SRP Digest: Allez, allez, allez

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SRP’s own Nikolay Nikolov reviewed the performance of structured products in the French market in the first nine months of 2024 during which an estimated US$44 billion was invested in 4,500 products.

Among interest-linked products, callable fixed rate notes showed strong traction, rising from 21% in Q1 2023 to a peak of 36% in Q1 2024

The conclusion: products linked to interest rates have significantly increased their market share over the past few years: from zero percent in 2019 to 32% in 2024 YTD.

Among interest-linked products, callable fixed rate notes showed strong traction, rising from 21% in Q1 2023 to a peak of 36% in Q1 2024, although their market share dropped slightly to 26% in Q3 2024.

At the same time, structures linked to a classic benchmark index, previously dominant with 44% market share in 2019, have steadily declined to 10% in 2024 YTD.

Australia’s Stropro is preparing to raise between AU$5 million to AU$10 million (US$3.3 million to US$6.6 million) for its Series A financing round as it looks to expand its technology platform globally.

“The use of funds will be to fund the commercialisation of the firm’s distribution partnerships with global brokers and asset managers and technology integrations,” Stropro CIO Ben Streater told SRP.?

In people news, Société Générale Securities Japan hired Guillaume Beaurain as the new head of structuring for products and solutions that covers across fixed income and equities derivatives under the global markets division in Tokyo.

Beaurain – who joined from Morgan Stanley, where he had been the head of Japan equity financial engineering since June 2022 – is succeeding Akiko Kuma, who joined J.P. Morgan this month as managing director, head of Japan equity derivatives structuring in Tokyo, after a 22-year-tenure with the French bank.

Morgan Stanley, meanwhile, appointed Thabata Maly as executive director, structured note sales for the Americas following a one-year stint at BNP Paribas where she was director, head of broker-dealer and registered investment advisor (RIA) sales for the structured derivatives group.

Based in New York, Maly will assume part of the responsibility from Larry Wilson who left the US bank for startup Arrow Investment Analytics, a structured product valuation and analysis provider.

Morgan Stanley Finance LLC (MS Finance) whose principal activity is the issuance of structured notes for its parent company Morgan Stanley posted a trading loss of US$1 billion for the first half of the year , according to the company’s 2024 interim report.

Another vehicle of the US bank, Morgan Stanley BV, posted comprehensive income of US$401,000 for H1 2024 , down 37.8% year-on-year (YoY) after it recognised a €7.9m loss of issued structured notes in fair value in the semester.

More product news came from Switzerland, where Leonteq Securities and Zurich-based private bank Bergos launched a cooperation for the manufacturing and distribution of structured products under a standardised white-labelling issuance model established by Leonteq while the Luxembourg domiciled Forte Pharma Fund , which invests in structured notes linked to underlyings from the global pharmaceutical and biotechnology sectors, ended Q3 with an 11.2% appreciation.

“Favourable performance of the underlying stocks in structured products triggered autocall events for several notes which, together with paid coupons, accounted for over 20% of the fund,” said Dmitry Reykhart, chairman of the board at Forte Pharma Fund.

Pharmaceuticals were also a theme in Poland, where Goldman Sachs International collaborated with Bank Pekao for the launch of Quanto PLN worst-of certificates on the shares of Merck & Co and Pfizer .

There were market reviews for Germany , UK , and Taiwan . In the former, capital protected products made up 26.8% of total sales volume in Q3 2024, down from a high of 41.24% earlier in the year, as the European Central Bank lowered rates twice during the period.

Santander was the number one issuer in the UK for the first time since May in a month which saw autocalls increase their market share to 85% (August: 78%) while in Taiwan the most used underlying assets for equity-linked structured notes in Q3 included AMD, Taiwan Semiconductor and Arm Holdings.

On the regulatory front, SRP reported on the Monetary Authority of Singapore, which is looking to adjust the risk-based capital framework for insurers in the country , including revising the capital treatment of structured products.

The proposal aims to make sure the risk charge more accurately reflects the underlying risk levels of the structured products