Morgan Stanley is gearing up to bring structured certificates and warrants to the German market via a strategic, long-term partnership with Germany's FinTech Group. Under the agreement FinTech Group's online broker Flatex will brand and market exchange traded products (ETP) issued by an undisclosed Morgan Stanley entity.
The first products are expected to be available in mid-2016 at the latest and will be offered alongside the German online broker's product offering from other existing partners. Flatex' is promoting its open architecture platform by providing access to "an enhanced range of products" and a potential reduction in trading costs.
Flatex' customers have executed more trades since the beginning of 2016 on the back of the present market volatility, "bringing our transaction numbers to top figures", according to Niklas Helmreich, head of Flatex. "Last year's relaunch of our CFD and Forex business has been particularly profitable: CFD and FX revenues rose by 30%, while costs and risks were reduced significantly at the same time," said Helmreich. "We also expect our partnership with Morgan Stanley to result in a further push of earnings."
The US bank has been making inroads to Europe's exchange traded products (ETP) market since May 2015 when it was accepted as a new member of the Nordic Growth Market (NGM) structured products specialist exchange and started issuing mini futures and bull & bear certificates in the Swedish exchange on May 19, 2015.
In contrast to Morgan Stanley's expansion in the ETP market the US bank has seen its European market share in the European retail structured products market shrinking over the last few years. In 2015, the bank marketed five structured notes in the German market, and acted as the derivatives counterparty in 26 structured products plans marketed in the UK market including 10 sold under the Morgan Stanley brand. The US bank has three 10-year structured notes open for subscription in France.
The US bank halted its issuance of structured products in the UK retail market and is reviewing its UK equity derivatives business which started in the wake of the UK Financial Conduct Authority's (FCA) release of its thematic review of products development and governance back in March.
Flatex is the only platform in Germany providing investors with a comprehensive range of products such as certificates, warrants, funds, and deposits from various banks. There are 10 issuers offering structured products on Flatex, mostly leverage certificates and warrants, including Deutsche Bank, BNP Paribas, Societe Generale, Commerzbank, HSBC, DZ Bank, Vontobel, Citi, UBS, UniCredit, Vontobel. As of end of June 2015 FinTech Group AG had €5.68bn of assets under management (AUM).
Morgan Stanley reported in January that full year net revenues for 2015 were $35.2bn compared with $34.3bn a year ago. Institutional securities reported pre-tax income from continuing operations of $4.7bn compared with a pretax loss of $58m a year ago; wealth management reported pre-tax income from continuing operations of $3.3bn compared with $3bn a year ago; while investment management reported pre-tax income from continuing operations of $492m compared with $664m a year ago.
As of December 31, 2015, the Morgan Stanley's common equity Tier 1 and Tier 1 risk-based capital ratios under US Basel III advanced approach transitional provisions were approximately 15.4% and 17.3%, respectively.
Morgan Stanley declined to comment.
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