(Bloomberg News) A JPMorgan Chase & Co. trader of derivatives linked to the financial health of corporations has amassed positions so large that he's driving price moves in the $10 trillion market, traders outside the firm said.
The trader is London-based Bruno Iksil, according to five counterparts at hedge funds and rival banks who requested anonymity because they're not authorized to discuss the transactions. He specializes in credit-derivative indexes, a market that during the past decade has overtaken corporate bonds to become the biggest forum for investors betting on the likelihood of company defaults.
Investors complain that Iksil's trades may be distorting prices, affecting bondholders who use the instruments to hedge hundreds of billions of dollars of fixed-income holdings. Analysts and economists also use the indexes to help gauge perceptions of risk in credit markets.
Though Iksil reveals little to other traders about his own positions, they say they've taken the opposite side of transactions and that his orders are the biggest they've encountered. Two hedge-fund traders said they have seen unusually large price swings when they were told by dealers that Iksil was in the market.
Joe Evangelisti, a spokesman for New York-based JPMorgan, declined to comment on Iksil's specific transactions. Iksil didn't respond to phone messages and e-mails seeking comment.
The credit indexes are linked to the default risk on a group of at least 100 companies. The newest and most-active index of investment-grade credit rose the most in almost four months yesterday.
The Markit CDX North America Investment Grade Index of credit-default swaps Series 18 climbed 4.4 basis points to a mid-price of 97 basis points at 5:13 p.m. in New York. The price of the index is quoted in yield spreads, which rise along with the perceived likelihood of increased corporate defaults.
A credit-default swap is a financial instrument that investors use to hedge against losses on corporate debt or to speculate on a company's creditworthiness.
Iksil may have "broken" some credit indexes -- Wall Street lingo for creating a disparity between the price of the index and the average price of the credit-default swaps on the individual companies, the people said. The persistence of the price differential has frustrated some hedge funds that had bet the gap would close, the people said.
Some traders have added positions in a bet that Iksil eventually will liquidate some holdings, moving prices in their favor, the people said.