Derivs - FX

New buyside entrants and portfolio managers are increasingly using options on futures as a way to keep margin costs down while generating tailored risk exposure, providing an effective alternative to over-the-counter swaps and futures strategies.

The latest proposals from the Commodity Futures Trading Commission and a coalition of five US prudential regulators could make trading uncleared swaps in the US costly and ineffective, driving business away from the country.

LedgerX, a bitcoin derivatives clearing house and exchange, has entered into a new partnership in a bid to expand the accuracy of its options pricing while increasing liquidity for bitcoin derivatives.

Market participants have been picking up put spreads on the Australian dollar against the US dollar, however investors should be wary as the currency pair has the potential to fall lower than expected, according to FX strategists.

A proposed clearing mandate for Canadian derivatives markets is generating concern over which products are captured for clearing. The proposals could eclipse regulations in the EU and US.

Nasdaq OMX Clearing has received authorisation from the European Securities and Markets Authority to clear both exchange traded and over the counter FX derivatives. This means that Nasdaq is only the second central counterparty that is FX recognised under the European Market Infrastructure Regulation.

Market participants in Europe are concerned over the definitions of request-for-quote and voice brokerage systems under the Markets in Financial Instruments Directive. The suggested definitions from the European Securities and Markets Authority would require the disclosure of provided quotes to the public, which could hamper liquidity.

Investors have been unwinding bearish positions on the euro following successful Greek negotiations which has led to an unexpected stabilisation of the single currency and a decrease in volatility.

Increases in FX volatility have the potential to erode returns and raise portfolio-level volatility in international multi-asset portfolios, therefore investors are looking at using FX forwards and options as a hedge to generate superior risk-adjusted returns.

Jacques Aigrain, chairman of LCH.Clearnet Group Limited and LCH.Clearnet Ltd. based in London, is stepping down and will be succeeded by Lex Hoogduin, current board member who is based in Amsterdam.

Liquidity in the FX options market is being hampered as bid-ask spreads on implied volatility widen, despite a rise in volatility and overall trading volumes, which has unexpectedly resulted in increased options premiums.

GFI Group’s board of directors have unanimously agreed to support BGC Partners’ tender offer for all its outstanding stock at $6.10 per share in cash concluding the hostile takeover that BGC initiated last year. This came following the merger agreement that was made between CME Group and GFI in July, which led to a bidding war between the exchange and BGC.