Getting Better All the Time: Switzerland’s Structured Products Industry
Structured product activity in Switzerland continues to thrive. At the end of 2021, there was a total of 778,030 structured products trades, with a trading turnover of CHF 20.1 billion on SIX Swiss Exchange. At year-end, there were over 41,000 structured products and warrants available to investors. Facilitating this robust growth has been SIX Swiss Exchange’s commitment to transparency, efficiency, reliability, and resilience.
“Nonetheless, Swiss investor participation in the structured product market is still fairly limited, with the asset class accounting for just 3% of overall portfolio allocations at institutions,” says Neukom. Most experts believe these portfolio exposures ought to be closer to the 5% threshold, although this will require the industry to make a wholehearted effort to better educate the wider investor community about the advantages of structured products.
“In addition to offering potential yield enhancements for investors, the flexible nature of structured products makes them an effective hedge against wider market volatility,” according to Fiastri.
But what sort of structured products have been popular among investors over the last 12 months? “Appetite for high yielding products including reverse convertibles and autocallables has been buoyant, while there is also strong interest in ESG (environmental, social, governance) and crypto-linked instruments,” says Neukom.
In the case of ESG, investors are increasingly searching for returns, which make a positive environmental or societal impact. Similarly, regulators – including the EU through its Sustainable Finance Disclosure Regulation (SFDR) – are also encouraging greater investment into ESG products.
“On crypto, many investors simply want exposure to products which are uncorrelated to equities. Although there is evidence of an increasingly marginal correlation between equities and crypto price movements, the latter does still provide investors with diversification benefits,” notes Fiastri.
Maximizing Success Through Efficiency Gains
A number of enhancements have been made to SIX Swiss Exchange’s CONNEXOR platform – a service which facilitates the efficient management of reference data throughout the entire lifecycle of a financial product. While structured products are at the core of CONNEXOR’s product offering, other asset classes are being integrated into the platform including listed and unlisted bonds and exchange traded products.
CONNEXOR is also targeting the APAC market, where a lot of processes underpinning structured products continue to be performed manually.
Most recently, the Spanish Stock Exchange BME, which is part of SIX – introduced CONNEXOR to their warrants issuers in Spain. “CONNEXOR will streamline the process of warrants’ admission to trading, by automating the data flow from the issuers to BME, including Iberclear. The roll-out to the Spanish market is a step forward in the digitalization and modernization of the listing process,” says Fiastri.