Unstructured reflections: Growth, Innovation, and the Future of the US Market

On Tuesday, November 12th, the structured products industry convened at the SPi US event, a day packed with insights, innovation, and strategic discussions. From team-building activities to forward-looking panels, the event underscored the sector’s continued growth and evolving dynamics. Here’s a look at the key takeaways.

The day began with an unconventional icebreaker: axe throwing. While it may seem an unusual activity for finance professionals, it fostered camaraderie and provided a break from spreadsheets and market analysis. In a fitting twist, JP Morgan emerged victorious in the competition, complementing their win of the coveted Derivatives House of the Year Award. BNP Paribas was a close runner-up, reinforcing the competitive but collegial spirit of the day.

Mathias Strasser presented a compelling demonstration of AI’s potential to enhance sales in structured products. By leveraging AI, sales teams can refine their pitches and respond to client needs with greater precision. Additionally, AI’s ability to streamline complaint handling offers a practical solution to a persistent challenge, ensuring faster and more tailored resolutions.

The presentation highlighted AI’s growing role in making structured products more accessible and manageable, particularly in a landscape where customization and client expectations continue to rise.

The discussion on technology reinforced its importance in driving industry efficiency. Straight-through processing remains a critical goal, promising to simplify the complex web of operations within structured products. However, legal hurdles—particularly the cautious approach of law firms—continue to slow progress. Despite these challenges, there was optimism that technological adoption will ultimately overcome these barriers, streamlining processes and reducing inefficiencies.

A buy-side panel discussion, which I had the privilege of moderating, delved into emerging trends and innovations shaping the industry. Topics included “catapult trades,” a cutting-edge approach to transaction execution, and the broader focus on growth opportunities amidst market volatility.

The panel also touched on how political dynamics, including those under the Trump administration, could influence trading strategies. Volatility, while challenging, was viewed as an avenue for creating new opportunities in structured products, underscoring the buy-side’s adaptability and forward-thinking approach.

The annuities segment brought attention to the role of quantitative investment strategies (QIS) and indexing in providing better client value. As interest rates and market conditions evolve, innovation is increasingly crucial in meeting client needs and sustaining growth. The discussion underscored the importance of finding fresh opportunities in a rapidly changing environment.

The closing session painted a positive picture of the structured products market. With 42% growth this year, the industry is on a strong trajectory, and SPi’s forecast predicts a further 16% increase by 2025, bringing the market close to $250 billion. Key drivers include autocalls, issuer calls, and scheduled maturities, all of which support robust market liquidity.

The consensus among participants was clear: despite impressive growth over the past few years, the industry is still in its early stages. There’s significant potential for further expansion as products evolve and client awareness grows.

Chart of the week: