One topic we are sure to hear more about is cryptocurrencies, with developments in that space slowing seeing an uptick in recent weeks.

Specialist digital asset-backed securities provider ETC Group has launched the first cryptocurrency exchange traded product (ETP) to be traded on a UK exchange following recent listings on Deutsche Boerse’s Xetra platform and the Six Swiss Exchange.

The ETC Group Physical Bitcoin (BTCE) product will be available to trade as of 7 June via the Aquis Exchange MTFs in London and Paris. This is the first time a cryptocurrency ETP has been available for trading on any UK market or any European MTF. Trading will take place in GBP, CHF, Euro and USD, while clearing will be carried out by Six x-clear as the sole CCP providing central clearing. 

We think this is the best way to empower financial intermediaries and promote the value of structured products - Kevin Dayot, Leonteq

Skyrocketing demand for cryptocurrencies has prompted one of the world’s largest financial advisory and fintech organisations to unveil a new and exclusive product linked to the movements of Bitcoin and Ethereum. Independent financial advisor deVere Group has launched a structured note tracking futures of Bitcoin and Ether on the Chicago Mercantile Exchange. The one-year maturity will pay a fixed yield and offers capital protection.

HSBC executed on 11 June a total return swap based on the performance of the MSCI World ESG Leaders Index for a global liability driven investment manager serving UK pension funds. The transaction is the first time the MSCI World ESG Leaders Index has been hedged with an FX overlay via a new custom-made index, the MSCI World ESG Leaders 100% hedged to GBP Index, manufactured by the bank for the client. This is proof that there are opportunities for ESG to be deployed around multi-dimensional problems, Patrick Kondarjian, global co-head of ESG sales, markets & securities services, at HBSC, told SRP. The international bank also made the headlines as its AI Powered Equity Index 5 (USD) Excess Return (AiPEX5) family is gaining visibility in Asia Pacific following launches in Singapore, Malaysia, the US and China earlier this year.

Staying in the sphere of indexing news, the Dow Jones Industrial Average celebrated its 125th anniversary at the end of May, and has grown from an average to an index. It has been an important part of the SRP US database since its launch in 2005. Back then, 45 products worth US$175m were linked to the index, including offerings from long forgotten entities such as Piscataqua Savings Bank, Henry County Bank, and Farmers & Merchants Bank. Since then, the evolution of issuance and sales volumes for products tied to the index has seen a fairly constant upward trend, despite dips in 2009 and 2012. Structures tied to the Dow peaked in 2020, when 4,120 products collected a combined US$8.7 billion, an increase of 184% by issuance and 158% by sales volume compared to the previous year. 2021 also promises to be a good year, with sales volumes having already reached 50% of last year’s total as of 8 June (from 1,508 products).

In the UK, the local structured products trade body has been involved in the recent paper released by UK regulators to provide advice on the transition from Libor. Following the launch of the Bank of England and Financial Conduct Authority’s (FCA) Sterling Risk-Free Reference Rates’ paper on the transition of structured notes away from GBP Libor, UK SPA chairman Zak de Mariveles said a key consideration is around fallback arrangements when it comes to new issues referenced to Sonia.

“Issuers need to have robust fallbacks in their documents for new risk-free rates. There are various considerations for documenting fallbacks including alignment with fallbacks for other asset classes to limit any mismatch risk and the extent to which fallbacks rely on and allow the exercise of discretion,” he said. 

On the tech side of things, Leonteq’s shift to a buy-side focus has seen the Swiss firm launch Quote, an automated click ’n’ trade module within its LynQs platform. It’s part of its efforts to offer a ‘unique one-stop-shop’ for structured products.

“We think this is the best way to empower financial intermediaries and promote the value of structured products. The different modules help relationship managers and private bankers to understand how these products fit in their clients’ portfolios and fine tune exposures,” Kevin Dayot, managing director, head of digital offering at Leonteq Securities, told SRP.

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