The association wants structured products to have comprehensive coverage in the new Sustainable Finance Disclosure Regulation.

The European Structured Investment Products Association (Eusipa) has reported an 11% increase in turnover in investment and leverage products on reporting markets quarter-on-quarter. This figure is also down 10% year-on-year in the third quarter of 2023, bringing the total to €28 billion.

The activity we recorded this year across European trading venues suggests that structured products are back on the scene, responding to investor needs - Thomas Wulf 

“The activity we recorded this year across European trading venues suggests that structured products are back on the scene, responding to investor needs,” Thomas Wulf (pictured), secretary general, Eusipa, told SRP. “In particular, yield enhancement products can deliver huge added value to portfolios in the current equity markets, while capital-protected products can likewise be offered again given the healthier and somewhat more normal interest rate environment across OECD markets.”

According to Wulf, the main challenge now is to make the various cross-asset distribution channels and large parts of the retail audience aware of structured products again, and the role they can provide in investment strategies and portfolios.

“Part of this situation is rooted in the fact that due to the zero-interest rate environment post-2008 many investors, who knew structured products only for their capital protection, did move to other instruments,” he said. “However, in the current environment our payoff types can play out their advantages again, with yield enhancement products that cater for a profitable exposure to sideways-moving markets, being particularly attractive.”

Wulf noted that the turnover and open interest increases in the Q1-Q3 2023 reporting “clearly show that structured products are capitalising on their ability to offer interesting payoffs and meet the needs of investors with very different risk profiles”.

“Combining a coupon level with capital protection, either full or partial, has again become an interesting proposition, not seen until a year or so ago for the reasons I explained before,” he said.

“From my perspective, the main challenge for 2024 remains fitting structured products into the general investment landscape alongside, for example, funds and fixed income deposits. In that context, investment themes like ESG do of course continue to play a strong role, while inflation protection and commodities are visible trends in many markets too.”

The European association is working with members on its feedback on the ESG topic to the EU Commission’s current consultation on recasting the internal market’s framework for Sustainable Finance Disclosure Regulation (SFDR) which will be submitted tomorrow (Friday 15 December).

“[We are arguing] for an inclusion of structured products into a new SFDR framework that embeds and integrates both quantitative MIFID/IDD aspects as well as the asset distinctions already part of the current SFDR (such as article 8 and article 9).”

Trading activity

Eusipa reported yesterday that the European structured products listed market has €392 billion in open interest with turnover increasing across stock exchanges. 

Third-quarter turnover in investment products which represent 31% of total traded volume on European trading venues remained flat QoQ and up 10% YoY. Turnover of leverage products which include warrants, knock-out warrants and constant leverage certificates reached €19 billion in the period from July to September, representing 69% of total turnover.

Turnover in leverage products decreased by 17% YoY and increased by 19% from Q2 2023. 

At the end of September, Eusipa member trading venues were offering 426,859 investment products and 1,840,503 leverage products, an increase of two percent in the number of listed products on a quarterly basis and by 10% YoY.

Banks issued 1,496,606 new investment and leverage products in the third quarter of 2023, up five percent on the previous quarter and down 12% annually.

In total, 137,296 new investment products were launched, accounting for nine percent of new issues, with the 1,359,310 new leverage products representing 91% of the total. There was nine percent less investment products launched compared to Q2 2023, according to Eusipa. 

For Austria, Belgium, Germany, Switzerland, Luxembourg and Italy, the market volume of investment and leverage products issued as securities increased by two percent from the previous quarter to a total of €392 billion.

At the end of September, the market volume of investment products stood at €380 billion, up two percent QoQ, while the outstanding volume of leverage products totalled €12 billion representing a 29% increase on a year-on-year basis.

Click the link to read the full Eusipa Q3 2023 market report