Readings: Bond insurance, Derivatives boom, Currency futures
Now the states want to get into the bond insurance business.
And why not? If it’s good enough for Warren Buffett and Wilbur Ross, why not California & Co.?
Lockyer, you may recall, earlier this year sent a five-page letter to the companies that rate municipal bonds, asking them to wake up to the fact that most municipalities don’t default on their debts, so let’s all have an upgrade, please. The letter was also signed by 14 other public finance officers.
Lockyer noted in the letter that California had paid more than $100 million from 2003 to 2007 to insure its bonds, because it didn’t have a AAA rating.
- Financial Times: Boomtime for derivatives as investors bet on volatility
Trading in equities and related derivatives is booming as investors take advantage of heightened market volatility generated by the continuing crisis in the credit markets and wider economic uncertainty.
In January alone, the US equity markets traded 35 per cent more than average monthly volume in 2007, according to traders.
And in the options market, 282m contracts were traded in March this year compared with 229m in the same month last year.
- Business Standard: Banks, brokers get nod to start currency futures
The Reserve Bank of India (RBI) has allowed banks and brokers as the first participants to start currency futures on existing exchanges.
In its report, the RBI said banks, being regulated entities, would be allowed to operate as trading-cum-clearing members for their own account, clients’ accounts and as professional clearing members (to provide liquidity in the market).
Brokers could be allowed on the basis of multiple criteria like net worth, market reputation, regulatory framework and participation in the derivatives segment.
In the initial phases, the product design will be standardised across exchanges and the size of a contract could be $1,000. The tenor will be akin to currency forwards, one, three, six and 12 months. The settlement of the contract in cash will be based on the expiry date.
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