French credit derivatives trade rules relaxed

Any mutual fund can now trade credit derivatives as long as it can show that it can price and monitor the risks involved. The old trading rules meant that only a small number of highly sophisticated fund managers could buy and sell credit derivatives.

“Before there were maybe only five asset managers in France that could trade,” said Hubert Le Liepvre, the London-based deputy head of the structured credit group at French investment bank SG. “Now, 100 or more will be able to trade.”

Mutual funds can now trade credit derivatives on any asset that is listed, or in the case of a corporate bond one that is rated. Investment banks say this should lead to increased business for their credit derivatives teams.

“The good news is that it may allow mutual funds to trade first-to-default structured notes,” added Le Liepvre.

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