The spike in volatility earlier this year has boosted trading activity in Switzerland as suggested by the 82% increase in leveraged products turnover year on year during the second quarter of 2018, according to a new report by the Swiss Structured Products Association (SSPA).
The overall turnover in the second quarter came in at CHF83 billion (€72.1bn), up 17% compared to the same period of 2017. The turnover of the leveraged products segment accounted for nearly a quarter of the total amount, becoming the second-largest product group. Although the ratio dropped somehow, yield enhancement products enjoyed the highest demand in the market with its turnover making up 48% of the total. Total turnover of yield enhancement products stood at 58% in the second quarter of 2017.
'The positive figures for the second quarter underpin the general trend towards increased demand for structured products in the first half of 2018,' said Georg von Wattenwyl (pictured), chairman of the SSPA.
Turnover value of Swiss structured products rose 24% in the first half of 2018 compared to the first six months of 2017. In terms of underlyings, products linked to equities dominated the market, comprising of more than half of the total turnover. The volume also grew over 30% in the second quarter compared to the previous year. The turnover ratio of products tracking foreign exchange, on the other hand, dropped to 29% from 34% in the second quarter whereas the share of fixed income products also edged down to 11% from last year's 12%, despite seeing nominal turnover growth of 4% compared to the same period of 2017.
In Switzerland, the majority of the structured product transactions are done over-the-counter (OTC), according to the survey. The turnover volume of non-listed products stood at CHF51 billion, marking an uptick from CHF50 billion in 2Q 2017 and representing about 60% of overall turnover this year.
The US dollar, euro and Swiss franc were the predominant currencies for structured products in the country, accounting for over 80% of the total turnover.
According to SRP data, there were 13 active distributor groups in Switzerland during the first half of 2018 with Vontobel leading the pack with over CHF5.8bn in sales on the back of 7,000 products marketed. Leonteq and UBS with CHF1.3bn and CHF609m, respectively, completed the top three ranking. SRP data also shows that issuance of leverage and flow products was led by Citi (over 50,000 products/CHF51m) and HSBC (over 39,000 products listed/ CHF41m) but sales were marginal compared to tranche-based products.
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