `Dangerous Herding' Derivatives Risk (Update4)

April 18, 2006

From Bloomberg:
Credit derivatives may create risks to the financial markets if events prompt investors to exit at the same time, said European Central Bank President Jean-Claude Trichet.

Investors ``may react in a way that can suddenly lead to dangerous herding behavior,'' said Trichet, who was speaking in Boston at the annual meeting of the International Swaps and Derivatives Association, which represents 750 banks and securities firms. ``Such situations are also a matter of concern from a systemic liquidity viewpoint.''

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UPDATE 1-UK FSA'S Tiner says derivatives backlogs resolved

April 18, 2006

From Reuters UK:
The problems of backlogs in credit derivative confirmations have been largely resolved, although vigilance is still needed, John Tiner, chief executive of the British Financial Services Authority, said on Wednesday.

Uncertainties remain over credit events, Tiner said, and firms should prepare for defaults and market stress events.

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Canadian exchanges set to clash

April 8, 2006

From Canada.com:
At one time, there had been talk of a merger between the Montreal Exchange and TSX Group Inc. But the competing exchanges are now girding for battle.

The Toronto Stock Exchange is preparing to compete head-on with the ME in trading futures and options - collectively known as derivatives.

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Derivatives: a two-minute primer

April 7, 2006

From The Gazette:
Derivatives have brought riches to some, but ruin to others, including Britain's Barings Bank, Orange County in California and hedge funds like Long Term Capital Management and Amaranth Advisors. All were tripped up by huge losses on wrong derivatives bets.

Despite those fiascos, derivatives - a term that refers to futures and options - are primarily risk-management instruments. Financial derivatives, for example, are routinely used by companies to hedge against unforeseen losses caused by currency and interest-rate volatility.

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Bloomberg: Major Investment Banks' Credit Derivatives Trade Near 'Junk' Status

March 2, 2006

From Yahoo! Finance:
Credit-default swaps tied to the large NY-based investment banks traded at their highest level in 19-months, as even their own traders are valuing them little above non-investment grade ("junk") status. Credit-default swaps, which transfer the credit exposure of fixed income products between parties, are the way in which firms like Goldman Sachs, Merrill Lynch and Morgan Stanley have equitized the U.S. mortgage sector.

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Canada Pension Plan Allowed to Increase Use of Derivatives

February 27, 2006

From Bloomberg:
Canada Pension Plan Investment Board, the country's public pension fund, can increase the use of derivatives to protect its investments and reduce costs, under new changes approved by the federal government.

The government scrapped a requirement that forced the Toronto-based fund to back its derivatives investments with cash or other assets, according to a decision posted on the Privy Council Web site.

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Goldman Sachs selects Fidessa for listed derivatives

February 16, 2006

From Banking Technology:
Global investment bank Goldman Sachs has selected Fidessa from royalblue as an additional distribution platform for buy-side listed derivatives flow. Through Fidessa’s network, users will now have the capability to route listed derivatives, cash equities and algorithmic orders to Goldman Sachs across 60 exchanges and 23 countries.

Brad Hunt, managing director at Goldman Sachs, said: “We are pleased to offer our clients a sophisticated trading solution by using Fidessa’s global connectivity network to access listed derivatives and cash equities liquidity. As we recognise the value in a broker neutral platform, we look forward to further developing our existing relationship with Fidessa.”

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Subprime Mortgage Derivatives Tumble for a Fourth Straight Week

February 16, 2006

From Bloomberg:
A derivatives index used to bet on the riskiest U.S. mortgage bonds headed for its fourth straight weekly decline as more lenders said they were losing money.

Prices for credit-default swaps linked to 20 securities rated BBB-, the lowest investment grade, and created in the second half of 2006 have fallen 2.6 percent to 83 this week, and are down 15 percent since Jan. 18, traders say. The decline, which indicates a deterioration in the perception of credit quality, means an investor this week would have paid more than $950,000 a year to protect $10 million of bonds against default.

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BoNY expands valuations service for OTC derivatives and asset classes

February 5, 2006

From Finextra:
The Bank of New York, a global leader in securities servicing, has expanded its independent valuation service for a broad spectrum of over-the-counter (OTC) derivative products and asset classes to include European swaptions, foreign exchange options and OTC equity options.

The Bank already provides valuation services for interest rate swaps and credit default swaps.

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CME Named ‘Derivatives Exchange Of The Year’

February 3, 2006

From Huliq:
CME, the most diverse financial exchange, today announced that it has been named Derivatives Exchange of the Year in Risk Magazine’s annual Risk Awards. The awards recognize best practice and innovation in the risk management and derivatives markets in 24 categories across banks, brokerage houses, investors and market providers.

Winners were named and profiled in the January edition of Risk magazine and the awards will be presented this evening during a dinner at the Jumeirah Carlton Tower, Cadogan Place, London. CME Executive Chairman Terry Duffy and CEO Craig Donohue will be in attendance to accept the award.

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Democrats launch bid to tighten derivatives oversight

January 20, 2006

From MSNBC:
Democratic efforts to tighten regulation of the vast over-the-counter (OTC) crude oil and natural gas derivatives markets took a first step forward on Friday with the introduction of a bill in the House of Representatives that would require traders to submit regular reports to the US futures watchdog.

The move comes after years of effort by mostly Democratic lawmakers to raise the issue of regulation of OTC markets, which they and some energy user industry groups say are too lightly regulated to prevent manipulation.

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TSX seeks to buy or be partner with derivatives exchange

January 20, 2006

From The Globe and Mail:
The Toronto Stock Exchange's owner wants a deal to buy or partner with a derivatives market by the end of this year, rather than going through the costly and chancy process of building one from scratch.

TSX Group Inc. wants to be ready to launch a derivatives business that would offer trading in stock options as soon as a non-compete agreement with the Montreal Exchange expires in 2009. Toronto already lags exchanges in the U.S. and Europe that trade in both stocks and options on one platform, so the pressure is on to be ready the moment the non-compete is out of the way.

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CALYPSO RANKED AS TOP SOLUTION FOR CREDIT DERIVATIVES

January 8, 2006

From Bob's Guide:
Calypso Technology Inc, the leading provider of capital markets trading software solutions, today announced that the Calypso credit derivatives solution was voted the top trading system and front-to-back office system for credit in Risk Magazine's 2006 Technology Rankings.

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SocGen, Calyon eye 50/50 derivatives joint venture

January 8, 2006

From Reuters:
French banks Societe Generale (SOGN.PA: Quote, Profile , Research) and Calyon, the investment banking arm of Credit Agricole (CAGR.PA: Quote, Profile , Research), confirmed on Monday they were considering merging their derivatives businesses into a 50/50 joint venture.

In a statement, the banks said the combined group, to be based in Paris, would be a global leader in derivatives markets, offering clients access to more than 70 derivatives exchanges.

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