Derivs - FX

Concerns are rising among market participants that the European Securities and Markets Authority is showing a lack of understanding of request-for-quote and other trading protocols as it prepares new rules. If ESMA imposes overly-restrictive transparency regulations on these technical systems, market participants may refrain from using them, according to lawyers.

Market participants have been buying vanilla options on the Norwegian krone as the currency continues to weaken as a consequence of the oil price rout. Low liquidity is in turn widening bid-ask spreads.

The Chicago Board Options Exchange is now publishing values for three new volatility indexes using the prices of CME Group’s FX futures options in response to client demand.

Investors have been picking up options on the euro against the dollar as the euro continues to depreciate amid uncertainty over what happens to Greece and the eurozone.

End-users trading swaps could be exempted from posting margin on swaps not cleared by registered derivatives clearing organizations under a new Congressional rule amending the Dodd-Frank Act. Despite flaws in the original drafting, the amendment to the rule would be a substantive change to the legislation and would clarify the margin posting process, according to lawyers.

John Miesner, the ex-global head of sales at KCG Hotspot, has joined GAIN Capital as managing director, head of global sales for GTX, the firm’s institutional FX electronic communications network.

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.

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.

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.

EBS, ICAP’s electronic FX business, has launched the first electronic over-the-counter, end-of-month non-deliverable forward contract on the Indian rupee. The moves come on the back of demand from both the buy- and sell-side, and the rupee is the first currency made available by EBS for a contract of this kind.