BinckBank has reported a share of 53% of the Dutch market for leverage products turnover during the final quarter of 2014. Income from the Binck turbo range amounted to €300,000 in the fourth quarter of 2014, up from €200,000 the previous quarter. The Dutch online broker issued its first turbo in The Netherlands in July 2014. Since then more than 5,000 turbos have been issued on shares and indices.
By differentiating product features such as tight spreads and longer trading hours the Binck turbo has managed to establish itself as the turbo of choice amongst investors actively trading in turbos according to BinckBank. “After a positive start halfway through 2014, the Binck turbo has grown rapidly into a popular product among active investors,” said Vincent Germyns, acting chairman of the BinckBank executive board.
BinckBank also offers turbos from other providers on its open architecture platform. “BNP Paribas relinquishing turbo as a generic name – instigated by proceedings by BinckBank – has been an additional factor in the success,” according to a release form Binck. “This ensures clarity for private investors and benefits financial education for the entire product group.”
Seven providers are active in the Dutch market for leverage products including ABN Amro, Binck, BNP Paribas, Citi, Commerzbank, Goldman Sachs and ING.
Goldman took over the issuance of ABN Amro as of January 28, 2015, although for the moment the Dutch bank continues to issue turbos under its own name. BNP Paribas took over the market making activities of all Royal Bank of Scotland (RBS) investment products in the second half of September last year.
For its turbo product, BinckBank has entered into a cooperation agreement with UBS in which BinckBank fully hedges the market risk on the Binck turbo issued in each transaction by purchasing a turbo issued by UBS. The Binck turbos issued are classified as derivative instruments under international financial reporting standards (IFRS) and therefore recognised under the item financial liabilities held for trading. The hedge transaction effected with UBS is also classified as a derivative under IFRS and recognised under the item financial assets held for trading.
The measurement of the derivatives includes an adjustment for credit risk for both the financial assets and the financial liabilities in line with IFRS 13. As a result of this discount, there is a difference between the measurement of a turbo issued by Binck and the turbo purchased for the hedge. The effect of these credit and debit valuation adjustments (CVA and DVA) on these derivatives as at 31 December 2014 was not material, BinckBank said.
The turbo products recognised by BinckBank as the issuer and the related hedge positions are recognised on the basis of published prices in an active market. According to BinckBank these products are thus reported under financial assets and liabilities held for trading under measurement level 1.
Click here to read the BinckBank year report for 2014.
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