Volatility of equity markets continued to decrease in June 2020 compared to the peak levels seen in March this year, despite a slight increase during the first half of June.
Both the VStoxx in Europe and Vix in the US stabilised around 30 after a at 40 peak in mid-June, when the Federal Reserve said it would hold interest rates steady at near-zero levels until at least 2022.
With this backdrop, Spectrum Markets has reported an increase in trading volume for the ninth consecutive month of full trading. In June, 35.3 million securitised derivatives were traded, a 2.3% increase over the previous month and another record.
‘Investors’ ability to forecast markets in June was limited, hence, uncertainty remained high,’ said Thibault Gobert (pictured), sales executive at Spectrum Markets. “On the other hand, we observed that investors assessed major unexpected swings to be unlikely, because markets were less volatile in June compared to March and April. Despite this decline in volatility, monthly trading volumes increased. This indicates that our growth is sustainable.’
The firm reported that the share of out-of-hours trading (ie 1730-0900) was 38.7% with indices taking the lion’s share of the trading volume of securitised derivatives (81.7% - May: 86.4%), FX (11.5% -May: 7.7%) and commodities (6.8% -May: 5.9%).
The most traded underlyings were Dax with a share of 21.5%, followed by the OMX with 21.0% and the S&P 500 with a share of 17.6%.
Quarterly figures are on a positive trend as well with 98 million securitised derivatives traded in Q2 2020, an increase of 63% on Q1 2020, according to Spectrum. The quarterly share of out-of-hours trading stabilised at 40% in Q2, vs 40.6% in Q1 this year.
Spectrum Markets is a pan-European marketplace where retail investors can invest in structured products via their brokers in Germany, France, Italy, Spain, Sweden, Norway, the Netherlands, Ireland, Finland, and Belgium.
UBS expands Etracs ETN range
UBS Investment Bank has expanded its range of Etrac tracker notes with the launch of the Etracs Midstream Energy Index ETN on NYSE Arca.
The new ETN is linked to the Alerian Midstream Energy Index, a broad-based composite of North American energy infrastructure companies who earn the majority of their cash flow from midstream activities involving energy commodities, such as gathering & processing, liquefaction, pipeline transportation, rail terminaling, and storage of energy commodities.
The Index is calculated by S&P Dow Jones Indices using a capped, float-adjusted, capitalisation weighted methodology. The Index was publicly disseminated starting from 25 June 2018, and has no live performance history prior to that date.
There are four other Alerian indices used in the structured products market including the Alerian MLP Index (20 products/US$ 4.1 billion); Alerian MLP Infrastructure PR Index (five products/US$2.1 billion); Alerian Natural Gas MLP Index (two products/US$12.9m) and Alerian MLP Infrastructure TR Index (two products/US$1.8m), according to SRP data.
Canada’s TrueMark enters structured outcome ETF space
TrueMark Investments has launched The TrueShares Structured Outcome (July) ETF (JULZ), the first fund in its structured outcome product suite.
JULZ is sub-advised by SpiderRock Advisors, a Chicago-based asset management firm specialising in option overlay strategies. The fund seeks to provide investors with structured outcome exposure to the S&P 500 Price Index with a built-in downside buffer and uncapped upside participation.
The fund seeks to provide investors with returns (before fees and expenses) that track the S&P 500 Price Index, while seeking to provide a buffer of eight to 12% on that index’s losses over the fund’s one-year investment period. In practice, the fund adviser will target the buffer at 10% of index declines over the investment period following the first day of trading while also allowing for uncapped upside participation.
The new product is the first of 12 monthly series in the True-Shares Structured Outcome ETF suite. Each fund will roll over at the end of a year-long term, at which point the downside buffer and upside participation reset based on current pricing for the options used by the strategy for each respective ETF. JULZ’s expense ratio is 0.79 per cent.
Zagreb bourse launches new Crobex10tr equity index
The Zagreb Stock Exchange (ZSE) will launch a new equity index - Crobex10tr, as of 15 July, it said in a statement on Friday.
The Crobex10tr will be a free float market capitalisation weighted total return index and will have the same composition as the existing blue-chip CROBEX10 index.
The weight of each component will be capped at 20%, with the index base level being set at 1,000.00 points as of 29 May 2020. The new index will be the 11th equity index for the ZSE and its second total return index.
The exchange said the new index is being introduced as part of its efforts to provide investors with a ‘reliable and publicly available investment performance benchmark for the Croatian stocks, and is suitable for issuing structured products or exchange-traded funds (ETFs)’, stated the ZSE.
The existing Crobex10 index includes the shares of 10 local companies, including manufacturer of plastic products for the automotive industry AD Plastik; the preferred shares of diversified conglomerate Adris Grupa; consumer goods distributor Atlantic Grupa; shipping company Atlantska Plovidba; telecommunications equipment manufacturers Ericsson Nikola Tesla and Hrvatski Telekom; confectionery maker Kras; telecommunications services provider Optima Telekom; food, beverage and drug producer Podravka, and tourism company Valamar Riviera.
Solactive deploys ‘work from home’ index
US ETF provider Direxion has released its new Work From Home ETF (WFH) using the Solactive Remote Work Index as its underlying.
The Solactive Remote Work Index tracks businesses providing infrastructure in the transition towards remote work. To obtain the index composition, Solactive identified four individual technological fields including cloud technology; cybersecurity; online project and document management; and remote communications. The index provider used its proprietary natural language processing software ARTIS to obtain the company composition
The Algorithmic Theme Identification System identifies the thematic exposure of a broad set of companies by analysing more than 500,000 text documents related to them and determining a company’s degree of thematic relevance based on theme-related keywords given to the algorithm as an input. Solactive picked the top 10 companies by thematic relevance of each one of the four technological fields – after applying liquidity filters. The 40 components of the Solactive Remote Work Index are equally weighted.
The Direxion Work From Home ETF went live on the 25 June on NYSE.
HKEx shortens listing cycle for structured products
Hong Kong Exchanges and Clearing Limited (HKEX) will shorten the listing cycle of structured products to three trading days from five trading days.
Issuers will be able to list their structured products, such as derivative warrants (DW), callable bull/ bear contracts (CBBC) and inline warrants (IW), on the cash market for trading on the third trading day after their submission of term sheets.
The exchange said the new listing cycle would enhance market efficiency on product issuance, and help increase product choices for investors. Products launched on or after 13 July 2020 will use the new listing cycle.
The shorter cycle will apply to all listed structured products on all eligible underlying assets. The publication timeline of supplemental listing documents will remain unchanged, and investors can have access to the documents via HKEXnews on the day following launch.
SIMON expands annuity platform, streamlines user experience
US based multi-dealer platform, SIMON Markets, will integrate with on-demand software supplier, EbixExchange’s AnnuityNet - a popular order-entry solution for annuity transactions.
The partnership aims to simplify the annuity sales experience by connecting wealth management advisers on SIMON’s cloud-based annuity platform with insurance carrier selections. AnnuityNet was designed to help enhance the adviser experience by optimising efficiency and decreasing compliance risk, and ensures that all annuity related transactions are fully automated, including the calculations of suitability scores and transaction routing through compliance workflows.
Currently, AnnuityNet features more than 1,600 annuity products from almost 40 insurance carriers and supports fixed, variable, immediate and equity indexed annuities. The software solution processes over 25,000 annuity transactions that reflect over US$2 billion in premiums.
Ebix aims at addressing ‘business adversities’ on two fronts that include improving the representative’s overall experience via upgraded ergonomics as well as optimising the distributor’s experience by ensuring regulatory compliance. In addition to automatic compliance reports built into AnnuityNet, distributors also have access to Ebix’s integrated suitability program which provides an in-depth review of their entire compliance environment.
In recent months, SIMON has cultivated a prominent relationship with broker-dealer Raymond James Financial to bring its end-to-end digital platform for annuities to the latter’s 8,000+adviser force. The US structured products platform expanded its digital platform in December 2019 with an InsurTech module targeted at financial professionals to navigate the indexed annuities market.
Additional reporting Lavanya Nair.