Societe Generale has expanded its offering in the Italian structured products market with a new range of structured certificates on Borsa Italiana (SeDeX). The new 62 certificates make part of the 'corridor' range which is aimed at investors neither -bullish nor bearish, seeking exposure to a non-directional market.

The 'corridor' range is the first of its kind in the Italian market as it doesn't play a directional market and it is targeted at traders seeking to play side-ways markets, according to Marcello Chelli, co-head of cross asset distribution (Italy), Société Générale. "The payoff is also very simple and is set up by and upper and lower barriers - at maturity each Corridor certificate will pay 10 € if the underlying did not touch a barrier, otherwise the investor will lose all the capital invested," said Chelli. "Investors are using these new certificates to take positions on trends in the market in a similar way investors use leverage products but is used by those without a bullish or bearish view of the market."

The Societe Generale corridor certificates will reimburse a fixed amount of €10 if the underlying asset remains within the 'corridor' delimited by the upper barrier and the lower barrier until maturity. If the barriers are reached or exceeded at any time during the investment term the product will redeem early without paying any return.

For this range, the bank has deployed a "diversified number of asset classes" including equities, FX, and commodities via underlyings that are popular with Italian investors, and investors can also choose from three investment terms (three, six, and nine months), according to Chelli.

"So far, the short-term maturity option is the most favoured by Italian investors which suggests the risk profile of investors is more conservative as they feel more comfortable with a short-term forecast," said Chelli, adding that investors are using these certificates in different ways. "Some investors that have a strong view on the market are using them as a buy-and-hold investment but others are using them in a more opportunistic way as there is a mark to market every day and products can be traded on the secondary market at any time during the term. Some investors are also using them as speculative trades by buying into the products when the price is very close to one of the barriers. This provides a low entry point and a higher potential return but it also there is also a higher risk to the invested capital that could be totally lost. We expected people to invest small amounts in this kind of product and to diversify their exposures with different strategies."

The appeal for 'advanced' retail investors - the Mifid 2 target market for corridors, is that the new range provides a new, but risky, instrument to manage lateral markets for which leverage products are not appropriate or efficient, according to Chelli. "We are targeting investors with a set of underlyings that are very popular with other structures, and we will increase this pool of assets," said Chelli. "This kind of structure lends itself to take positions on foreign markets and other assets beyond the domestic market, and we are planning to expand it over time. We are seeking to build a diversified offering with single stocks, indices and commodities."

Chelli also noted that this kind of strategy can work with any asset because the barriers are set depending on the volatility of that underlying asset. "The more volatility the further apart the upper/lower barrier, and vice versa," he said.

The launch follows a successful year for the French bank in the Italy's listed structured products market which became the number one issuer in the securitised products market with 40% market share (source: Borsa Italiana, year 2017).

"We have established ourselves in the Italian market with a competitive offering in the fixed leverage certificates segment where we have 57% market share (source: Borsa Italiana, year 2017). which makes a top player in the Italian listed market," said Chelli. "This market is dominated by trading instruments and a smaller portion of investment products. In the investment side there is increasing demand for fixed coupons and some kind of protection, and our Cash Collect Protection Plus+ range allows us to respond to that demand with a set of products that provide regular coupons and enhanced conditional protection."

In addition to strengthening its position in the market Societe Generale also introduced new products to respond to demand from investors which has also helped to increase its visibility, according to Chelli. "The Italian market is very competitive and quite expensive in terms of exchange fees, depositary fees, etc.," said Chelli. "Societe Generale has invested significantly to increase its footprint in the Italian market and we see opportunities with Mifid 2 coming into effect because the new set up will push for fee-only advisory and this will open up opportunities around shelving products aimed at advisors which was not possible within the previous framework. The new set up will enable us to sell products outside traditional networks."

Going forward Societe Generale is looking to capitalise on the new list of approved independent advisors that the Consob will make public in October 2018 which "will continue to shape the market".

It is expected this will be a turning point in the Italian market as product providers will be able to tap into a new distribution channel to expand their offering beyond execution-only, according to Chelli. "We think this will result in an increase in sales of products with conditional protection, and in an increase in education among sophisticated retail investors," said Chelli, adding that a number of banks have already moved to set up their specialist advisory desks. "Investors will also need to get used to the idea of paying for advice as opposed to having the fees embedded in the products. We hope the two models will coexist and help the market to grow further after a transition period."

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