Over the past week, we looked at the latest dynamics on decrement indices in the US structured note market, a flurry of banking earnings for Q3 2024, and the new regulatory moves from Europe to Asia.

Despite the US market logging a noticeable pickup in the issuance of structured notes on decrement indices this year compared to three years ago, the activities remain highly concentrated in the notes linked to MerQube vol advantage indices series, a collaboration between J.P. Morgan and its affiliated index provider MerQube over the past three years, SRP data shows.  

The database shows that 2,051 structured notes linked to a group of 14 decrement indices with combined notional of US$2.6 billion in the US. They were traded from February 2021 to September 2024, comprising 2,023 registered notes and 28 exempted notes. Approximately 77% of the notional, or US$2 billion, came from the products linked to the MerQube vol advantage indices series.

For the first nine months, the registered structured notes market has delivered a new high at US$105.4 billion notional, on track to break last year’s record

In September, the US market saw a total of US$11.1 billion notional traded from 3,216 structured notes registered with the Securities and Exchange Commission, which was an 18.4% decline month-on-month or a 34.9% increase year-on-year (YoY). For the first nine months, the registered structured notes market has delivered a new high at US$105.4 billion notional, on track to break last year’s record.

The third quarter also saw a record-high for fixed index annuity sales as they edged up 54% to US$34.9 billion YoY. That led to US$94.2 billion in sales for the first nine months, a 33% climb YoY, according to preliminary results from Limra’s US individual annuity sales survey.

A flurry of third-quarter bank and corporate earnings releases also buzzed in the market.

UBS’ global markets delivered revenues of US$1.9 billion in Q3 2024, up 31% YoY. The bank noted that its growth was mainly due to a 44% YoY increase in derivatives and solutions revenues at US$964m, reflecting increases mostly in equity derivatives, foreign exchange and rates revenues, which were partly offset by lower revenues in capital markets financing within the investment bank.

For Citi, while the US bank’s net income was down nine percent on a yearly basis and revenue was up one percent, its markets revenue edged up to US$4.8 billion in the third quarter following robust growth of all products in equities, up 32% YoY, amid healthy new issuance activity in derivatives.

On the wealth and private banking front, HSBC’s wealth revenue under its wealth and personal banking division posted a 15% year-on-year increase to US$6.7 billion in the third quarter of the year, with one-third coming from investment distributions revenue that is supported by ‘higher sales of mutual funds, structured products, and bond’ and ‘improved market sentiment’, especially in Asia, the bank said.

SRP also took at various markets’ latest performance: In Switzerland, yield enhancement products claimed a market share of 98% in September, up 22 percentage points year-on-year, while Finland’s structured products’ sales volumes decreased by 35% in Q3 compared to the previous quarter and decreased by 49% YoY.

In Ireland, 18 publicly offered structured products worth an estimated €65m (US$70m) struck during the July-September period. Sales volumes increased by 100% compared to Q2 2024 when 17 products collected €32m; YoY sales were up 25%.

Meanwhile, the Austrian certificate association (Zertifikate Forum Austria or ZFA) latest figures showed that outstanding volumes for structured certificates sold to Austrian retail investors reached €15.4 billion (US$16.6 billion) in September, up 0.9% compared to August.

The week also buzzed with regulatory moves, including the Autorité des Marchés Financiers (AMF) releasing new guidelines for investment services providers and financial investment advisors governing the distribution of actively managed certificates (AMCs) to retail clients ‘in view of the increased distribution of these financial instruments in France and the risks they pose for retail clients’.

The European Structured Investment Products Association (Eusipa) paper on Value for Money published by the trade association to set out its position on the negotiations on the EU Retail Investment Strategy (RIS) has identified diverging funding costs between issuers as one the main hurdles to make structured products from different issuers comparable.

In Asia, the Securities Association of China imposed new guidelines on structured note issuances to local securities houses, detailing specific measures on debt financing instruments around issuance eligibility, sales practices, and risk management.

Local securities houses, the issuers of these notes, are grappling with the new measures as the latest rules converted a tightened signal on non-principal-protected structured notes issuance, also known as floating income beneficiary certificates in the local term and lifting a higher bar to issue principal-protected notes, senior sources in the industry said.

Meanwhile, SRP had a catch-up with Marex Solutions’ Head of Institutional Sales Walter Cegarra, on the firm’s institutional push and how it plays a visible role in helping raise assets and providing structured access to funds for asset managers, discretionary managers, and hedge funds.

Image: Who is Danny/Adobe Stock.

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