Following the launch of a strategic partnership between the Vienna Stock Exchange and Limeyard Indices, a Swiss-based index provider, aimed at expanding the index provider's offering in the Austrian market, by offering real-time calculation and data dissemination, SRP spoke to Christoph Boschan (pictured), chief executive officer of the Vienna Stock Exchange, about the exchange's plans to leverage the partnership with Limeyard to continue facilitating access to retail investors to hard-to-get assets.
Boschan notes that indexing is an important field of business for the Vienna Stock Exchange which calculates more than 130 tradable indices on countries, covering 14 stock markets, sectors, regions and various investment themes and styles including the Austrian Traded Index (ATX), CECE Composite Index and the Russian Depositary Index.
The Austrian blue chip index - ATX is used as an underlying for 8,246 products across eight countries for a variety of products like leverage, flow and primary market products in Germany, Austria and Switzerland. The majority of products are linked to leverage long and short products as well as reverse convertibles.
The most important index covering the central and eastern European markets is the CECE Composite Index (EUR) has 2,680 products across 15 countries linked to it. The index is most popular as an underlying for reverse convertibles and discount certificates on the secondary market in Germany, Austria and Sweden.
The Russian Depositary Index (EUR) has 2,791 products linked to it, used in 13 countries. The majority of the products (2,550) is offered to German investors as secondary market products as reverse convertibles and discount certificates. The RDX (USD) is more used with 3,275 products, offered in 15 markets. The majority was issued on the Germany and Swedish market as an underlying for bonus certificates, discount certificates and reverse convertibles.
"We have five decades of experience in this area," said Boschan. "Our international customers greatly appreciate the range of indices we have developed for the region of Central and Eastern Europe and Russia."
The exchange is seeking to push its growth strategy even further by diversifying its index business through its joint venture with Limeyard, which is "the ideal partner" for the exchange thanks to its "tech-driven innovation and agile approach to index calculation".
"Our customers will benefit from faster, automated services that have an utmost degree of reliability and a global scope," said Boschan, adding that by partnering with Limeyard the VSE is moving towards the next generation of global index calculation as the index provider can significantly boost "the reliability of index calculation versus traditional providers, through its innovative database architecture and high degree of automation".
"Our customers will benefit from a faster service, innovative products and state of the art cloud-based technology. The resulting cost advantages can be passed on to the investors. With this approach, we want to become an active player on the global structured products market and achieve worldwide visibility."
In 2017 structured products industry was strongly pressed by implementing Mifid 2 but the volume in structured products increased by well performing stock markets, especially Austria as well as the CEE region, according to Boschan.
"Although interest rates are slightly increasing we are still in a low interest environment and investors are on the search for alternatives," said Boschan. "The many different features and good earnings potential make products such as certificates an attractive alternative for all market situations and investment horizons."
Structured products on the Vienna Stock Exchange benefit from having a dedicated outlet and being one of the more flexible investment instruments to play bullish, bearish and sideways markets, according to Boschan.
"[Structured products] are traded in a tailor-made market segment," said Boschan, adding that these products are also "opening markets to private investors that would otherwise be hardly accessible for them."
Vienna Stock Exchange has developed and distributed a wide range of 130 tradable indices, covering Central and Eastern Europe as well as Russia to more than 140 financial institutions globally.
In late 2017, the exchange identified a "massive need" to further efforts in educating Austrian investors with their financial knowledge. Earlier, Boschan joined the Austrian Certificate Association (Zertifikate Forum Austria - ZFA) last year as a member of the advisory board and has embarked on the effort to strengthen the certificates market by educating investors as "education is the best investor protection".
In January 2018, there were 5,930 structured certificates traded on the Vienna Exchange worth €56.2m from three issuers; 2,513 warrants worth €1.6m from two issuers, and nine ETFs worth €2.8m from two issuers.
SRP data shows that up to five structured products providers have been active in the leverage and non-flow part of the exchange, including Goldman Sachs (four turbo certificates), Erste Group Bank (2,190 products), Raiffeisen Centrobank (4,249 products), UBS (10 trackers/leverage) and Unicredit (one product), according to the VSE.
Of the €625.2bn invested by Austrians, 41% is held in cash and low-interest investments, 20% in life insurances, 18% in other equity securities, 9% in certificates, 5% in bonds, 4% in stocks and 3% in other requirements.
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