In the second of a two-part interview, Nicky Maan (pictured), chief executive at Spectrum platform, talks about the difference between turbos and other non-regulated instruments such as CfDs and binary options, and why the firm is focused on developing a full range of single stock equity turbos.
Maan believes it is important to note that the turbo 24 is a structured product that in some jurisdictions is not categorised as leverage because of the nature of the product.
“The nature of the products is that you are buying that product for that price,” he says. “There is no financing element for the price you pay for that product. There is a reference price in terms of the underlying asset but you cannot lose more than there has been invested into a turbo24 product.”
The success of the platform so far is not purely based on demand for leverage products. “There are several factors to highlight including that Spectrum is pan-European, is very efficiently put together - a lot of clutter has been cleared away, and people feel very confident with the set-up, the product mix and the way they are issued,” says Maan. “All of that explains the numbers since we launched.”
Turbo24’s are issued as structured products with a full prospectus, regulated by Bafin
Maan also expects that investors will be able to discern between the different products out there as from a client perspective, it is easy to say that turbos are a similar kind of product to binary options and contracts for difference (CfDs), or the trading experience is the same.
“This is not always true,” says Maan. "The turbo24 allows you to take a view on an asset up or down”.
“If we look behind the product structure and behind the trading environment you cannot compare it with a CfD. Turbo24s are issued as structured products with a full prospectus, regulated by Bafin. Each and every instrument available on Spectrum has to go via the regulator. The product itself when it is created and manufactured is fully transparent and has to go to the regulator whereas some of the products you have mentioned don’t need to go through any regulatory approval.”
The second big difference, according to Maan, is that from the very beginning Spectrum has “catered retail client demand in a way that is stable, sustainable, and solid”.
“The only way you can make regulators comfortable is by proving very openly how everything is manufactured and how everything is traded,” says Maan. “CfDs, Binary options cannot do this. They are OTC and not comparable to turbos. When you look at the infrastructure behind, we have an ISIN number behind every instrument, we have to settle every instrument via Clearstream.”
In addition, every trade is happening on a transparent venue that is fully compliant with all of the regulatory requirements.
Going forward
“Although [the platform] has been developed to make it appealable to retail clients, the protection for investors exists,” says Maan. “We see robo-advisory as a natural evolution for our platform, though it is not in my mind for the short to medium term. If you are asking is it possible, then it is possible. But is not a priority for us at the moment. The reason why is because we have plenty to do beforehand.”
The platform is focusing now on three fronts including product development, increasing distribution throughout Europe on the client side, and talking to other product manufacturers and issuers to do different type of products over the next coming few months.
From a product category perspective, the platform is focused on developing the equity and the single stock equity underlyings for its turbo24 range.
“Within this it is absolutely essential to complete the offering because if you look at clients who are familiar with single stock equities and actually single stock equities with securitised product is a very attractive product, and the one what we need. We are working on this and it should come across within the next few months,” says Maan.
From a user perspective, the platform has developed a set up that allows the listing of a product in one day as an alternative to the traditional set up to create and list an instrument which can take up a few days.
“We are also working on developments to be able to have intra-day issues over the next three months,” says Maan. “This will enable retail investors to create, list, and trade a product within the same day. The product development on the underlying and the product creation framework are the main two items on our pipeline and will be a focus for us in the short term.”