Derivs - FX

FX derivatives traders breathed a sigh of relief after the European Securities and Markets Authority scrapped clearing of non-deliverable forwards for the time being. This was bad news for LCH.Clearnet, which is the only European clearing house authorised to clear NDFs, but good news for other third-country central counterparties who are still waiting to be recognised as equivalent to their European counterparts — a problem that has superseded all others in NDF discussions. Hazel Sheffield reports.

Non-deliverable forwards will not be subject to the clearing obligation for over-the-counter derivatives following a consultation with market participants by the European Securities and Markets Authority, which said Wednesday that more time is needed to discuss market participants’ issues with NDF clearing before an obligation is introduced.

Asset managers are increasingly trading products that are based on the Chicago Board Options Exchange Volatility Index on the back of a spike in volatility. According to UBS, asset managers are looking to the VIX as a tool for hedging, in addition to a product that they can trade in their clients’ portfolios.

Investors were seen looking at puts on the Australian dollar against the US dollar with a reverse knock-out, ahead of Tuesday’s Reserve Bank of Australia meeting, where the central bank unexpectedly cut its key rate by 0.25% to a record 2.25% low, causing the Aussie to weaken almost 2% against the dollar.

Unpredictable trend reversals are causing investors to shy away from options and short-term hedging strategies on the Chicago Board Options Exchange Volatility Index, even though vols have been on the rise since December 2014, according to equity derivatives strategists.

EBS, ICAP’s electronic FX business, is launching a new integrated trading platform in the third quarter of 2015 which will give customers single-screen access to its products, services, analytics and liquidity so that FX derivatives such as non-deliverable forwards and swaps are available to view on a single screen.

The made-available-to-trade process is not fit for purpose and should be eliminated, according to Christopher Giancarlo, commissioner at the Commodity Futures Trading Commission.

Market liquidity is at stake if a balance is not achieved between rules imposed by regulators and codes of conduct from within firms, according to David Clark, chairman of the Wholesale Markets Brokers Association in London.

Interdealer broker Tradition has made three senior hires in London and New York in a bid to expand its hybrid and electronic business.

More swaps trading being pushed onto exchanges and other venues will not eliminate the presence of volatility in derivatives markets. However, the move to electronic trading has increased matched trades and efficient sourcing of capital.

The Intercontinental Exchange Benchmark Administration (IBA) is reforming the methodology for the ISDAFIX derivative benchmark calculation, which represents a first ever move from calculating the rate on a submission-based panel of banks to tradable quotes listed on regulated trading venues.

Benoy Raveendran, head of options, exotics and cross-currency swaps trading at Deutsche Bank in London, has left the firm.