SRP Nordics Wrap: Mifid 2 and Priips is a big revolution and regulation is a bloody lot of work

The balance of the European Central Bank (ECB) is now bigger than that of the US Federal Reserve, according to Elina Maria Lepomaki (pictured), politician and member of the Finance Committee of the Finnish Parliament in the keynote address at SRP Nordics 2017 on September 27 in Stockholm's Grand Hotel. In her analysis of the state of the European Capital Markets Union, Lepomäki referred to high-yield bonds using their original moniker of junk bonds.

But, as far as capital market developments in Europe, Lepomäki talked of "The Downloop", a feature that is, unsurprisingly, as gloomy as it sounds. The European Capital Markets Union has the potential to be at least part of the solution to Europe's financial woes, although perhaps Safe Bonds are not, she said. The Capital Markets Union is a solution with transparent rules, said Lepomäki.

Teresia Harri, SRP analyst for Sweden and Finland said there are 10% more listed products in the Nordics region this year, compared to the same time in 2016, and that 37 payoffs have been used in Sweden in 2017.

Nico Langedijk, regional director, Switzerland, Scandinavia and The Netherlands at Stoxx said the company would like to create an index that was easy to explain to regulators and investors, which comes as a relief. Hitendra Varsani, executive director at MSCI said Defenders have moved the market higher. Environment and Social Governance, or ESG, made its usual appearance on index panels: we should be encouraged, according to Christophe Mignard, head of UK equity pricing and solutions at Societe Generale.

Thibault Aronio de Ramblay, executive director, structured credit trading at JP Morgan said that credit has never been so popular, but then he would say that. Credit-linked notes in Asia are getting "more flavoured", according to Ramblay. He explained how you could have made money on Deutsche Bank and Volkswagen credit - the worm has turned. The ECB's Quantitative Easing has lowered the spreads on corporate bonds; and CLNs are not that different from cash bonds.

Illka Vakevainen, director, structured debt and investment at Taaleri Wealth Management noted that CLNs are a protective, defensive part of an investment portfolio, replacing capital protected products. Jorn Kjorsvik, chief executive officer and partner at Garantum Norge said there is no interest in CLNs in Norway. Fredrik Langley, founding partner at Strukturinvest, said CLNs are complex, but "horses are for courses". There is a large concentration problem and sooner or later you will pay the price, according to Langley. "We need newer products with similar risk and more protection," said Langley.

Vakevainen said regulation is a "bloody lot of work", but target market is good. Bigger banks could be the beneficiaries of all this regulation, but they are, luckily, lost in regulation, according to Vakevainen. Structured products are a small but rapidly growing market in Norway, said Kjorsvik. Vakevainen agreed with the panel that teaching is fundamental. "We used to be more present and vocal about individual product types," he said.

Claes Hemberg, saving economist at Avanza might buy a structured product one of these days.

The technology panel fizzed.

"Stupid people can be very rich," said Bodo Gauer, head of structured retail products for Austria and Germany at Credit Suisse.

As far as favourite products, SRP's global head of data, Tiago Fernandes' favourite is a South African rand-denominated product, "because I am young". Nicole Francia, head of PIP external network for Italy and public distribution for Italy and France at UniCredit, wants a stability note that contains tail risk, which is a matter of probability, which is very Italian. Gauer prefers a six-year trigger redeemable with a 70% barrier on the Eurostoxx 50, which he said is simple.

Priips is a presale regulation; Mifid 2 is supposed to cover the lifetime, said Emmanuel Doumas, senior policy officer, investment management at the European Securities and Markets Authority. Mifid also covers institutional investors, he said. Doumas tried to be "brief and exhaustive", noting that there have been, so far, 70 Q&As attached to these new laws for consumer protection, and more are due.

The manufacturer is responsible for the Key Information Document, unless it is modified, in which case, the modifier becomes the manufacturer. The Swedish structured products industry needs to write to Esma about Mops (multi-option products) - not a sentence I ever expected to write. "Mifid 2 and Priips is a big revolution," Doumas concluded.