The value of structured products in tumultuous markets has been proven during the recent coronavirus outbreak.
According to Charles Firth, managing director, Asia Pacific solutions, at Credit Suisse, on the whole, structured products volumes held up in January and February which was a surprise because going into the new year, there was a strong bullish consensus. That feeling changed very quickly when geopolitical issues began emerging (Iran, oil war) and stocks indices began to reverse.
“Momentum changed dramatically at the beginning of March in the region, but by that time correlation between China and the rest of the world had dropped significantly - and product volumes started to fall,” Firth told SRP. “There was an initial retreat from investors in structured products because markets were going down.
We’ve observed that many investors are keen to purchase structured products incorporating bullish views when markets are on an upward trajectory. When markets turn bearish, many such investors tend to prefer to keep the money in their pockets, rather than buying products where investors can profit from expressing bearish views.”
Over in the US, analysts in the SRP data team found that the implied volatility of Apple options spiked the most on 18 April 2019. On average April 2019 had an implied volatility of 167.95% compared to 167.1% in April 2020. Other months had considerably lower volatility. Conversely, the peak in implied volatility of the S&P 500 was recorded on 20 March 2020, at 208.69%.
The product innovation side of things has been very active of late.
BNP Paribas has rolled out a new secondary trading module within its SmartDerivatives platform. BNP Paribas has added new functionalities to its click-and-trade single issuer platform targeted at secondary market trading activity with enhancements on monitoring, customisation, analysis, trading and management.
“We had around 50,000 trades last year in the primary market and, in the secondary market, around 25,000 trades through [SmartDerivatives],” Geoffrey Rodrigue, global head of equity derivatives business transformation, told SRP.
Isbank is distributing a capital-protected structured fund in Turkey. The one-year product is linked to a basket comprising five shares from the pharmaceutical and biotechnology sector (Bayer, Bristol-Myers Squibb, Novartis, Roche, Pfizer). At maturity, it offers a minimum capital return of 104%, plus 75% in the rise of the basket, capped at an overall maximum return of 130%. An annual fee of maximum 2.19% applies.
The product adds to Federal Finance Gestion’s has added a new product to its ‘Autofocus’ range of 38 structured funds (fonds à formule) launched to date and totalling €2.7 billion in outstanding. Autofocus ESG Juillet 2020 is a nine-year autocallable structure linked to the Refinitiv Eurozone ESG Select Index. This is the first time this index is available in the structured products market, according to SRP data.
Three key elements differentiate the index including a very strong extra-financial requirement which excludes 75% of the companies of its initial universe by the sole application of environmental, social
“In line with our white-labelling strategy Leonteq enabled EFG to issue its first listed product in Italy,” said Marco Occhetti, managing director, CRO and team head at Leonteq Securities in London.
The company acts as a multi-issuer platform, manufacturing and selling Leonteq products, as well as those from EFG, Raiffeisen, Corner Bank, Standard Chartered and seven other partners. In its domestic market Switzerland, Leonteq issues products via private and public placement under the Swiss Issuance Programme, however, for public offering in Europe, the Swiss firm uses a European Issuance Programme.
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