In the second part of an interview, Nilesh Jethwa chief executive at Marex Solution’s and Joost Burgerhout (pictured), head of Marex Financial Products talk about the company’s edge in the market, the role of technology and its plans going forward.
What is Marex FP’s edge in the market?
Joost Burgerhout: Our edge is our state-of-the-art infrastructure, based on the most recent technology, allowing us to quickly deliver our products and services to investors. We can price quickly, generate the documentation, execute the trade and soon also provide tools for clients to see the lifecycle events of their products.
Our prices are generally attractive and the fact that we are a non-bank issuer also resonates with many investors looking to diversify their exposure.
To grow from one person to 100 people in under four years, we have had to be agile and adaptable - Nilesh Jethwa
Nilesh Jethwa: Another differentiating factor for us is the ability to attract high quality and committed talent from the industry. Today we have built a very strong team across sales, trading, support and control, with people that know and understand these products.
We are lucky to have the backing of a serious, large global group, but retain a startup entrepreneurial mentality.
To grow from one person to 100 people in under four years, we have had to be agile and adaptable. This would have been much harder in a less entrepreneurial setup. This agility and adaptability remain central to our business today and enable us to continue our growth trajectory. We’re already issuing about 100 customised structured notes per week and the number is growing each month.
How important is the technology aspect in the structured products market? Has the role of technology increased to keep the market alive during the lockdown triggered by the pandemic?
Nilesh Jethwa: This is demonstrated by our Agile mini-future click-and-trade web platform, which is an extension of our proprietary Agile technology suite and was built in response to the demand for mini-futures during the pandemic. Since then, US$1 billion of notional has been traded through the platform.
Moreover, we recently launched our notes pricing platform for distributors, which has already had significant uptake.
Rolling out our web pricer and our web-based tools for our clients is also part of our plan; we also want to grow the number of issuers using our platform. So far, we have been raising liquidity and providing a source of revenue for Marex, but we’re also looking at white-labelling to other issuers and we’re in discussions with a number of them.
A large part of this year’s flows have come from the EEA and Switzerland - Joost Burgerhout
Joost Burgerhout: Our platform technology has also allowed us to service our clients whenever markets are opened even if we are not in the office. We can execute orders, and amend or adjust limits for clients at any time.
The traditional structured notes business, where Marex is the issuer, has performed very well but we are also growing our OTC business, which is also a good complement for us - we had 5,000 issuances so far with a notional of US$2.5bn.
We remain very technology driven. Having a pricing tool is normal for this business but we’re also rolling out our web pricer to clients, simplifying things. We know that you have to provide a good user experience, which is absolutely fundamental to our approach.
Do you have plans to expand Marex FP’s footprint in other markets and target market?
Joost Burgerhout: Most of our activity is based in the UK but we opened a Paris office earlier this year, which suits our business as a large part of this year’s flows have come from the EEA and Switzerland. Next year we are looking to develop our business in APAC. We have successfully positioned Marex Financial Products as a new issuer, and that has increased awareness of our brand and new business.
Since early 2020 our business has grown which has been a staggering achievement, with October and November our best months to date.
Apac is a region where we think there are opportunities and we’re aiming at having a presence there by the second half of next year. The immediate focus will be on strategic European markets and Latin America.
Nilesh Jethwa (right): We have established ourselves as an issuer and have proven there is demand for our paper, demand for the service we deliver to our clients, and that we can risk manage our books effectively. Our goal for 2021 is to continue to build our market share – grow our staff, expand to other geographies and increase our product offering.
What is the value of structured products in the current environment and taking into account the markets uncertainty providers and investors face?
Nilesh Jethwa: With yields getting ground down across the world and likely to continue on this path, structured notes provide an attractive alternative and clients are seeing it. The economic outcome of 2020 has been catastrophic but when we look at our clients’ portfolios, they look OK, they have weathered the storm pretty well, which is credit to the resilience of structured products.
Implied volatility keeps going down but remains inflated compared to the 2019 levels. This supports yield enhancement products. The market is paying investors well for taking partial downside equity risk.
Joost Burgerhout: Since the end of the summer the market has been difficult for many issuers, with volumes down, whereas for us it has been the opposite in issuance volume and the size of the trades. This indicates that demand for these products remains strong.