The firm’s OTC derivatives arm builds team from SocGen, Morgan Stanley & Hellier to become a non-bank affiliated structured note issuer.

Global commodities firm Marex Spectron has launched Marex Financial Products, a structured note business aimed at broadening the company’s range of product offerings and helping diversify its funding.

The new Marex Financial Products business line is part of Marex Solutions, the firm’s OTC derivatives arm, and leverages the firm’s fintech platform which was initially deployed for OTC commodity hedging.

The initial offering will be targeted at Qualified Investors globally including asset managers, private banks, corporates, pension funds and family offices, according to Nilesh Jethwa (below-right), Marex Solutions’ chief executive officer.

"We have benefitted from being able to build the business starting from a blank canvass," Jethwa told SRP. "This is the offering we always wanted to deliver, but were unable to at larger organisations which are encumbered by their legacy technology. We have built a cross asset derivatives engine which can deliver any payoff on any underlying, faster, more flexible and cheaper than our competitors. Having taken significant market share on OTC corporate hedging side, trading US$7 billion notional already, we are now turning our attention to structured investment products. It’s a market we know well and believe is ready for a fresh approach."

 Earlier this year, Marex Solutions launched its own structured investment product issuance program for equity, credit, FX, commodity and fund linked notes after testing appetite for its structured investment products via third party issuers in 2018. The UK issuance programme delivered directly from the balance sheet of Marex Financial uses Citibank as its paying and issuing agent, Clearstream as its custodian, and Goldman Sachs as its prime broker. Initially, the notes were listed at the Vienna Stock Exchange.

“We see increasing scope for non-investment bank specialist providers to disrupt the marketplace as investors look for issuer diversification,” said Jethwa. “There is room for a fresh approach. We believe that our fintech setup and entrepreneurial mindset sets us apart from competitors, enabling us to offer a broad and flexible range of products to investors, both in hedging and in structured notes.”

The new business will leverage the firm’s “tailored yet fully automated approach” and will be used to bring to market products such as equity autocallables, as well as capital protected and credit-linked notes.

The new offering will enable investors to build their own structured notes across several asset classes, with a range of payoffs and underlyings. As part of Marex Spectron, Marex Financial Products is the first non-bank affiliated structured note issuer to hold an S&P Investment Grade rating.

"As we build out the business, our technology will set us apart as we have seen in the corporate hedging market," said Jethwa, adding, "the immediate feedback from clients is that they are fully loaded with bank issuer risk and are excited to be able to work with an issuer who is not a bank, but is still Investment Grade rated by S&P. "Diversification is a key topic for them. Ultimately, our main differentiator is that some of the best practitioners in the market over the past 2 decades have come together to build what we hope will be the best platform for structured investment products. We have the backing of a large corporate, the benefit of building this from scratch and we are doing this with some of the most successful people in this business. We are very excited about what we can deliver."

Senior appointments

The new structured notes business is led by Joost Burgerhout (pictured), former managing director and head of private banks sales at Commerzbank who moved to Société Générale for a short two-month stint following the French bank’s acquisition of Commerzbank’s Equity Markets and Commodities (EMC) business.

Burgerhout’s team is completed by five others from Société Générale including David Cohen, formerly head of agricultural OTC desk who joined as head of agricultural commodity solutions, and Nicholas Burke, a former director of OTC agricultural sales at the French bank; one from Morgan Stanley and another from Hellier Capital.

“We have assembled a very talented team with proven track-records from leading organizations and deep knowledge of the structured note market,” said Jethwa. "The demand for the product is large and growing. Defined outcome products are showing that a transparent offering with a flexible tool box is necessary during these days of increased macroeconomic uncertainty. We believe with a high quality team, with a flexible offering and with a new type of investment grade issuer, we have a roll to play."

Ian Lowitt, Marex Spectron’s Chief Executive Officer, said the launch broadens the range of products offered to existing clients, and is expected to attract new clients to the firm.

‘It also, importantly, strengthens our funding,’ he said.