Latest: BMO’s acquisition of BNP’s Bank of the West gets green light

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. 

BNP Paribas said the final financial impacts of the sale will be provided on 7 February 2023, together with the publication of the bank’s 2022 Annual Results. 

BNP Paribas’ set up in the United States remains a strategic pillar for its development - Jean-Laurent Bonnafé, BNP Paribas

The sale of the US retail bank does not alter BNP Paribas’ plans in the US market which will be driven by the bank’s Corporate & Institutional Banking franchise which has been recently reinforced. BNP made several senior appointments in its global markets Americas division as part of its plans to grow its global equities, global credit and global macro franchises in the region, following the reorganisation of its global markets business.

‘BNP Paribas’ set up in the United States remains a strategic pillar for its development,’ said Jean-Laurent Bonnafé (pictured), BNP Paribas Group director and chief executive officer. ‘The Group will continue to consolidate and further develop its Corporate & Institutional Banking franchise to better serve multinational clients’ needs.’

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 (MLCDs) with an estimated value of US$605m, according to SRP data.

Most of the products sold by Bank of the West were linked to baskets of equity shares although the French bank also deployed a number of structures linked to proprietary and custom indexes such as the BNP Paribas Multi Asset Diversified 5 Index, DWA Large Cap Sector Rotation Target Volatility 7 and Morningstar Ultimate Stock-Pickers Target Volatility 7 Index. There are currently two live structures sold by Bank of the West which will mature in 2023.

With the acquisition BMO continues to build its footprint in North America. After closing and until conversion of the combined banks' systems, expected in early September 2023, customers will continue to receive service through their respective Bank of the West and BMO branches, websites and mobile applications.

DDV: German investors bearish on DAX

Most of Germany’s self-directed investors are optimistic about the performance of the DAX index in 2023, according to the Deutscher Derivate Verband’s (DDV) monthly survey.

German investors in listed structured products are optimistic about the development of the German stock index DAX with more than half of the respondents (50.5%) expecting the index level to be significantly higher at the end of the year than at the beginning of the year. Some 30% are forecasting the DAX will close at the same level as it opened in 2023; and 19.55 of respondents are  assuming a negative performance at the end of 2023.

‘Despite all the optimism, one should not lose sight of the risks and it is here that structured securities show their strengths,’ said Christian Vollmuth (below right), executive director of the DDV. ‘There are suitable structured securities for every scenario and risk appetite.’

Structured investment products bought by self-directed investors in Germany are mainly referenced to equity indices (40.1%) and equity stocks (23.6%) with interest rates (34.5%) as the third asset class with the highest volume.

When it comes to leverage products, equities (58%) remain the most favoured asset class ahead of indices (30%) and other underlying assets (12%).

Given the geopolitical uncertainties and the economic challenges related to energy, supply chains and the covid pandemic, the DDV expects 2023 to be another ‘exciting year’.

‘We are convinced that structured securities on the DAX and DAX stocks will play an important role in 2023,’ said Vollmuth.

A total of 2,125 people took part in the DDV online trend survey which was carried out together with several German financial portals including finanzen.net, finanztreff.de, guidants.com, marktEINBLICKE.de, onvista.de and wallstreet-online.de.

Retail investors more bullish on equity indices at year end

Pan-European MTF for securitised derivatives Spectrum Markets has published its SERIX sentiment data for European retail investors for December, revealing a year-end rebound in sentiment towards all European and US equity indices.

The SERIX value indicates retail investor sentiment, with a number above 100 marking bullish sentiment, and a number below 100 indicating bearish sentiment.

‘We tend to see a bump in bullish activity around October as investors look for markets to recover after what is often a quieter period during the summer, but this year it came in during December. This could be due to the global crisis and volatile markets, with many investors feeling unsettled and entering the market a little later than usual,’ said Michael Hall, head of distribution at Spectrum Markets.

‘Despite persistently high inflation in Europe and the US, corporate earnings expectations have remained stable, leading some commentators to hope that the coming recession will be milder than originally thought,’ said Hall.

This combination of factors likely contributed to some of the bullish exposure Spectrum saw retail investors taking towards equity indices in December, though there was also some profit-taking on the short plays, as investors benefitted from downward price swings during the month.

In December 2022, 116 million securitised derivatives were traded on Spectrum, with 36% of trades taking place outside of traditional hours (i.e., between 17:30 and 9:00 CET).

Just over 80% of the traded derivatives were on indices, 10.8% on currency pairs, 7% on commodities, 1.6% on equities and 0.1% on cryptocurrencies, with the top three traded underlying markets being DAX 40 (24.4%), S&P 500 (20%) and Nasdaq 100 (16.4%).

Looking at the SERIX data for the top three underlying markets, the DAX 40 shifted from a bearish 96 to a neutral 100. S&P 500 shifted from 98 to a bullish sentiment of 103. The Nasdaq 100 saw a similar turn from a neutral 100 to a bullish 103.

CME rolls out new micro e-mini options and futures

CME Group has expanded its suite of weekly options expiries for its micro E-mini Nasdaq-100 and S&P 500 futures with the launch of weekly options on 13 February, pending regulatory review.

These new weekly options contracts will complement the existing Friday Weeklies, End-of-Month and Quarterly options on micro E-mini Nasdaq-100 and S&P 500 futures.

‘Micro E-mini Equity Index futures and options have become among the most actively traded equity index products at CME Group, achieving a combined record volume increase in 2022 of more than 50% year-over-year,’ said Paul Woolman (right), executive director of equity products at CME Group.

According to Woolman, interest and trading activity around short-dated options continues to grow, with more than 6.6 million combined contracts traded to date.

The additional expirations based on the two iconic and historic benchmarks will provide market participants more index-related insights on risks, returns and opportunities in the US equity markets, said Woolman

Canada introduces CORRA benchmark

The Bank of Canada-backed group overseeing benchmark transition in the country has recommended moving ahead with plans for a forward-looking term version of the local secured overnight rate.

The regulator is also considering allowing banks to conduct interdealer transactions in derivatives based on the benchmark. Canada is going through its own interest rate benchmark transition after Refinitiv announced in May last year that the Canadian dollar offer rate (CDOR), a rate based on an archaic type of short-term, will be phased out.

On Wednesday, the Canadian Alternative Reference Rate work group (CARR) published a market notice that confirms Term CORRA benchmarks are underway to develop a one- and three-month Term CORRA benchmarks.

Any entity that originates financial products referencing Term CORRA or redistributes it will be required to enter into a licensing agreement. End-users, such as corporate borrowers, will not require a license until the CDOR cessation date in June 2024, but will have to agree to standard terms and conditions and, following the CDOR cessation date, could be required to enter into licensing agreements if it wants to continue to access Term CORRA.