The European Banking Authority (EBA) has launched a public consultation on its draft Regulatory Technical Standards (RTS) on the method for identifying the main risk driver and determining whether a transaction represents a long or a short position.

The Capital Requirements Regulation (CRR) includes some derogations for the calculation of the capital requirements for market and counterparty credit risks, for small trading book business, derivative business or business subject to market risk.

A position can be considered as long or short depending on how movements in its main risk driver affect the market value

The CRR3 specifies that the size of the business shall be equal to the absolute value of the aggregated long position, summed with the absolute value of the aggregated short position. A position can be considered as long or short depending on how movements in its main risk driver affect the market value.

The proposed general method to identify the main risk driver pivots on sensitivities defined under the market risk standardised approach (FRTB-SA) or on add-ons defined under the standardised approach for counterparty credit risk (SA-CCR). For the determination of the direction of the positions, the methodology is aligned with the one set out in the RTS on SA-CCR.

Considering that small banks are, and have always been, exempted from using the FRTB SA or SA-CCR, a simplified method has also been included. The simplified method covers relatively simple instruments which are normally traded by small banks such as fixed-rate bonds, floating-rate notes, stocks, forwards, futures, simple swaps and plain vanilla options.

The consultation runs until 24 July 2024.

Leonteq, Raiffeisen extend cooperation partnership

Leonteq has extended its cooperation in the area of structured products with Raiffeisen Switzerland Cooperative until 2030.

The work to connect Leonteq’s technology and services platform to a new Raiffeisen platform has been completed and the cooperation agreement between the two parties will be extended from 2026 to 2030, stated the Swiss structured products provider.

Under the terms of the partnership, Raiffeisen will in future issue, hedge and distribute part of its structured products via its own platform, which is connected to Leonteq's LynQs technology platform for continued servicing.

The company led by CEO Lukas Ruflin (right) will also continue to distribute Raiffeisen issued products through its own distribution channel in Switzerland, Europe and Asia.

BMO bullish on structured outcome ETFs

BMO Global Asset Management expects to see more growth in the structured outcome ETF market in 2024, driven by more targeted funds that appeal to more sophisticated investors.

The Canadian asset manager conducted an overview of the ETF industry identifying structured outcome ETFs as the latest growth area and proof of the constant innovation in the space in terms of reducing portfolio risk.   

BMO sees the ETF market continuing to evolve and innovate in order to meet the growing demand for more sophisticated products in an ETF wrapper.

BMO is particularly bullish on structured outcome ETFs, which were created to help investors manage risk. It believes that investors in equity funds and short-term bond funds are exposed to volatility given the outperformance of megacap, technology stocks over the past year and uncertainty around the Fed’s rate cuts.

ETFs are becoming 'the primary way for investors to get exposure to themes, trends, and investment opportunities', wrote Sara Petrcich (right), head of ETF & structured solutions, BMO Asset Management. .

'We continue to see a rise in the usage of ETFs, both as core holdings and as complements,' she said. 'With the targeted exposures offered in ETFs, they are now often used as a replacement for individual stocks and bonds to better manage a portfolio.'

Structured outcome ETFs use options to protect against downside risk and cap upside potential.

Calamos targets capital protected ETF investors

Chicago-based alternatives manager and options-based strategies provider Calamos Investments has  announced the planned launch of 12 structured ETFs which will provide 100% protection and equity upside to a pre-determined cap over one-year outcome periods.

The ETFs are designed to offer capital protected exposures to the S&P 500, Nasdaq-100 and Russell 2000 benchmarks. The first listing, Calamos S&P 500 Structured Alt Protection ETF – May (ticker: CPSM), was launched on 1 May with an upside cap range of 9.20% - 9.65%.

'Our expertise, combined with the current interest rate environment and tax efficiencies of ETFs enabled us to design simple, yet compelling offerings that continue to protect and grow investors' capital over a practical one-year outcome period,' said John Koudounis (right), president and CEO of Calamos Investment.

Koudounis  noted that the demand for capital protection solutions has significantly increased in recent years with approximately US$309 billion of principal protected strategies being purchased in the US in 2023 via structured and annuity products.

While the new structured funds will use the price return versions of the S&P 500, Nasdaq-100 and Russell 2000as primary benchmarks, secondary benchmarks have been developed by MerQube.

US fintech eyes structured products in platform expansion

ClickIPO, a US fintech platform for broker-dealers, is expanding its investment products offering and rebranding to Click Capital Markets.

The company is seeking to become 'a more diversified capital markets provider to include our traditional IPO business, as well as unit investment trusts (UITs), closed end funds (CEFs), alternative investments, and structured products; said Scott Coyle (right), president and founder of Click.

'Over the past five years we have steadily grown our underwriter and issuer relationships, expanded the number of broker-dealers globally that are connected to our platform via API, giving their retail customers easy access to US capital markets products,' said Coyle.

'We have participated in over 400 different product offerings in the last few years, made significant technology investments to improve our global platform, and established several new capital markets relationships that enable us to expand our product offerings.'

Click Capital Markets offers an API designed to give US and foreign brokerage firms and financial advisors, access to US registered new issue capital markets products including IPOs, secondary offerings, UITs and CEFs, with structured products, corporate debt and alternative assets to be added in the near future.