BNP Paribas Structured Solutions Group in the Americas has a dual goal for 2014: integrate the assets and liabilities of Royal Bank of Scotland’s Retail Investor Products & Equity Derivatives (IP&ED) business and refocus its underlyings for structured notes and certificates of deposit.

The focus for the European bank this year will be on integration following yesterday’s agreement on the sale of certain assets and liabilities of RBS’s Structured Retail Investor Products & Equity Derivatives to BNP Paribas Global Equities and Commodity Derivatives (GECD).

That acquisition comes on the heels of BNP Paribas’s October 2013 acquisition of Crédit Agricole’s derivatives book of business, which followed the July 2012 acquisition of the equity derivatives business of Macquarie.

Third parties
Going forward, BNP Paribas expects to be busy partnering with independent firms for the creation of underlyings that the bank can use in the US for its retail structured notes as well as structured certificates of deposit which are sold through its affiliate Bank of the West.

Although BNP Paribas had, several years ago, developed a series of proprietary long/short and algorithmic indexes that it used for its structured products, the firm will rely on third-party firms going forward.

“We are now partnering with outside content providers for fundamental analysis, commodity and other underlying indexes,” Fabrice Hugon, head of equity derivative sales, Americas, structured solutions group, told SRP. “We will use our technology and a new breed of indexes using fundamental analysis to back up algorithms,” he said.

BNP Paribas expects to release several products with these newly developed underlyings each quarter. Three new partner firms are already lined up, Hugon said, although he declined to specify which ones. The next generation of structured products with third-party themed underlyings will actually be more vanilla type products, he added.

Hugon expanded his role some six months ago and added flow products to his span of control, in addition to overseeing the bank’s structured products business.

First voyage
BNPP’s first inroads into the world of non-proprietary underlyings began with the April 2012 rollout of a five-year principal protection note linked to the Morningstar Ultimate Stock-Pickers Volatility 7 Index. This past October, BNP Paribas debuted its first product linked to a basket of ten equity shares driving the US manufacturing industry, as selected from the 80-company universe of Richard Bernstein Industrial Renaissance companies.

BNP Paribas will also continue to focus energies on its SmartDerivatives electronic structured product platform which has been evolving.

“We are pretty bullish on the structured products business,” Hugon said. “We see a potential upside for market share in the US.”

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