Latest: Leonteq, GGX partner in ESG push

The ETP+ is listed on the SIX Swiss Exchange and is available to institutional and retail investors in Switzerland.

The GGX Sustainable Dynamic Leaders Europe Index NTR includes companies on the basis of the GGX ESG Rating methodology which measures the sustainability performance of companies - the index currently comprises 20 European companies, including a wind turbine manufacturer as well as a hydrogen plant manufacturer.

The product enables investors to incorporate the first-ever ETP linked to a sustainable index in Switzerland into their portfolios - Allessandro Ricci, Leonteq

‘The product enables investors to incorporate the first-ever ETP linked to a sustainable index in Switzerland into their portfolios,’ said Alessandro Ricci (pictured), head investment solutions, Leonteq.

The index provides exposure to businesses with a favourable ESG impact while also offering promising return opportunities, according to GGX.

‘Through the unique amalgamation of ecology and economy in the reference index, private investors, asset managers, pension funds and other professional investors can now combine sustainability aspects and return potential in their custody accounts,’ said Martin Raab, chairman of the GGX Ratings committee.

Chicago trading firm acquires structured products market maker

DV Group, a Chicago-based company parent to proprietary trading firms DV Trading and DV Securities, has completed the acquisition of the business of Centaur Markets, an over-the-counter (OTC) trading firm specialising in making markets in options and structured products across multiple asset classes.

The acquisition is seeking to combine Centaur's technology to deliver customised products and risk management strategies with DV's market relationships, capital base, and resources, said Jared Vegosen (right), co-founder of DV Group.

‘We are confident that this partnership will widen our institutional footprint with more innovative solutions and comprehensive tradeable instruments,’ he said.

The acquisition adds a new team of Centaur traders and analysts to DV Group's existing force of nearly 400, expanding the firm's capabilities in trading structured products.

‘At Centaur, we have always been committed to bringing innovative and tailored solutions to meet the investment objective,’ said Anestis Arampatzis, principal at Centaur Markets. ‘Together, we will be well positioned to develop even more comprehensive and sophisticated financial instruments."

The partnership aims to create synergies that will allow the two firms to deliver more extensive and innovative financial solutions across multiple asset classes including ‘customised products, risk management strategies, and access to new markets and investment opportunities’.

Isda defends CDS after banking turmoil

Isda’s chief executive officer Scott O'Malia (below right) has defended the important role OTC derivatives such as credit default swaps (CDS) play in ‘making the market safer and more efficient’.

O'Malia noted that it ‘all feels a bit like 2008, but there are important differences’ as following the financial crisis, reforms were put in place to ensure that all over-the-counter (OTC) derivatives – including single-name CDS – were reported to regulators via trade repositories, alongside increased clearing of standardised derivatives.

‘These rules mean single-name CDS, which play an important role in managing risk, are much more transparent,’ said O'Malia. ‘Far from being opaque, regulators now have access to data showing who is trading what, when and in what size.’

counterparties are obliged to report key details of all their trades to regulators via trade repositories and the Depository Trust & Clearing Corporation’s (DTCC) Trade Information Warehouse provides a centralised electronic database that holds the most current details for virtually all cleared and bilateral CDS contracts globally.

‘Efforts are currently underway to harmonize data reporting rules across jurisdictions, providing regulators with better quality, more consistent data sets – an initiative that ISDA has long supported,’ said O'Malia.

Overall, the credit derivatives market is smaller now than it was before the 2008 crisis. According to data from the Bank for International Settlements, the gross market exposure of credit derivatives was US$247 billion at the end of June 2022 versus US$5.4 trillion at the end of 2008.

‘Despite its smaller size, the credit derivatives market continues to play a critical role, particularly during times of volatility, as it enables firms to customize and hedge their exposure to individual credits or sectors,’ said O'Malia.

Allianz GI loses CFTC certification in US

The Commodity Futures Trading Commission (CFTC) has announced the revocation of Allianz Global Investors US registrations after accepting the settlement offer from the company and resolving the action. The order revokes AGI US’s registrations with the CFTC as a commodity trading advisor and commodity pool operator. 

The CFTC alleged that AGI US was subject to statutory disqualification of its registrations based the Securities and Exchange Commission (SEC) order that found AGI US guilty of multiple anti-fraud provisions in the case involving the company’s Structured Alpha range of products (Allianz Global Invs. U.S. LLC, SEC No. 3-20855, 2022 WL 1644317 of 17 May 2022).

The CFTC stated that the SEC order found that AGI US, ‘through three portfolio managers, engaged in a massive fraudulent scheme in which it made numerous misrepresentations and omissions to the institutional investors of funds that employed a complex securities options trading strategy called Structured Alpha’.

Specifically, the SEC order found that AGI US misrepresented to investors the significant downside risks and actual performance of the Structured Alpha funds.

Improvements needed in ESG benchmarks, says UK FCA

The UK Financial Conduct Authority (FCA) has sent a letter to index administrators outlining the issues identified in its preliminary review on ESG benchmarks published in a previous circular in September 2022.

The regulator reminded benchmark administrators of poor disclosures for ESG benchmarks, including the lack of detail on the ESG factors considered in benchmark methodologies; not ensuring that the underlying methodologies for ESG data and ratings products used in benchmarks are accessible, clearly presented and explained to users; and not fully implementing ESG disclosure requirements.  

The review also found that benchmark administrators are failing to implement their ESG benchmarks’ methodologies correctly – for example, using outdated data and ratings or failing to apply ESG exclusion criteria. 

The FCA expects all benchmark administrators to have strategies to address the issues identified.

‘We will be doing more work in this area to address the potential failings and expect firms to be able to explain these strategies on request. We will use the full range of our tools where this does not happen,’ stated the regulator. 

The FCA supports the regulation of ESG ratings and is working with the UK government to develop a voluntary Code of Conduct for ESG data and ratings providers. 

Click in the link to read the FCA’s letter to index administrators.