New measures implemented by the Market in Financial Instruments Directive (Mifid 2), such as better education for investors, increased transparency, and increased disclosures are very welcome, but there is still a fair amount of room for better alignment across methodologies, better understanding and better interpretation, according to panelists during the In Conversation with Leading Manufacturers discussion at the 15th Annual Europe Structured Products & Derivatives conference at the Etc.venues, County Hall, in London on February 8.

"Mifid is a very positive evolution for the structured products industry," said Didier Imbert, managing director, head of cross asset public distribution Europe ex France, Societe Generale. "Everything that allows to compare products easily, to provide further transparency  and better information to retail clients can only be a positive for our industry," said Imbert who admitted that the financial world is still in a transition period.

Asra Abdulaziz (pictured), head of sales Emea, equity derivatives, Natixis, agreed that things are going in the right direction. "We have to bear in mind that always when there is a change it can be a bit blurry," she said. "There are a lot of different regulators, a lot of different banks with different philosophies, and regulators themselves are not always saying the same thing," said Abdulaziz who noted that a recent statement from the FCA about the Key Information Document (Kid) had not necessarily been accepted by some other local regulators. "The FCA said that manufacturers could add extra information and simulations in the Kid if they felt that the information in this document was misleading," said Abdulaziz.

There have been a fair amount of conversions taking place both from a legal and technical point of view, according to Arnaud Jobert, managing director, global head investable index structuring, JP Morgan. "There are still some nuances and differences, cost and charges definitely being one of them and also think there could still be some cultural and cross border barriers," said Jobert.

According to Abdulaziz, the idea of Mifid and Priips is more about harmonisation. "It is about making sure that any individual, non-professional, wherever he is in Europe, when he looks at a product, he would understand it and understand exactly the risks he is taking when he invests in that product.

"What is surprising, and it is interesting to see what regulators will do, is that some products are authorised in some countries and not in others," said Abdulaziz. "CLNs (credit-linked notes) for example are ok in Germany and not in Italy. Well if you have a Kid that discloses the same information in these two countries why would you not be allowed to invest in that product?" asked Abdulaziz.  "We could use the same example talking about the Belgian market where there is a very strict moratorium in place to protect retail investors. Now we have Kids what will we do? Will the moratorium remain?"

Whenever there is a new regulation there is a challenge and an opportunity, according to Jorge Masalles, managing director, head of institutional & private bank sales, Commerzbank. "The challenges that we have had so far are mainly on the creation of the Kid and the distribution of the Kid, which is a technological challenge," said Masalles. To produce Kids, to make them available and to make sure that all that all the different firms in the chain that have to deliver the product are up to speed and are able to deliver the thousands upon thousands of Kids on a daily basis was the biggest problem on January 1, said Masalles. "Those challenges are already disappearing quite quickly, it's still a challenge but we are halfway there."

More critical is the legal risk that manufacturers and distributors have, according to Masalles. "Some of [the scenarios in] the Kids are producing results which do not make sense. That creates a legal risk for anyone who is involved in this industry. However, I think it is a matter of a year, or even less, that the industry will get together and will start working on what should be our self-regulation, imposed on some of the topics that the RTS wants us to do."

We work very closely in each country with the local structured products association, said Imbert. "I think we learned a lot throughout the last two years by working more together. What we don't master however is the timing of the response from the regulator. But there is a strong lobby."

The problem with the Kid is not having to provide them, but, according to Abdulaziz, "the fact that we know that in some cases they are misleading and we are still forced to produce them in a certain way". "If you take the Eurostoxx, the last five-years it has been going up and up and up. In the history of structured products, and in all the different brochures that we have been producing in marketing, we kept writing everywhere that historical simulations do not guarantee a future return, and here we have a regulator that is telling us this is how it should be done."

Masalles said that the German market is an example others should follow. "There is a real self-imposed code of conduct among manufacturers in Germany," he said. "The regulation is Pan-European, which is good news, but at the same time it is more challenging to get the French, the Germans, the British, the Spanish, the Italians, together in a round table, that is a bit trickier."

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