Derivs - FX

€2.9 billion notional of barrier options on the euro against the US dollar that expired Thursday ended up being worthless. The barrier options had strikes at $1.2850, but their tenor could not be gleaned.

Hedge funds have been taking profit or closing out long vanilla and exotic options trades on the US dollar against the Japanese yen as spot on the pair has continued its uptrend over recent weeks.

Concerns are mounting in the derivatives market and beyond that it is all starting to feel a bit like 2007 as market players pile into ever-riskier trades and strategies — in turn devouring greater amounts of precious capital — in a bid to overcome the deleterious effect of an enduring era of low volatility and rates on P&L targets.

The annual Global Derivatives Awards from GlobalCapital Derivatives, the new Derivatives Week, took place on Thursday, September 18th at the Landmark Hotel in London. The awards honoured the people, companies and deals that made an impact on the global derivatives market during the last 12 months globally (May 2013-May 2014). Winners in each of the award categories received their awards at a Gala Reception and Dinner in London.

The Singapore Exchange (SGX) said on September 19 that it was introducing FX futures contracts for Chinese onshore and offshore renminbi, Japanese Yen and Thai Baht, starting from October 20. The exchange also said Bank of China (BOC) would be the first market maker for its RMB futures and SGX’s first Chinese settlement bank for its derivatives market.

The FX non-deliverable forward market could fragment further after the introduction of mandatory clearing in the US, opening up the asset class to swap execution facility trading.

ForexClear, LCH.Clearnet’s fx clearing service, has expanded its range of clearable currencies to include the Peruvian nuevo sol in response to both member and client demand.

Swap execution facility TeraExchange has launched the first regulated platform for bitcoin derivatives and a spot bitcoin price index in response to growing demand from global merchants, payment processors, miners and hedge funds for an efficient hedging tool.

Fx volatility, particularly in sterling, has increased on the back of increased options trading due to the uncertainty of the outcome of the upcoming Thursday Scottish referendum. This comes following months of historically low fx vols and a continued slump in trading volumes.

Increased trading activity in the fx options market, particularly in G10 currency pairs, has resulted in a significant spike in volatility following months of low fx vols and trading volumes.

More made-available-to-trade determinations could be seen as swap execution facilities introduce more asset classes and the nascent market evolves further.

Investors are increasingly buying options on the euro, particularly against the dollar and sterling, which is helping to push volatility up following months of low fx volatility.