SRP Digest: pulling back

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Goldman and Credit Suisse make radical changes to their operations as new products reach the market.

We start the week's roundup with Goldman Sachs' decision to scale back its retail business before moving to Credit Suisse's ‘radical’ restructuring plans and latest partnerships in the industry.?

The US investment bank has announced a revamp of its operating segments which will see a reduction from four divisions to three – Asset & Wealth Management, Global Banking & Markets and Platform Solutions. Goldman is bringing asset and wealth management together again after separating them in 2019.

The bank is also pulling back from retail banking and has announced that the technology underpinning its consumer finance unit Marcus will now be embedded into the unified asset and wealth management division ‘given the growing convergence of wealth and consumer banking’.

We are excited about the role that asset and wealth management will play in our forward growth plans - David Solomon, CEO

In Switzerland, Credit Suisse has also unveiled a restructuring plan, which leaves structured products unscathed. The bank's business model will see a radical revamp of its investment banking activities as well as an ‘accelerated cost transformation’, and the strengthening and reallocation of capital to build upon its wealth management and Swiss Bank franchises, and its product capabilities in asset management and markets.

The bank remains committed to its equity derivatives and structured products activities which will leverage the connection with the Markets business and will continue to be housed under its Investor Products franchise, SRP has learned. The ‘radical restructuring’ of the investment bank over the next three years is aimed at significantly reducing Risk Weighted Assets (RWAs) and will position CS First Boston as an independent capital markets and advisory bank.

In the US, Cboe Global Markets and S&P Dow Jones Indices (S&P DJI) will collaborate to develop the Cboe S&P 500 Dispersion Index, which marks the first strategy developed by Cboe’s new tradable products and services division, Cboe Labs.

The new volatility-related index is designed to provide representation of implied dispersion for the S&P 500 Index and aims to help investors better understand portfolio diversification benefits and implement dispersion trading strategies.

Meanwhile, MSCI has launched the MSCI Climate Action Indexes, a new family of indexes designed for investors seeking to drive the low carbon transition in the real economy by investing in companies making progress towards emission reduction targets.

The new suite of equity climate indexes will consist of companies that are taking measurable steps to tackle their emissions, selecting from across the economy using the 11 Global Industry Classification Standard (GICS) sectors.

Also in the index space, Intercontinental Exchange (ICE) plans to launch a FTSE 100 Index Total Return Future (TRF) on 14 November 2022, subject to regulatory approval.

The ICE FTSE 100 Index TRF seeks to replicate the theoretical returns on a FTSE 100 index total return swap in a more cost-efficient and transparent way, allowing participants to manage or gain exposure to the FTSE 100 index, including its market and dividend risk, without owning the cash underlying.

In terms of people moves, Citigroup hired Stuart Kaiser to lead the firm’s US equity trading strategy, according to sources. He will focus on the interaction between derivatives, equity markets and macroeconomics, and assume the responsibilities of Alex Altmann, who joined Millennium Partners earlier this year.

Kaiser joins from UBS where he spent the last five years - most recently as head of derivatives research in UBS’ macro strategy team. Prior to that he was head of equity derivatives research.

In South Korea where autocallables are dominated, the outstanding balance of equity-linked securities (ELS) increased for the fifth consecutive quarter, reaching KRW45.2 trillion (US$31.6 billion) at the end of Q3 2022, despite a slowdown in issuance across the South Korean market, according to a recent report from the Korea Securities Depository (KSD).

In the meantime, the outstanding volume of equity-linked bonds (ELBs) remained stable at KRW23.5 trillion. The combined ELS/ELB outstanding amount reached KRW68.7 trillion, down 29.4% YoY.

On the crypto market, Yield App, a digital wealth platform offering clients a fixed return on their crypto assets, announced in its Q3 2022 report that it's building out a structured products offering, which will provide its customers opportunities to further enhance the returns on their holdings. According to its chief investment officer Lucas Kiely, the company will be adding structured funds to its product range, as well as other products that provide a structured type of return, be it volatility or correlation type products.