Aggregate investment on European structured product exchanges has reached almost €257bn in assets under management on the back of a markedly increase in product issuance across markets, according to the latest quarterly report from the European Structured Investment Products Association (Eusipa) based on structured products listed activity from its members.
The tendency for European markets is to continue their generally positive tendencies in Q3 is most likely is rooted in the bullish global equity environment, according to Thomas Wulf (pictured), secretary general at the European trade body.
"A year-on-year comparison, which due to the seasonality of our business often hints at underlying trends, reveals an especially positive picture for Italy and Sweden, but also the Netherlands," said Wulf. "In the leverage segment in particular, the consistently growing number of products across Europe might suggest investors are confident to seek short-term investment opportunities within a certain volatility bandwidth."
Eusipa reported that exchange turnover in structured investment and leverage products on Europe's financial markets stood at€27.6bn at the end of September 2017. This represents a 6% increase year-on-year. Turnover however fell 5% from the second quarter of the year.
Third-quarter turnover in investment products trading on European exchanges amounted to €10.2bn, or 37% of the total. Exchange turnover was down 19% quarter-on-quarter, but up 4% on the same quarter of 2016.
Leverage product turnover including warrants, knock-out warrants, factor certificates, etc., totalled €17.4bn from July to September which corresponds to 63% of aggregate turnover. Leverage product turnover was up 6% on the second quarter of 2017, and 7% year-on-year.
At the end of September, exchanges located in Eusipa member countries were offering 565,533 investment products and 1,127,562 leverage products. The total listed products offering rose 7% quarter-on-quarter, and a significant 23% on the year.
Banks issued 944,879 new investment and leverage products in the third quarter of the year, up 8% on April-June 2017 and 13% year-on-year. In total, 160,426 new investment products were launched, accounting for 17% of all new issues; the 784,453 new leverage products accounted for 83% of aggregate new listings. At the end of the third quarter, in Austria, Belgium, Germany and Switzerland, the market volume of investment and leverage products recognised as securities came in at €256.6bn - a 1% drop on the previous quarter, though stable in comparison with the third quarter of 2016.
At the end of September, the market volume of investment products amounted to €222.1bn, a 1% decrease from the end of the prior quarter. On a year-on-year basis, however, market volume was up 3%. The outstanding volume of leverage products totalled €34.5bn at the end of September, down 4% from the previous quarter and down 13% on the same period of 2016.
In the short term, on a broader scale, the structured products business will certainly be impacted by decisions about interest rates and quantative easing (QE) phase-out management by both the European Central Bank and US Fed, which are highly likely to impact on equity and bond markets, according to Wulf.
"As for 2018, the regulatory impact of the numerous regulatory items coming into force in the European Union - most prominently Mifid 2/Mifir, Priips and EU benchmark regulation - will manifest itself across the 28 member states," said Wulf. "We don't expect major drawbacks, but most of these new arrangements have not been tested in practice and might thus call for further adjustments, potentially impacting the advisory and distribution channels in particular. Eusipa is in close contact with national and European regulators to keep any negative repercussions to a minimum."
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