In the first quarter of 2017, turnover of Swiss structured products reached CHF69.4bn (€64.9bn) which represents a 9.1% increase relative to the previous year, according to the latest report from the Swiss Structured Products Association (SSPA) including listed and non-listed structured products created in or for Switzerland that are sold nationally as well as internationally.

According to the report, year-on-year total quarterly turnover was 9.1% above the figure for Q1 2016. Yield-optimisation products once again accounted for the lion's share at 57% while participation products now constitute the second largest portion at 16%, after a relative increase of 43% compared to Q1 2016. In addition, leveraged products made up 15% of the total and capital protection products 10%.

According to Jurg Stahelin (pictured), managing director at the SSPA, Q1 2017 has seen a significant increase of demand for structured products, especially in the first two months. "Investors obviously appreciate the investment opportunities offered by structured products in this challenging market environment," said Stahelin. "Especially yield enhancement products seem to be highly demanded by investors to generate some return in the low interest environment."

Compared to Q1 2016, the capital protection portion grew by approximately 36%, which also represents an increase of 48% compared to Q4 2016. Currencies and equities remain the most frequently used underlying assets. Equity products represented the largest portion of total turnover, growing from 45% to 52% since Q1 2016. Compared to the previous year, the share of currency-based/foreign exchange products decreased from 41% to 34%, while the share of fixed income products grew by 21% compared to Q1 2016 to now 10%.

According to the SSPA report, non-listed products constituted about 71% of the turnover in Q1 2017 which corresponds to a slight decline of the share of non-listed products compared to Q1 2016 (previous year: 72%).

Dominique Boehler, head of derivatives & ETF public distribution Switzerland at Commerzbank, said that on the leverage products segment which is the main focus for the German bank in the country's retail market, there appears to be a shift from on exchange to off exchange offering.

"That this is definitely a sign of increased connectivity in the market thanks to new technical means available today which were not [accessible] in the past," said Boehler. "As long as the potential fragmentation of the market can be kept within reasonable boundaries, this will result in a cost advantage for customers and thus improve overall performance of structured products. We believe this kind of development will further accompany us in the future."

The SSPA report also shows that around two-thirds of turnover (62%) were generated in the primary market, while transactions were almost exclusively executed on the secondary market (nearly 95%). From a currency perspective, USD, EUR and CHF served as the main currencies for Swiss structured products, comprising 88% of turnover: USD is the predominant currency in Q1 2017 with a share of 40% (prior year: 35%). The shares of EUR and CHF decreased to 29% and 19%, respectively.

According to Stahelin, although it is very difficult to provide a forecast for the whole of 2017 the figures of the first quarter suggest that the market is in good form and that investors are discovering the benefits of structured products.

"In 2017, the SSPA will continue playing an active role in the ongoing regulatory debate, and focus on further implementing our app Structured Products Portfolio Optimizer to promote the proper use of structured products in a portfolio context," said Stahelin. "Additionally, we intend to position structured products more as a solution provider and investment alternative for pension funds. We believe that structured products should be assessed and discussed as possible investment opportunity for pension funds in their search for yield."

The Swiss Six Exchange reported earlier this month that on-exchange trading turnover reached a total of CHF143.1bn in March, which marked an increase of 32.2% on the previous month. Trading turnover was also up on a year-on-year basis. Over the first three months of 2017, turnover on the trading platforms of Six Swiss Exchange totalled CHF371.7bn, equating to growth of 6.0% versus the same period last year.

According to the Swiss exchange, the month-on-month growth in March was reflected across all segments. In structured products and warrants, turnover was up 18.4% to CHF1.5bn while the volume of trades rose by 13.1% to 55,812. The number of transactions was also up by 17.8% in the equities including funds and ETPs segment, in which 4,485,017 trades were conducted, with trading turnover up by 29.9% to CHF110.9bn. In ETFs, trading turnover advanced 44.7% to CHF12.8bn, while the number of trades climbed by 17.7% to 101,285.

In March, 3,192 new structured products and warrants (+16.3%) were admitted to trading, and 8,904 new structured products and warrants (-10.5%) have been listed since the start of the year.

SRP data shows that year to date Citi has been the most active provider with over 37,000 products marketed although sales remain low at CHF37m. Sales volumes continue to be dominated by domestic banks with Vontobel (CHF876m/1,159 products) leading the pack followed by Leonteq (CHF870m/415 products), UBS (CHF451m/415 products), Credit Suisse (CHF376m/179 products), Raffeissen (CHF334/159 products), Julius Baer (CHF334m/153 products) and Zuercher Kantonalbank (CHF252m/120 products).

From an underlying perspective, baskets of domestic blue chips (Nestle, Novartis and Roche) continued to drive most sales (CHF220m) followed by index baskets (CHF195m). Products linked to baskets of commodities sold CHF27m in Q1 2017.

At a firm level, Zuercher Kantonalbank and Avaloq expanded their collaboration around the application of the Avaloq Banking Suite, which has been used by the Swiss bank for over ten years. The largest cantonal bank and Switzerland's fourth largest bank has licensed additional functional modules of the Avaloq Banking Suite. Implementation will begin in the second quarter of 2017.

Zuercher Kantonalbank will continue to use the Avaloq Banking Suite for processing its securities transactions and for fund administration and will also deploy the Avaloq Portfolio Management module and the Avaloq Wealth Advisory module for investment advisory services for third parties.

SSPA members Barclays Capital, Banque Cantonale Vaudoise, Credit Suisse, Commerzbank, Goldman Sachs, Julius Baer, Leonteq, Notenstein La Roche, UBS, Vontobel as well as Zurich Cantonal Bank took part in the survey for the first quarter of 2017. They represent a majority of the Swiss market.

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