JPMorgan Trader Iksil Said to Distort Credit Indexes

by Tom Carlson | Thursday, Apr 5, 2012 | 413 views

Bruno Iksil , a London based JPMorgan $ Chase Co.  derivative trader ; as per hedge funds and financial rivals ;  who is involved with health of financial corporations has garnered up such large positions  in the $10 trillion market that he is  capable of  or possibly  driving the price moves there. The rivals agreed to discuss the information on anonymity as they don’t have the authority to discuss on the transitions as of now.

Iksil is said to specialize in the market of credit-derivatives indexing, a market which has outperformed the trade market of corporate bonds and has become the best option in the sector of betting on company defaults.

The rival investors complain of the price distortion which in turn is affecting bond related instruments used for hedging fixed-income holdings. The analysis of risk in credit markets is gauged using these indexes.

Though little is known about iksil’s positions, rivals transacting from the other side have revealed that his positions are among the biggest that one can encounter, causing big price swings whenever his deals took place in the market.

No comments or statements could be had from either JPMorgan or Iksil’s ends. JPMorgan usually deals in buying and selling the securities of its customers but Iksil belongs to the investment office, a unit out of the treasury of the bank, which carefully invests excess funds and is aiding in steering and holding market risks.

Possibly being supervised at JPMorgan; the department belonging to Iksil is linked to management and hedging of the foreign-exchange of the firm, and instead of focusing on profits for the short term is managing risks on structural assets, interest rates and other liabilities.

The default risks of almost 100 firms are linked to the credit indexes and credit-default swaps help the market players to hedge losses in the corporate debt market or speculating on the creditworthiness of the corporates. By creating an irregularity between the average pricing of the swaps and index’s price, he has offset the predictions of various hedge funds that were banking on the differential to close. Now traders are betting on Iksil liquidating some of his holdings which will eventually turn the price trends in their favor. The Series 18 ( IBOXUMAE) after climbing 4.4 basis points reached to 97 basis points as its mid-price.

The Volcker Rule which is to take effect from July will aim at preventing banks from proprietary tradings involving  high risk investments with their own capital. Though it’s not very clear how the rule will stop the banks from hedging for risk curtailment in lending or trade businesses.

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