Societe Generale is listing 10 daily leverage certificates (DLCs) on the Singapore Exchange (SGX), making it the first bank to issue exchange-traded products offering fixed daily leveraged exposure to an underlying asset, allowing sophisticated investors to trade and capture enhanced returns, both up and down, on short-term market moves.

"DLCs have less complex product features compared to warrants, CBBCs (callable bull/bear certificates) and options, which may suit a larger audience," said Luuk Strijers (pictured), director, head of products at SGX. "Furthermore, Asian investors have shown a strong appetite for leveraged products, as demonstrated by the local structured warrants market, the success of CfDs (contracts for difference) and leveraged and inverse funds in the region."

The DLCs will be the first leveraged products of their kind in Asia, offering investors fixed daily leveraged exposure to a number of Asian indices, including the MSCI Singapore, Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI). The French bank's DLCs will be listed and tradeable on the SGX on July 17, 2017.

Keith Chan, head of cross asset listed distribution at Societe Generale’s Global Markets in Asia Pacific, said that since its emergence in 2012, DLCs have become the fastest growing listed products by volume in Europe. ‘We see strong appetite for leveraged products from Asian investors,’ said Chan. ‘Our recognised leadership in equity derivatives and our solid experience with DLCs in Europe make us an ideal partner with SGX to introduce this new product to Singapore.’

Since their emergence in 2012, DLCs have become the fastest growing listed products by volume in Europe, according to Keith Chan, head of cross asset listed distribution at SG global markets in Asia Pacific. 'We see strong appetite for leveraged products from Asian investors,' said Chan, in a release.

There are over 4.5 million live leverage and flow products available for trading across European exchanges, according to SRP data. The most active markets for leverage products in Europe are Germany (4.2 million), Austria (2.4 million), Switzerland (784,000), France (115,000), and The Netherlands (96,000).

"Daily leverage certificates have shown the largest growth, in terms of traded value, compared to other listed structured products in Europe since 2012," said Strijers. DLCs come without implied price volatility, time decay and margin calls, features that affect the pricing of options, and are also known in Europe as constant leveraged products or factor certificates.

The first batch of DLCs issued will consist of 10 products, including long and short versions offering fixed leverage of three or five times the daily returns of the three different underlying indices, which are, respectively, the net total return version for long and the total return version for short DLCs. "The transparency and simplicity of DLCs on SGX will offer a fresh new trading option for investors to capture short-term market moves," said Strijers.

The products are designed to be traded predominantly on an intra-day basis, offering the opportunity to trade in rising and falling markets. Due to the daily compounding effect, the products are not designed to be held long-term, while investors are required to be specified investment products qualified before they can invest, according to SG.

SG will provide real-time pricing on the SGX, enabling investors to buy and sell at any time during SGX market hours, similar to a share, through a securities trading account with their brokers.

SG has marketed close to 700 DLC products across nine countries in Europe covering multiple asset classes, including major indices, single stocks, foreign exchanges and commodities. In Hong Kong, the bank has developed its warrant franchise since 1996, although its presence in a Singapore's structured retail products market, which was dominated by Vontobel, UOB and Standard Chartered in 2016, is marginal. SG remains the top provider of structured products in Hong Kong, with over 1,000 products issued and an estimated volume of US$1.1bn in 2016, followed by Citi, HSBC, DBS and Bank of East Asia. This year, the French bank has issued 968 products worth US$451m in Hong Kong.

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