Volume has soared again and the credit correlation market disruption of April and May produced hedge fund and bank proprietary dealing losses without prompting the withdrawal from the market of any significant players. Regulators have steadily increased the pressure on dealers and funds to tackle operational deficiencies in the credit derivatives market, but supervisors seem satisfied by the response to their public expressions of concern, at least from banks. Equity derivatives specialists are

The listed product sector currently exhibiting the strongest growth is fixed income, primarily short-term interest rate futures and options. Within this segment, the biggest beneficiaries of increasing volumes are the two main Chicago futures exchanges (see chart) – the Chicago Board of Trade (CBOT) and the Chicago Mercantile Exchange (CME) – which have at last embraced electronic trading, a notable contributor to their recent success. Dave Nicholls, head of global finance at Deutsche Bank, obse

The derivatives industry was already aware of the issue and had been working for some time on addressing default swap confirmation backlogs. Much of the work has been done under the aegis of the International Swaps and Derivatives Association (ISDA). “The association has published a series of documents outlining timetables for tighter end-to-end processing and increased automation of bilaterally negotiated derivatives processing,” said Robert Pickel, executive director and chief executive office

Asian structured product growth has come from the opening up of new markets and growing familiarity with new investment techniques. The development of any new market comes with its share of risks, however, as some international banks discovered this year. In global terms, Asia represents a fraction of the financial markets, which is always going to act as an effective revenue cap on any product line in the region; it is no different for structured products. Yet the numbers are already good enoug

According to some estimates, the first quarter of this year saw more commodity-linked hybrid products sold than all of last year. “The returns [for the commodity sector] are excellent and there is a believable and coherent story for why that should continue. It is not like 1973 and 1979, where [the oil market] was supplying the lead. This is about demand and growth,” said Kevin Rodgers, global head of energy trading at Deutsche Bank (see chart). Most commodity-linked transactions are oil-focused

Financial market participants are often confused by patents. “The thing about patents is that once a patent is granted, you need to show that it is not novel and that it should not have been granted. [Patent law] doesn’t operate on a balance of probability like a normal suit,” said Paul Forrester, an attorney at Mayer, Brown and Rowe in Chicago. Discovery of a patent covering distressed collateralised debt obligations (CDOs) triggered Forrester’s interest in patents on securitisation technology.

Through 2007, 12% per annum growth is anticipated in global equity derivatives business, according to Boston Consulting Group (see graphic). Product innovation, increased demand for equity derivatives products from institutional investors, hedge funds and high-net-worth investors will play key roles in the global equity derivatives industry’s growth story. Lower trading costs, due to greater liquidity, and further equity market improvements will also factor into the business line’s positive outl

The conundrum on which the Fed chairman has been musing over the past year – falling long yields – is not only an issue for US dollar swap dealers; it has been a global one. There were some signs of a long-awaited steepening of the curve in the sterling market in early October, but the flattening trend looks set to continue elsewhere. In the euro market the forward path of 30-year rates for the next seven years, as reflected by the forward swap market, is more or less the same as current levels,

With May in mind, dealers are waiting to see what impact Delphi’s bankruptcy filing has in terms of tranche downgrades. Rising raw material and labour costs prompted Delphi, the largest US auto supplier, to file for bankruptcy on October 8. Delphi has the potential to rock the markets in a similar fashion as the GM and Ford downgrades did this spring. Fitch says that Delphi featured in 35% of its bespoke synthetic collateralised debt obligations (CDOs) and Standard & Poor’s estimates that Delphi