Citi has issued the first shark fin product in the US market in two years. The product, which sold $2m, has a one-year term and is linked to the worse-performing of the S&P 500 and the Russell 2000 indices.

Traditionally, a shark fin pays a minimum return at maturity plus a participation in the rise of the underlying. However, if an upper barrier level is breached at any time during the investment period, then the return at maturity is reduced to a fixed amount.

This product varies from the traditional shark fin payoff, as it pays a positive return at maturity if the worse-performing underlying has not breached the 20% downside protection barrier or has risen by no more than 17% from its initial level. If the underling falls by less than 20%, it returns the value of the fall plus 20%. If the underlying is greater than its initial level, the product pays a fixed return of 17.25%. However, if the lesser performing underlying rises by more than 17% from its initial level, the investor automatically loses 64% of invested capital.

Investors in the product would take the view that the bull market has slowed down in the US, and that both the Russell 2000 and the S&P 500 will be neutral or deviate only slightly from their respective levels in either a positive or negative direction. This product is particularly risky in that it can incur a loss for investors in either a bull market or a bear market for the worst-performing underlying.

There have been 299 structured products issued in the US market with a shark fin payoff, of which 36 products are still live, most of these being certificates of deposit. Historically, HSBC has been the most active issuer, with 98 products. Following HSBC are Barclays, with 56 products, and JP Morgan, with 50. Other issuers of shark fin products include Deutsche Bank (21 products), Wells Fargo (18 products), SunTrust Bank (13 products) and Citi (10 products).

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