In this week’s roundup, we several recent developments in and around the structured products market including the new partnership between Singapore’s SBI Digital Markets and Switzerland’s CAT Financial Products, Nomura’s new investment management-focused unit in the Americas, and more.

Hong Kong's first covered call exchange-traded funds (ETF) have been listed on Hong Kong Exchanges and Clearing (HKEX).

An ETF that incorporates a covered call strategy can help investors save time, generate passive income, and remove the complexity of managing downside risks on their own - Brian Roberts, HKEX

The first two new ETFs listed on 29 February – the Global X HSI Components Covered Call Active ETF and Global X HSCEI Components Covered Call Active ETF – were both issued by Mirae Asset Global Investments (Hong Kong). They primarily invest in constituent equity securities in the Hang Seng Index (HSI) and the Hang Seng China Enterprises Index (HSCEI), respectively.

‘The use of covered calls is an increasingly popular investment strategy as investors look to diversify beyond traditional products, navigate potentially volatile markets and hedge downside risk,’ Brian Roberts (pictured), head of equities product development at HKEX, said in a statement.

A covered call is a strategy in which an investor sells call options on an asset they already own, generating income in the form of a premium. It allows investors to benefit from potential asset appreciation up to the strike price, and during times of volatility, the options premiums can provide downside protection to investors, the exchange said.

Roberts noted that while this type of strategy typically requires a level of expertise and involves active trading, ‘an ETF that incorporates a covered call strategy can help investors save time, generate passive income, and remove the complexity of managing downside risks on their own.’

Along with leveraged and inverse products, ETFs are part of the large umbrella of exchange-traded products (ETP) listed on HKEX. In 2023, the average daily turnover in the Hong Kong ETP market reached an all-time high of HK$14 billion, up 17% from the prior year, according to HKEX’s data.

Singapore is also an active market that has seen the covered call strategy implemented through products. In Feb. 2023, SRP reported that DBS Private Bank was introducing its first-ever minimum redemption of principal-at-maturity notes linked to an in-house fund that uses a covered call.

Just this past January, Roundhill Investments, a US-based thematic-focused exchange-traded fund (ETF) issuer, revealed its Bitcoin Covered Call Strategy ETF that has traded on the Cboe BZX Exchange.

SBI Digital Markets, CAT Financial Products team up

SBI Digital Markets, the Singapore-based digital asset arm of Japanese conglomerate SBI Group, has partnered with CAT Financial Products in Zurich to establish a strategic manufacturing and distribution channel of structured products between Asia and Europe.

With the parent company's large securities account customer base and second-largest trading market in Japan, SBI Digital Markets, led by CEO Winston Quek (right), brings network expansion opportunities to the partnership.

Meanwhile, CAT Financial Products, the Swiss structured product issuer and technology provider, will enable SBIDM to gain access to its price discovery and lifecycle management platform CUGLOS via the partnership.

By integrating these services into SBI Digital Markets’s own financial product platform, clients will have access to have real-time pricing information for structured products as well as track and manage all outstanding products.

SBI Digital Markets is also seeking to leverage CAT Financial Products’ issuance platform for actively management certificates (AMCs), ETPs, thematic tracker certificates, leveraged products and the ability to securitize semi-liquid or illiquid assets.

Nomura refines focus in the Americas

Nomura Holdings has realigned its asset and investment management business in the Americas under the new unit Nomura Capital Management (NCM).

The new arm in the Americas will integrate Nomura’s public and private credit businesses, taking from its discontinued unit Nomura Private Capital (NPC) and the three-decade-old public credit business Nomura Corporate Research and Asset Management (NCRAM), which will remain independent as a public credit boutique.

Robert Stark, former CEO of NPC, was named CEO of the new unit while remaining head of investment management in the Americas at the firm he joined in 2022.

‘NCM was created to tap into growing demand from US institutional and intermediary investors for credit market expertise,’ said Stark.

Under the new leadership, NPC’s CIO Matthew Pallai now serves as CIO of the new unit, while David Crall (right), CEO and CIO of NCRAM, remains to lead the public credit boutique. Yuichi Nomoto, CEO of Nomura Asset Management (NAM) USA, will continue to lead the same team as it manages NAM strategies and distribution to Japan.

ICE debuts MSCI index total return futures

Intercontinental Exchange (ICE) has launched new MSCI Index Total Return Futures offering investors exposure to four different MSCI indices - MSCI EAFE Index, MSCI Emerging Markets Index, MSCI USA Index and MSCI World Index.

The new futures contracts will serve as an 'exchange-listed alternative' to over-the-counter (OTC) total return swaps that seek to replicate the performance of MSCI’s indices in a 'more capital-efficient and transparent way’, stated ICE.

The contracts use the underlying US funding rate, the Secured Overnight Financing Rate (SOFR), which measures the cost of overnight cash borrowing.

According to ICE, in 2023, the average daily volume for ICE’s MSCI complex was approximately 214,000 contracts, equal to an estimated US$14 billion of notional value. ICE MSCI futures traded over 53 million contracts last year.

‘ICE’s markets account for over 70% of global MSCI futures trading by volume, making ICE the natural home for customers to trade MSCI Total Return Futures alongside our deeply liquid suite of MSCI Futures,’ said Caterina Caramaschi (right), vice president, financial derivatives at ICE.

The latest development followed last fall when the US-based data, tech, and market infrastructure provider launched approximately 600 equity indices covering the qualifying, listed security universe across 16 selected European countries, including the UK.

Dubai-based CBI adopts Bloomberg’s MARS

Commercial Bank International (CBI), a national bank in the UAE, has adopted Bloomberg’s Multi-Asset Risk System (MARS) modules for counterparty risk, market risk and valuation, according to Bloomberg’s press release.

The Dubai-based CBI previously adopted MARS front office to aid its LIBOR transition and has now decided to adopt three additional modules.

The counterparty risk module is aimed at helping address existing regulatory requirements such as SA-CCR for counterparty credit risk capital calculations, while the market risk module was integrated to support supporting the risk management and data workflow.

The valuations module, on the other hand, provides valuations for derivative portfolios, including over-the-counter (OTC) derivatives and structured products, ensuring data and pricing consistency across the front-to-back trading workflow cycle.

Bloomberg MARS is a suite of risk solutions that provides risk analytics for cash and derivatives securities.

Do you have a confidential story, tip or comment you’d like to share? Write to info@derivia.com