In the final week of January, we saw smaller firms poach executives from their larger counterparts, and a Singaporean bank report a huge increase in trading volume of structured products.

UK brokerage Causeway Securities is expanding its US footprint with the hire of Adam Black, Alex Borggren, Austin Rogers and Asher Smith, all from Halo Investing. They will be covering the entire US registered investment advisor (RIA)/family office marketplace. Black, Borggren and Rogers join as directors while Smith is the company’s new internal wholesaler. They report to Randy Mulford, managing director, head of US sales at Causeway Securities, based in New York.

Hilbert Group has announced the appointment of Thierry Pudet as a senior quant strategist at Hilbert Capital, the quantitative asset management arm of the group, effective 1 February 2023. Pudet joins Hilbert Group following three decades at senior risk management and investing roles at tier one hedge funds and investment banks. He will focus on the ongoing development of Hilbert Group's systematic trading strategies and report to Niclas Sandström, Hilbert Groups's CEO. The appointment is part of the firm’s plans to grow its quant team and proprietary trading technology.

In corporate news, BMO Financial Group has received all regulatory approvals required to complete the acquisition of Bank of the West which was previously owned by BNP Paribas. The transaction is anticipated to close on 1 February 2023, ‘subject to the satisfaction of the remaining customary closing conditions set forth in the agreement,’ stated the Canadian bank. 

The acquisition will bring nearly 1.8 million customers to BMO and will further extend its banking presence through 514 additional branches and commercial and wealth offices in the US market. Bank of the West has been BNP Paribas’ main outlet for retail structured products in the US market since 2010. The French bank marketed close to 100 market-linked certificates of deposits with an estimated value of US$605m, according to SRP data.

J.P. Morgan sold US$2.7 billion worth of retail structured products in the US during Q4 2022, down 9.8% year-on-year, which has led to a record-high sales volume of US$14.5 billion on a yearly basis. It reported net income of US$11.0 billion in Q4 2022, a 5.9% increase year-on-year, driven by higher net interest income. Net revenues rose 29% to US$15.8 billion YoY.

J.P. Morgan had a 13.04% share of the US retail structured products market in Q4 2022, making it the third most active issuer in the quarter, after Citi (15.98%) and Goldman Sachs (15.49%), according to SRP data.

The largest Malaysian bank leveraged its structured products capabilities to expand beyond its home market in 2022. Maybank Singapore, which saw a 30% increase in trading volume of structured products in 2021, started 2022 with a plan to scale up its structured products business with non-directional dispersion warrants. In Q3 22, Maybank Investment Bank entered Thailand’s structured products market with its first structured note on 23 August to end the year with almost 30 structured notes issued worth US$5.8m-equivalent.   

In the meantime, the investment banking arm expanded its offering with a range of long/short structured warrants on Bursa Malaysia, tracking eight Hong Kong-listed stocks.

Turning our attention to regulation, the UK’s Financial Conduct Authority has been checking firms’ progress ahead of the 31 July Consumer Duty deadline and warned this week that some may struggle to apply the rules effectively when they come into force.

The ‘outcomes-based’ duty is a big shift in the way product development and service is conceived and measured. It also brings product manufacturers into the consumer outcomes chain with a look-through provision designed to challenge a manufacturing business model often built around the fact that they don't deal with retail.

According to 1OAK Capital MD David Stuff, issuers will have to start thinking about what they can do to demonstrate the products they are developing are good for the end customer and what information they provide to the buy side, whether IFA or a private bank, DFM or family office, and whether the product is sold as a stand-alone or to be part of a portfolio.

Image: PNG Tree.