The London Stock Exchange (LSE) has become a leading listing venue for structured products in Europe. In 2017, 650 structured products were admitted to London Stock Exchange markets, and the volume (over US$7bn equivalent), almost doubled 2016's 363 products and $3.9bn. SRP spoke to Elena Chimonides (pictured), fixed-income product specialist at the LSE, about the exchange's attempts to become the trading hub of choice for structured products providers.

Structured products have traditionally had a marginal presence on the exchange, but this is changing.

Structured products is very important to the LSE, with a massive jump in trading activity and volumes over the last year. There are many reasons, including the low interest rate environment, which is pushing investors to look for yield. Our goal is to provide a trading hub: we are product agnostic and in favour of any products that add diversity to a portfolio.

What makes the LSE an attractive venue for the trading of structured products?
We aim to be the listing venue of choice for all issuers and products, and we have done a lot of work over the last 18 months to provide a robust platform for structured products and cater for all products, and have seen issuance become increasingly varied and global, with more emerging markets issuers choosing London for their debut issuances.


We have a well-established pool of structured products issuers, which is only increasing. Investec's launch is testimony to our appeal as a listing venue for a variety of issuers and products. With the addition of the International Securities Market, London now offers UK and international fixed-income issuers a tailored listing solution with a customer centric and efficient admissions process, and enhanced flexibility of disclosure. We are attracting new issuance programmes because we offer the capabilities and infrastructure to trade structured products, and offer a reputable and well-recognised platform.

What's the value of issuing on exchange versus over the counter?
Typically tax considerations or exemptions and investor mandates, but there are also specific requirement for liquidity and price transparency via a secondary market. In addition to this, on exchange trading provides an element of transparency and confidence to investors.

Can the exchange capitalise on the regulatory shift towards transparency and disclosure?
The regulatory shift towards transparency is not a burden for us as an infrastructure operator. We have launched ISM specifically through which issuers will be able to meet their disclosure obligations in an efficient way. This is aimed at professional investors only and, therefore, uses a rulebook specifically tailored to their needs. It offers enhanced flexibility not available on other European MTF markets, such as future incorporation by reference of financial information and a simplified disclosure approach for existing issuers, while still keeping in mind the highest level of investor protection and information provision.

Exchanges are important for the provision of connectivity between investors and product providers. Do you have plans to increase trading in structured products? 
We spend a lot of time promoting our issuers and promoting engagement between issuers and investors when they come to market.

It also depends on product type. Traditionally, in the UK, most plain vanilla bonds are traded OTC, but the trading data also goes through the LSE. This provides extra transparency, and we also provide order books which capture all the activity.

Overall, investors use the exchange on a product-to-product, and country-to-country basis. In Italy, for instance, retail investor participation in the financial markets is greater than in the UK. We have developed a number of initiatives aimed at retail investors, to educate them about the products available and how they can access them on exchange.

What is the appeal of the ISM for structured products participants?
The quality of the disclosure on our ISM platform and the efficiency when transacting are two strong elements of our offering, coupled with other benefits that the LSE can offer in terms of profile raising events and various ancillary services. We also talk to structured products issuers to make them aware of what we offer and how they can benefit from listing their products on exchange.

Chimonides also stressed the combination of client relationships and product capabilities as a driver of innovation around specific products types, such as structured products, but also in areas such as environmental, social and governance. Currently, over $600bn of ETF assets under management track FTSE Russell indexes. In the structured products market, there were 630 products linked solely to the Russell 2000 index worth $2.6bn in 2017, while the FTSE 100 index was featured as a standalone underlying in over 330 products worth $2bn.

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