Marex debuts cobalt-linked structured ‘cash-and-carry’ note

Marex Financial Products has issued its first structured ‘cash-and-carry’ note linked to cobalt.

We continue to observe strong demand for innovative payoffs, particularly those linked to diverse asset classes, such as commodities - Martin Kummer

This new structure was executed by Marex’s accessing physical cobalt in the spot market, hold it, and simultaneously sell cobalt futures on the Chicago Mercantile Exchange.

The derived value has been packaged into a structured investable product with a guaranteed undisclosed coupon more than double the risk-free rate over a fixed tenor.

“We continue to observe strong demand for innovative payoffs, particularly those linked to diverse asset classes, such as commodities including battery metals, such as nickel, lithium and cobalt,” Martin Kummer, executive director, Marex Financial Products, told SRP.

“Our strategic positioning in certain asset classes provides a competitive advantage, allowing us to leverage specific market dynamics for investor benefit.”

According to Kummer, since the start of the year, Marex has seen robust activity and is consistently gaining market share across all its operational markets.

“Despite periods of volatility, supportive market conditions have fostered growing volumes,” he said.

Kummer added that the structured note was manufactured to offer ‘a compelling return’ for the client, adding that Marex’s diversified capabilities across the firm, ‘showcasing the enhanced value we can deliver through our interconnected platform’, sets Marex apart in the industry.

^{Cobalt – 1-year spot price}

_{Source: Trading Economics}

Historically the cobalt futures market has traded in steep ‘contango’, where the futures price is significantly higher than both the spot price and the implied carry costs - storage, financing, and insurance costs.

This is because most cobalt consumers, such as electric vehicle (EV) makers, cannot easily hold the physical metal so they buy the physical metal to manufacture straight away and hedge their cobalt consumption price risk by holding long positions in cobalt futures.

Using the Marex’s ability to hold physical cobalt, Marex Financial Products has packaged a structured note that will extract value from the price difference between the spot and future in the form of a guaranteed coupon.

The UK-based non-banking issuer has manufactured several derivatives in a structured note format for institutional investors including the world’s first autocallable linked to bitcoin, as well as other coins such as ethereum, decentralized protocols, correlation products between crypto assets and cash and carry trades. ​

In the retail structured products market, Marex Financial Products has more than 600 live structured products with an estimated value of over US$3 billion across markets mostly in Italy but also in Switzerland, the Nordics, South Africa and Luxembourg, according to SRP data.

_{Image: Adobe Stock.}

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