In a week that saw the live virtual ceremony for the SRP China awards and SRP US data released on the latest market movements, the mood was positive.
Shenwan Hongyuan Securities (SWHY) won the Rising Star accolade at the SRP China Award 2021 on the back of a tier 1 OTC option licence received in 2021, which boosted its structured product business.
The full licence, handed out by the China Securities Regulatory Commission (CSRC) in December 2020, enables securities firms to conduct over-the-counter (OTC) derivative trading with any company qualified to trade equity derivatives while tier 2 companies can only trade with tier 1 companies.
We achieved more than most tier-1 dealers operating as a tier-2 dealer until 2021 - Tang Jun, SHWY
Prior to that, SWHY was also granted a pilot scheme licence for cross-border business in July 2020, which paved the way for the use of offshore underlying assets.
“We achieved more than most tier-1 dealers operating as a tier-2 dealer until 2021. From 2018 to 2020, SWHY jumped from sixth to third to second in the league table of OTC options notional outstanding [made by CSRC],” Tang Jun, managing director and head of equity derivatives at SHWY told SRP.
Over in the US, the mood was just as positive, as the local structured products market continued to blossom as both sales volumes and product issuance reached record levels during March.
Some US$9.95 billion was collected from 3,075 structured products that had strike dates in the US during March 2022. Sales volumes were up 26% compared to February and by 13% year-on-year (YoY) while issuance increased by 16% on the previous month and by 6.8% YoY.
In fact, both sales and issuance reached their highest ever levels on the SRP US database, which was first launched in 2005. The previous high for sales volumes, at US$9.1 billion, was set in February 2021 while for issuance it was the following month (March 2021) when 2,879 products were launched.
Despite this positive performance, US investment bank J.P. Morgan reported losses related to markdowns of derivatives receivables from counterparties linked to Russia in Q1 2022. It reported a net revenue of US$30.7 billion for the first quarter of 2022, a decrease of five percent year-on-year (YoY).
Net income was US$8.3 billion, down 42%, predominantly driven by a net credit reserve build of US$902m compared to a net credit reserve release of US$5.2 billion in the prior year.
The bank’s Q1 2022 results included US$524m of losses within credit adjustments & other in the corporate & investment bank (CIB) driven by funding spread widening as well as credit valuation adjustments relating to both increases in commodities exposures and markdowns of derivatives receivables from Russia-associated counterparties.
Equity markets revenue was US$3.1 billion, down seven percent, driven by lower revenue in derivatives and cash equities compared to a record first quarter last year.
Luma Financial Technologies and asset manager 1OAK have partnered to get the platform message out across parts of the market. The two teams have been working for some time to try and find ways to bring automation into a traditional market that has not really had a lot of attention in the past. The US platform chose 1OAK as a partner because of its footprint – it covers around three-quarters of the UK market - its infrastructure and the strong market knowledge of its people. The initial approach will leave the pure independent financial adviser (IFA) business - the plan manager business – out as that part of the market is “really well set up and served and is not where the interest has come from”.
Private equity firm Bowmark Capital has acquired a majority share of software-as-a-service (SaaS)-based document automation provider for structured products, WallStreetDocs (WSD). The software solutions company has been looking for a buyer for several years as it looks to develop its product roadmap and expand its coverage across North America, Europe and Asia where there are a number of platforms offering similar services such as Luma, Simon, Halo, Fin IQ, Futora and Contineo.