Latest: UK regulator bans the sale of crypto ETNs to retail consumers

The UK FCA has published final rules banning the sale of derivatives and exchange traded notes (ETNs) that reference certain types of crypto-assets to retail consumers.

The UK watchdog considers these products to be unsuitable for retail consumers due to the harm they pose.

According to the FCA, these products cannot be reliably valued by retail consumers because of the inherent nature of the underlying assets, which means they have no reliable basis for valuation; the prevalence of market abuse and financial crime in the secondary market (eg cyber theft); and the extreme volatility in crypto-asset price movements.

‘Significant price volatility, combined with the inherent difficulties of valuing crypto-assets reliably, places retail consumers at a high risk of suffering losses from trading crypto-derivatives,’ said Sheldon Mills (pictured), interim executive director of strategy & competition at the FCA, said:. We have evidence of this happening on a significant scale. The ban provides an appropriate level of protection.’

In addition, the regulator believes there is inadequate understanding of crypto-assets by retail consumers, and a lack of legitimate investment need for retail consumers to invest in these products.  

These features mean retail consumers might suffer harm from sudden and unexpected losses if they invest in these products. 

Unregulated transferable crypto-assets are tokens that are not ‘specified investments’ or e-money, and can be traded, which includes well-known tokens such as Bitcoin, Ether or Ripple. Specified investments are types of investment which are specified in legislation. Firms that carry out particular types of regulated activity in relation to those investments must be authorised by the FCA. 

The ban is aimed at addressing these potential harms, and applies to the sale, marketing and distribution to all retail consumers of any derivatives (ie contracts for difference – CFDs, options and futures) and ETNs that reference unregulated transferable crypto-assets by firms acting in, or from, the UK.

The ban will come into effect on 6 January 2021.

LPA joins Swiss association

CapTech provider Lucht Probst Associates (LPA) has become the 41^st member of the Swiss Structured Products Association (SSPA) which together accounts for more than 95% by volume of structured products in Switzerland.

LPA offers a number of digital tools to support their clients with automating the entire life cycle of structured products, OTC derivatives and funds - this includes the complete issuance process, alongside the fully automated, workflow-controlled creation of documentation and other front, middle and back office processes.

The firm also provides a tailored document and data service for the buy-side aimed at facilitating the sale of structured products.

‘Our mission is to help financial services companies raise their efficiency – while remaining fully compliant,’ said Stefan Lucht, founder and managing partner of Lucht Probst Associates. ‘We look forward to contributing this expertise to SSPA and, through close dialogue, promoting wider use of structured products.’

Contineo unveils 2.0 cloud-based platform

Multi-issuer structured products platform Contineo has announced the release of its ‘next generation’ platform.

The new platform which has been released to all its clients goes live after two years of work. The new version has been developed on a ‘flexible architecture of micro services all containerized and managed in Kubernetes clusters’.

‘It is completely hosted in the cloud and doesn’t require any client side deployment,’ said the firm’s CTO Franck Lerat. ‘It offers our clients an open architecture, exposing all services available via standard API transports and formats.’

The new platform provides ‘high availability and resiliency, combined with the agility to quickly deliver and deploy changes’ as well as ‘full scalability to handle large volumes, combined with the ability to integrate the most complex products and work-flows’.

The MIP which is celebrating its fifth anniversary accelerated the move towards a web-based set up as the recent work from home environment under Covid-19 ‘had proven the benefits of a web-based platform that can be remotely accessed by a wide population of users’.

Contineo has facilitated nine million prices year-to-date across 16 different issuers for pricing and execution of ten equity payoffs. The platform also offers market intelligence and post-trade services.

‘We foresee more than twice the volume placed via Contineo compared to last year despite the unprecedented business dislocation in 2020,’ said Antoine de Charnacé, CEO at Contineo.

AIX to expand ETN range

Astana International Exchange (AIX) has rolled out four new exchange-traded notes (ETNs) in order to provide local retail investors with a broader range of investment options.

The exchange’s iX ETNs were introduced to provide ‘a low-cost way to build a globally diversified portfolio’ and are paving the way for a broad range of exchange-traded products which are expected to be registered in the Astana ( Kazakhstan) International Financial Centre – AIFC - jurisdiction.     

The iX ETN Funds invest in a number of iShares, USCF and Vanguard ETFs which in turn track designated benchmark indexes. The new ETNs listed on 5 October add to the exchange’s first series of five ETN issued last year and include the iX Gold SPC linked to the iShares Gold Trust; iX High Yield Corporate Bond SPC linked to the iShares iBoxx $ High Yield Corporate Bond ETF; iX US High Dividend SPC linked to the iShares Core High Dividend ETF; and iX US Short-Term Treasury SPC linked to the Vanguard Short-Term Treasury ETF.

Raiffeisenbank is the custodian bank to provide the safekeeping of underlying assets with Crowe Kazakhstan acting as the auditor company for all iX ETNs.

Nikko AM partners with Solactive

Solactive has entered into a new collaboration with one of Japan’s largest Asset Management companies, Nikko Asset Management to launch the Solactive Asia ex Japan Dividend Plus Index.

The new benchmark builds on the Solactive GBS Asia Large & Mid Cap USD Index, which covers a broad universe of 800 Asian large and mid-cap stocks after exclusions of Japanese equities and China A-shares.

The Dividend Plus Index employs a methodology that systematically searches for companies able to, sustainably, pay higher dividends in the long run. Backtests show that the strategy delivers an almost 40% higher dividend payout while exhibiting lower volatility, compared to the Solactive GBS Asia Large & Mid Cap benchmark index.

The index is one of several new-generation indices that both companies plan to roll out, with an enhanced factors index in the pipeline.

The Solactive Asia ex Japan Dividend Plus Index will go live on 1 October 2020.

21Shares bitcoin ETP enter the Nordics

Crypto exchange traded products (ETP) provider 21Shares AG has expanded its offering to Swedish and Scandinavian investors via Nordnet Bank’s digital platform for savings and investments.

The two approved Xetra listings - the 21Shares Bitcoin and Short Bitcoin ETP, mark the first foray of the firm in the Nordics as it moves to further expand its offering in the region.

The launch follows the listing of 21Shares’ eleven other institutional grade crypto exchange-traded products and bolsters the firm’s profile as the provider with the most comprehensive regulated product suite of crypto assets listed on stock exchanges across Europe.

Sweden was the first EU country to allow a bitcoin structure to be admitted on the Nasdaq Nordic exchange in 2015 while Scandinavian investors were the first in Europe to access crypto structured products.