Exchange turnover in investment and leverage products increased across Europe in the fourth quarter of 2016, according to the European Structured Investment Products Association (Eusipa): exchange turnover stood at €28.2bn, an increase of 8% on the quarter, although a 3% decrease on the year. For the first time, additional trading data from Certix EuroTLX, the Italian exchange was included in this report.
Fourth-quarter turnover in investment products trading recorded on European exchanges amounted to €10.9bn, representing a 38.7% share of the market, according to Eusipa. Exchange turnover was up 11% on the previous quarter and 28% year on year. In leverage products (warrants, knock-out warrants, factor certificates), turnover was €17.3bn in the fourth quarter of 2016, which represents 61.3% of turnover volume and an increase of 7% on the quarter, but a 16% decrease on the year.
At the end of December, trading venues located in Eusipa member countries were offering 555,997 investment and 890,018 leverage products. The number of products listed rose by 5% from the previous quarter and 4% compared to the same period in 2015.
"The recent rally in equities following the US elections has driven most of the activity on the European exchanges," said Thomas Wulf (pictured), secretary general at Eusipa.
The US interest rates environment is also seen as positive, "because it could signal an increase in Eurozone rates towards the end of the year, which would definitely bolster activity across markets and attract more investors", according to Wulf. "Capital protection continues to be in high demand from retail investors across Europe, and their manufacturers have been waiting for an increase in rates to improve the pricing environment after a number of years in which they have struggled to provide meaningful upside," said Wulf.
The Eusipa quarterly report also shows that banks issued a total of 899,259 new investment and leverage products in the fourth quarter of last year. Compared to the period from July to September, new issuance rose by 7%, with an increase of 9% on the year. In total, 202,396 new investment products were launched, accounting for 22.5% of all new issues, but new leverage products dominated with 696,863 new issues that accounted for 77.5% of overall issuance.
At the end of the fourth quarter, the market volume of investment and leverage products in Austria, Belgium, Germany and Switzerland came in at €258.4bn - a 1% increase on the figure recorded for the previous quarter; while volume rose 9% from the fourth quarter of 2015. By year end, the market volume of investment products amounted to €221.3bn - an increase of 2% on the quarter, but a 2% fall on the year. The outstanding volume of leverage products declined by 7% from the previous quarter, to €37.1bn, but increased by 255% on the year.
"We remain positive the market will continue to grow, but the pace will depend on the European Central Bank's (ECB) decisions around interest rates," said Wulf. "This will be absolutely vital to bring more investors into the market as it will provide scope to structure products with appeal to investors."
The ECB may follow the US Federal Reserve's decision to increase rates, as long as there are no extreme market developments, and, in relation to the Priips RTS, the industry welcomes European regulators' move to finally remove past performance scenarios from the Kid, according to Wulf. "The asset management lobby has made regulators realise it could have misled investors and made products non-comparable," said Wulf. "That's good news. The new RTS also includes a new risk scenario, called 'stress scenario', which looks more of a regulatory safeguard. We are not arguing about its technical utility, but we are not convinced it will add value to the end investor."
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