Structured Products Platforms Report 2019

Structured Products Platforms Report 2019

Introduction

This report records the progress so far - and the barriers that remain - of the structured product industry’s shift towards automation and digitalisation. It does not seek to rate the different platforms operating in the structured products market. Rather, the aim is to shed some light on a lesser-known part of the industry.

Over the last year and in 2019, the market has recorded several high-profile developments in the platforms’ space including the launch of Luma Financial Technologies, a multi-issuer electronic platform for structured products and annuities. Luma was launched in mid-2018 with Bank of America Merrill Lynch and Morgan Stanley as its main shareholders.

Later in the year, Simon Markets, the online distribution platform for financial professionals focused on structured investments owned by Goldman Sachs, was offloaded by the investment bank which sold its majority equity interest. The platform added a group of investors and issuers including Barclays, Credit Suisse’s Next Investors, HSBC, J.P. Morgan, Prudential and Wells Fargo.

Earlier this year, we saw the demise of WallstreetDoc’s Transparitrade after the platform’s main shareholder reviewed the strategy and decided to focus on the legal business building on the relationships with some investment banks working with WallstreetDocs.

Similarly, ResonanceX reviewed its business model and shifted its issuer focus to become a onestop- shop for the design, pricing and trading of bespoke structured investments for the buy-side. The UK based platform reached an exclusive agreement with multi-dealer request for quote (RFQ) platform OTCX to combine capabilities and offer ‘all-in-one’ service.

Also in Q1, Swiss company DeltaQuest launched Strukis – a new click-and-trade platform aimed at

disrupting the country’s platforms market which is dominated by Vontobel and Leonteq. During the first half of 2019, ITG RFQ-Hub was acquired by Virtu Financial for about US$1 billion in a move to complement its high-speed trading capabilities with a brokerage that had relationships with institutional investors.

In Q2, US platform Halo added Allianz as a stakeholder of the company after receiving a US$12m investment from a Series B financing round.

As the industry entered the summer holiday season, a new click-and-trade platform for structured products was launched in France. Feefty is a digital platform targeted at professional investors, private banks, family offices, insurers and institutional investors, with a commission fee of 50 basis points of the notional transacted.

Finally, in early July, Swiss cloud platform and service provider for banks, wealth managers and investment firms, Avaloq signed an agreement to acquire 100% of Zurich-based Derivative Partners, an independent information and data provider for structured products and derivatives in Switzerland.

Our special thanks go to all those executives supporting this initiative and providing input and content for the report.

Finally, we would like to thank Delta Capita for their excellent editorial support in completing the chapter covering the sell-side survey.

Chapter 1 Executive Summary

Overview

In the age of Amazon, Facebook, Netflix and Snapchat, many digital platforms have shown how user engagement can be simplified and streamlined. This has yet to happen in the world of structured products though the industry is moving forward, progressively leaving behind those stuck in an outdated set-up based on emails, phone calls and ad hoc solutions.

Under the traditional framework, clients are faced with issues managing the three steps of the investment process on their own, using DIY methods or receiving support from companies only able to help them through one of those steps.

“The entire investment process is not only a trading operation, it also includes what happens before and after the trade,” says Stanislas Perromat, founder and managing director at PrivatAM. “Before, clients were typically spending six to 10 hours per week, struggling with Excel spreadsheets to manually create, reconcile and follow their investments.”

The structured products industry is behind other segments of the capital markets when it comes to technology and automation. But a number of investment banks have invested heavily in technology over the last decade, and are well ahead of other issuers when it comes to offering automated tools.

Some single-dealer click-and-trade platforms originated at investment banking level have become very powerful tools that go beyond pricing and execution with easy to navigate user-friendly interfaces. This has paved the way for the rest of the industry to gear up.

“Private banks are seeking to increase their penetration ratio with relationship managers by using this kind of technology as well as increasing the efficiency around their structured products activities and reducing manual work when it comes to transacting and managing structured products,” says Géraldine Laussat, head of structured products at Virtu Financial.

The industry is in the midst of the third stage of the structured products platform landscape evolution. In the early 2000s, the first single-dealer platforms were developed by a handful of investment banks. Around 2012, a number of these banks and fintech firms launched multi-issuer versions. Over the past two years, the market has seen a wave of new entrants including unregulated brokers challenging established players.

“The need to streamline processes is making buy-side firms engage with product manufacturers offering automated solutions”

According to Laussat, there are three types of competitors in Europe. Firstly, RFQ platforms aimed at dealing desks of private bankscapturing institutional workflow of private banks from €500k to €20m. These co-exist with platform solutions aimed at the retail market and asset managers, as well as web-based platforms developed by broker-dealers.

When it comes to adoption, it can be a case of chicken and egg. The sell-side has been somewhat forced to make the shift towards automation on the back of new regulatory requirements and increasing costs whereas the buy-side has been slower in its adoption. However, the need to streamline processes is making buy-side firms engage with product manufacturers offering automated solutions.

And/or?

Single-issuer platforms such as BNP SmartDerivatives, SG Markets and UBS Equity Investor have been at the forefront of developments for a number of years. This has given them a head

start over others, as well as the ability to build very powerful platforms in response to market needs. Other investment banks such as Goldman Sachs with Marquee, JP Morgan with its SI 360 platform, RBC or HSBC, although slightly later in the game, have also developed their own digital tools recently to transact structured products.

“Adoption of single-dealer platforms is everywhere and has grown exponentially over the last few years,” says David Wood, head of electronic business equity, derivatives & cross asset for Société Générale Corporate & Investment Banking (SGCIB). “We’re still adding customers to the platform. For independent multi-dealer platforms, growth is slow but it seems to be gathering momentum. It’s still early days for some multidealer platforms but the smaller, more agile independent broker ones are making progress faster. These firms are building and putting these tools in their clients’ hands.”

Despite the increasing traction around multi-issuer platforms, most investment banks are retaining and creating single-issuer hubs targeted at execution and advisory desks, as they are “more suited for professional investors”.

“Most issuer banks are developing some sort of internal pricing platform,” says Eric Wasescha, head platform solutions at Vontobel Investment Banking. “This involves a shift in philosophy from the reverse enquiry set-up.”

Single-issuer platforms make sense because private banks need a tool to carry out RFQs for their audit trail but also a technology hub to aggregate all the pricings from single issuers.

“The way some of these private banks are operating is by opening five, six or seven accounts with issuer platforms so they replicate the payoff as many times as the number of platforms they are connected to,” says Nicolas Gaumont-Prat, managing director at RiverRock’s Linkedtrade. “However, from an operational perspective, this approach is not efficient and that is why multi-issuer platforms make sense. However, this is early days and the market is a long way before a multi-issuer platform can do any product or payoff, and execute.”

For Mahesh Bulchandani, CEO and director, FinIQ Europe, adoption has been slower than expected because manufacturers are still nervous about the multi-issuer approach and have not embraced it, “Most investment banks see multi-issuer platforms

as competitors that will cannibalise their singledealer counterparts,” he says.

Another cause for concern for investment banks is that multi-issuer platforms are going to tighten the bid-offer spread as private banks and advisers will be able to compare prices more easily and narrow down profit margins.

“The experience in Asia is that this happened but not as much as people had feared,” says Bulchandani. “Ultimately, a trade has to be appealing for the issuer to go ahead and execute but if they do not justify the capital they are putting in and the risk they are taking, it will not happen. You can call 200 banks to get pricing but if a trade does not make sense the investment bank will just not do it.”

The good news for platform providers is that although every trade has to provide a decent margin, this is a complex market and every so often investment banks make errors of judgement and lose money with their product management.

“We think platforms are not about gaining market share or winning every trade but about managing the risk and making money out of that product management,” says Bulchandani. “That approach has resulted in margins still being decent - they came down but did not nosedive.”

Although there are a few global platform solutions with a very broad reach, fully automated setups seem to be limited to some of the main retail structured products markets - and a handful of markets only.

Players with no platform cannot really serve clients that are now demanding increased connectivity and efficiency to manage these products

“At SG, we look at platforms as a competence factor,” says Wood. “Those players with no platform cannot really serve clients that are now demanding increased connectivity and efficiency to manage these products. The differentiating factor nowadays is to be able to respond to the needs of those clients as opposed to just having a platform.”

Market edge

In the current environment, the downside of single-dealer platforms is twofold, according to one private banker.

“On the one hand, there are too many of them, and they all look very different,” he says. “If you want to price a structure from multiple banks you have to log in to multiple platforms and spend a significant amount of time navigating them, comparing the different prices and then keeping a log for the regulator to prove you got the best price [best execution] which is far too complicated.”

On the other, large private banks only have a limited number of people from the product desk using single-dealer platforms but hundreds of bankers that are not structured products specialists and dealing with other products.

“[These bankers] are not in a position to deal with many different platforms and that is why the multi-dealer/multi-asset set up is more appealing and in line with private banks as they can get pricing from the different issuers in one place,” says Bulchandani. “When you open a platform to thousands of people doing bonds, funds, structured products, FX derivatives and seeking solutions for their clients, the market can be broadened.”

Antoine de Charnacé, chief executive at Contineo, notes that buy-side demand for more automation has increased over the last couple of years because they see this as a very efficient way to meet new regulatory requirements - best execution being one example.

“Platforms are also seen as a way to unify tools used by different buy-side firms with a global reach that are seeking ways to be very precise when choosing what manufacturers they want to work with,” he says.

The structured products market now has a number of live platforms covering different functions with different target markets and operating in different jurisdictions.

“In that sense they can co-exist,” says Bulchandani. “Single-issuer platforms are more relevant to the execution desk whereas multi-issuer ones are more relevant when building the banker-advisor relationship.”

From price discovery to AI

A relationship manager traditionally had to seek out relevant information contained in a flurry of emails not specifically adapted to their preferences, and sift through product manufacturers’ varying formats and terminology. Then, they had to contact each issuer one-by-one to find the best pricing. Last but not least, they had to book and follow all the different types of products, issued by different investment banks, with various underlying assets.

A few years ago having a pricing tool or an email pricer was enough to make a difference in the market but this is no longer a differentiating factor. Technology is helping to streamline processes and bring efficiencies to sell- and buy-side firms dealing with structured products for the back-, middle- and the front-office.

Price discovery remains one of the most powerful functionalities of a click-and-trade platform as it empowers advisers and relationship managers by putting in their hands a tool they can use to shop for different structures and price them on the fly.

However, even today, although some single-issuer platforms play a very important role for price discovery, they do not offer a real platform set-up as nothing is done on the platform – the price discovery is done on an electronic basis but everything else is decided by phone or email.

“As trading is digitalised, connectivity between internal systems and with external providers is increasing and improving”

“If an issuer wants to price a product and the product is priced by a machine using a financial information exchange [FIX] message to me that is a proper platform,” says one investment banker. “If the platform prices a product using some other method and then the client has to be on email to be able to get the price then we’re talking about an email generating system.”

This is a high-risk area in the market for bankers and distributors so platforms should empower bankers and make them feel they are in control with a toolkit

that is comprehensive enough to stop them from making mistakes.

However, because private bankers need more than just pricing and execution, there was an opportunity to develop pre- and post-trade workflow solutions that would appeal to product distributors. Multiissuer platforms became the perfect solution to serve bankers seeking to put the name of the client in the platform as well as do real-time checks on suitability, credit, funding and documentation.

“In a good platform you will have 50 variations of the same structure and you can price all 50 of them on the fly and get quotes on all of them within two minutes so that the adviser can decide which variation makes sense for my client,” says Bulchandani. “Not all multiissuer platforms can do that. This is why some single issuer platforms are more comprehensive in their offering than some multi-issuer platforms out there.”

“Eventually a platform should be able to serve every single client with a customised approach based on their individual profiles in the platform”

The offering and capabilities of the different platforms differ but over the last two years there has been a clear shift towards developing new functionalities and tools such as mobile apps, application programme interfaces (APIs) as well as the use of machine learning algorithms to provide further scope and a differentiating edge.

As trading is digitalised, connectivity between internal systems and with external providers is increasing and improving. But this is only happening because processes are being automated throughout the trading lifecycle, says ResonanceX CEO Guillaume Chatain.

“Providers with a strong digital profile can now capitalise on new opportunities to develop tools to improve the client experience but also access the platform on the go via different devices such as tablets, mobile phones etc,” he says.

Some of the most advanced platforms are being built to replicate successful online businesses like Hulu, Amazon and Netflix. These high performance technology companies have leveraged user data,

artificial intelligence (AI) and algorithmic capabilities to profile clients and offer recommendations based on user preferences.

“Eventually a platform should be able to serve every single client with a customised approach based on their individual profiles in the platform,” says Wood. “The idea with this kind of tool is to provide tailor-made product recommendations based on past activity.”

ResonanceX demonstrated in 2018 how blockchain technology can be used to provide a transformational benefit for structured products

As the market reaches a stage where the old email/ phone set-up is used alongside the most advanced algorithms linked to structuring bots or digital structurers that connect with trading desks of investment banks to price those products, some players have already proven that platforms can actually go further.

ResonanceX demonstrated in 2018 how blockchain technology can be used to provide a transformational benefit for structured products. The UK-based fintech brought to market the world’s first structured product issued, cleared and settled on an open public Ethereum blockchain.

Hariton Korizis, a product architect at the company, notes that the whole point of leveraging technology is to provide a holistic set-up from the moment a trade is done.

“We showed the market that blockchain technology could be a game changer in the way products are transacted as it will enable smart contracts to administrate the lifecycle events and cashflows for structured products,” he said. “This will further reduce issuance and administration costs, while ensuring compliance with regulatory client money/asset rules and contractual requirements.”

Model models

There is no single platform that covers pre-trade, execution and post-trade.

When it comes to multi-issuer platforms in Europe, advisers and private banks can use Leonteq Constructor and Vontobel Deritrade, owned by investment banks. Also in Europe, mainly in France and Switzerland, there are a number of brokerled platforms including RiverRock LinkedTrade, PrivatAM Parity and Lynceus Argo..

In the US and Asia Pacific, advisers and relationship managers can use Contineo, Simon Markets and Luma, which are owned by consortiums of investment banks and product manufacturers. Also in Europe the US and Apac, there are a number of independent fintech providers such as FinIQ, Virtu (formerly ITG/RFQ-Hub) and most recently OTCX/ ResonanceX and Halo, offering similar capabilities for distributors in Europe, Apac and the US.

In addition, several technology firms such as Numerix, Bloomberg and Modelity have also developed the infrastructure to manage pricing, click-and-trade, and post-trade modules targeted at the structured products market.

Some of the executives polled for this report noted that, as the market consolidates, one of the bestselling points for independent platforms is that they are offered by ‘truly independent technology providers with no manufacturing or distribution bias’.

“When you call one of these platforms with a request at any level, they don’t have any other business than doing technology,” says Bulchandani. “If the market is moving and there is a lot going on, they don’t really care because their focus is on technology.”

Being multi-asset also seems to give some platforms an edge as their footprint with investment banks goes beyond structured products and equity derivatives.

“Our platform enables investment banks to do structured products, spot FX, FX derivatives and bonds in the same place,” says Karim Faraj, head of structured products at Bloomberg. “So our clients can book multiple assets through our platform and transact a number of different trades. Being more than a structured product platform has given us a solid foundation to have a state-of-the-art hub to help banks pricing and issuing their products.”

Platforms owned by investment banks and consortia of manufacturers such as Leonteq, Vontobel, Simon, Luma or Contineo, also have their own advantages.

“They started by automating their own processes and then offered that automation to third parties,” says one banker. “This approach is very powerful

because they’re giving clients the same tools that they use internally, but there are question marks in relation to how transparent is the process.”

Regional landscape

In Asia, Contineo is conceptualised as a platform targeted at the sell-side so all the functionalities are designed with the sell-side in mind. FinIQ, on the contrary, has been developed with the buy-side in mind and with input from the buy-side, according to Bulchandani.

In Europe, Vontobel and Leonteq have developed very strong platforms as well but are targeting different type of clients: asset and wealth managers as well as multifamily offices as opposed to private banks.

In the US market, the main user is the intermediary market, with platforms having a strong educational component. The three platforms active in the US market are also seeking to grow the market by providing connectivity and access.

Apac and Europe have different set-ups because of the differences around client types, RFQs, workflow and budgets. The European platform business is more about sustainability than growth. In Europe, platforms are used as comprehensive hubs to cut costs, streamline processes and make structured products a sustainable business. In Apac, the platforms’ business is focused on growth (equities, autocalls).

Looking ahead

The platform’s market remains fragmented with more competition and different players trying to do similar things. But the ultimate measure of success for platforms will be profitability and credibility.

The reality is that despite a lot of talk surrounding them, platforms remain mystical. This is why it is going to take time before electronic trading of structured products happens on a large scale. Transparency is also an issue as some of the players continue to hide sales volumes behind a wall of silence and others keep the illusion of having something special or the magic bullet to differentiate their offering when everybody knows how far the technology can go and what can be done at this stage.

All in all, platforms will continue to expand and become more relevant in the flow side of the business, but for the more sophisticated investor platforms will remain a marginal tool.

Chapter 2 Platform Profiles

Single-issuer

BBVA PORTAL

Overview

Spanish bank BBVA partnered with Bloomberg in the summer of 2017 to launch BBVA Portal, a meta-tool to enable its institutional clients to build bespoke structured products and calculate pricing in real-time in a fully automated fashion via Bloomberg’s Derivatives Library (DLIB), which makes part of Bloomberg Professional service, the company’s financial data and information platform.

BBVA Portal platform offers autocallable structures such as Athena and Phoenix structures, as well as reverse convertible strategies in a note and swap format for more than 400 underlying assets.

In addition to delivering structured products pricing provided by BBVA in real-time, the Spanish bank’s clients can access DLIB tools to manage the derivatives workflow, from idea generation and market-data analysis to structuring and pricing of new products. BBVA Portal buy-side clients can also access Bloomberg’s DLIB back-testing capabilities, stress testing tools and product lifecycle management.

This includes a library of pre-existing and custom deal templates for structuring equity, FX, credit and interest rate derivatives contracts with desired characteristics. Users can work-up theoretical pricing and analyse the risk of deals, including exotic and hybrid payoffs, on the Bloomberg Terminal when they are ‘Bloomberg Anywhere’ subscribers.

BBVA Portal users can also save their deals for future reference via DLIB’s Bloomberg Multi-Asset

INSTITUTIONAL/BUY-SIDE

Risk System (Mars), which provides a list of precanned referenced data shocks, historical events and crisis as well as custom scenarios to anticipate upside and downside scenarios.

Mars front-office is targeted at hedge fund traders, portfolio managers and investment advisors as well as sell-side traders, structurers and sales people. This functionality allows for position monitoring, pre-trade analysis, intraday lifecycle and cash flow management, and provides regulatory capabilities to comply with the Priips and standard initial margin model (Simm) guidelines.

Key Elements

Speed: 45 sec to obtain a price

Autonomy: Clients drive product design, choosing from 330 + underlyings and making it possible to use hundreds of combinations when building a customised product.

Execution: Prices are firm and in real time

Access/Multi-channelling: clients can use the Bloomberg terminal, smartphone, tablet or laptop.

Functionality: Clients can price and close any kind of autocallable and reverse convertible structures via Bloomberg in a completely automated process including different parameters such as coupons, barrier levels, triggers, and funding parameters, insert desired return in both absolute and relative terms, back-testing.

BBVA Portal - Technical Capabilities

Technical specifications:

Autocallables, Versus/Phoenix, Reverse Convertible and Put Worst of; BBVA notes, options or swaps; EUR, USD, GBP, CHF or SEK; Maturities up to six years; forward strike up to 70 days.

How many underlyings are covered (Americas)?

200 USA underlyings including 25 ETFs, eight ADRs and main S&P 500 stocks

How many underlyings are covered (Asia)? 0

How many underlyings are covered (Europe)?

330 underlyings including global indices, and main European stocks including 15 Swiss stocks

How many payoffs are covered (Americas)? Phonenix, Rev conv, autocall, Twin WIn snd Booster

How many payoffs are covered (Asia)? 0

How many payoffs are covered (Europe)? Phoenix, Rev conv, autocall Twin WIn and Booster

Error Rate (%) - n/a

Min ticket size ($k) - Swaps €200,000, Notes €500,000

Max ticket size ($k) – €4 million

Educational Material (Y/N)? Clients can access any educational materials via Bloomberg including backtesting, lifecycle management. Bloomberg Dlib has a number of features and additional service clients can access too

Do you include product recommendations and ideas? n/a

If yes, how often and how many? n/a

Do you include research (Y/N)?

Via Bloomberg Dlib

Do you offer news (Y/N)? News and corporate actions via Bloomberg Dlib

Mobile/App Accessible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). THREE MINUTES

What liquidity/secondary trading is offered? Not currently but in development. Clients can see via Bloomberg/Reuters were the value of their positions are

What post-trade services can you provide? YES

How long does trade execution take? REAL TIME

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? REAL TIME

How do you ensure the security of transactions and client data? Does your platform offer full same-day execution/Straight-Through-Processing (STP) (Y/N)? TELEPHONE CONFIRMATION

Do you offer STP trades for sale to US investors (Y/N)? YES

Do you offer STP trades for sale to Offshore investors (Y/N)? YES

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? NO

Do you provide immediate term-sheet generation (Y/N)? No, but planned. Clients can get this via Bloomberg DLib

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? No

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)?

Yes

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? Fee-based

Does the platform cater to public offerings in the respective regions (Y/N)? No

BNP PARIBAS SMART DERIVATIVES

Overview

In 2012, BNP Paribas’ Smart Derivatives launched in Europe, Canada’s offshore market and was also rolled out in Asia with some specific features to comply with local regulatory requirements.

The platform is now live in a number of European countries including Switzerland, Luxembourg, Belgium, France and the UK, with the French bank planning to launch it in the US market. Smart Derivatives is an online equity derivatives trading application.

Smart Derivatives is a web-based platform providing a full combination of marketing, primary and secondary trading, and post-trade information on structured products, built around three interactive and complementary applications.

With this platform, BNP Paribas offers a one-stop online platform that covers all aspects of the client experience from pre- to post-trade. The platform is used both by internal users at BNP Paribas and by clients, and allows them to achieve their investment strategies while streamlining their structured products operations. Smart Derivatives is now live in more than 49 countries, offers pricing or trading abilities on more than 500 payoffs with more than 5,000 underlyings available.

The platform on-boarded credit-linked notes and interest-linked notes recently. Furthermore, sales are now able to price through the platform equity or rates hybrid credit contingency. This new function allows sales to add a credit risk to all standard payoffs. In addition to structured products, Smart Derivatives is also extending to the flow business. The platform has truly moved from an EDQ tool to an integrated crossasset solution with the ability to price and trade fixed income, credit and equity derivatives.

Since January 2018, Smart Derivatives has been upgraded to comply with Mifid 2 and Priips requirements, and to offer to clients all necessary documentations (target market and KID). Through Smart Derivatives, both BNP Paribas sales and clients are able to produce those complex documents on the fly for an unlimited range of payoffs and in more than 14 different languages. As a part of BNP Paribas strong commitment in CSR, Smart Derivatives offers, since the beginning of 2019, an access to ESG ranking of underlying companies.

In an effort to further diversify our coverage,

BNP Paribas has continued to expand among the registered investment adviser and relationship manager community. The success of our whitelabelling partnerships has led us to build an interactive education tablet app with product ideas selection wizard and price simulation, which is complementary to the Smart Derivatives offer.

In collaboration with BNP Paribas Global Market Lab, a mail parsing service based on artificial Intelligence has been integrated in the Smart Derivatives platform. It has first been successfully launched in Asia, but is now used in full scale in both the American and European markets with very positive results. This service, based machine learning and natural language processing, converts any format of email sent by a client into a defined request directly onto the platform.

Connectivity to external platforms has been one of the biggest challenges of the last two years.

Leveraging on our connection to multi-issuer platform FinIQ in Asia, we have been able to deploy a fully serviced workflow for ELI products in Asia targeting the retail market. Smart Derivatives has also been connected to the UBS private bank platform since last year, providing, pricing, execution, document generation.

Smart derivatives has been connected to the SIMON platform in the US on the primary and secondary Markets since Q2 2019. Most recently, Smart Derivatives has been connected to Vontobel multiissuer platform Deritrade.

Key Facts

 Number of trades via SD in 2018: more than 200,000 primary and secondary trades.

 Around four million quotes generated through the platform, including 30% triggered by the clients themselves.

 More than 1,200 active users of SmartDerivatives

Notional transacted in 2018: Not disclosed

First issuance/secondary issuance: 30%/70%

Pricing delivered directly to relationship managers: Yes

IT budget/Increase from last year: No disclosed

Smart Derivatives - Technical Capabilities

How many underlyings are covered (Americas)? +5,000

How many underlyings are covered (Asia)? +5,000

How many underlyings are covered (Europe)? +5,000

How many payoffs are covered (Americas)? +500

How many payoffs are covered (Asia)? +400

How many payoffs are covered (Europe)? +400

Error Rate (%)- N/A

Min ticket size ($k) - 150K

Max ticket size ($k) – N/A

Educational Material (Y/N)? YES. Market Intelligence and trade ideas provided by our structuring team in our “Pre-trade” page called Investment Strategies and pushed by the sales based on client profile

Do you include product recommendations and ideas? YES

If yes, how often and how many? Weekly Basis

Do you include research (Y/N)? NO

Do you offer news (Y/N)? YES

Mobile/App Accessible (Y/N) NO

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes) - 10 MINUTES

What liquidity/secondary trading is offered? Live bid-asks with no minimum size accessible all day

What post-trade services can you provide? Valuation, secondary trading, backtesting, notifications on performance and events impacting the products (barriers, coupon payment, maturity, autocalls, etc.

How long does trade execution take? From 10 seconds to a 1 minute

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? 1 for pricing + 2 for trading

How do you ensure the security of transactions and client data? All the trades are following a workflow of validation and the platform is linked to an internal monitoring/audit system in order to ensure the security of transaction and client data - Our legal and compliance teams have also access to the platform in order to check if the security checks are in place

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? NO

Do you offer STP trades for sale to Offshore investors (Y/N)? YES

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? YES

Do you provide immediate termsheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivise higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? YES

What features do you plan to add in the next 12 months? New and simplified design on Secondary tool /Finalisation of integration of x-asset products/More connectivity and development of API to enhance our time to market for new connectivity project.

What differentiates your platform? Very flexible technology allowing to onboard new payoffs very easily: 98% of the products can be priced and traded via SD with automatic generation of the docs. One stop shop platform from pre trade to post trade with access to value added services throughout product lifecycle (grid pricing, basket optimizer, backtesting, porfolio monitoring (barriers, coupons, maturity, etc.)

SG MARKETS

Overview

The French bank launched its Alpha platform in 2010 to connect clients directly to its trading floors, providing access to the bank’s range of electronic offering. Alpha offered pricing for FX spot, swaps, forwards and non-deliverable forwards (NDFs); precious metals spot, swaps and forwards; money market deposits; equity indices; primary issuance and secondary market for structured products; and base metals outrights and carries. The platform had a web user interface, and also offered an application program interface (API).

In 2015, the French bank added an OTC functionality to allow distributors, private banks and wealth managers to price OTC instruments. In 2016, Société Générale launched SG Markets which replaced Alpha. The bank migrated all its clients to a new umbrella platform for structured products desks, distributors, private banks and wealth managers called SG Markets Structured Products which offers an integrated offering. The interface was revamped via the new HTML 5.0 technology which is supported by the different types of devices (smart phones, tablets, PCs).

2018 was a transformational year because of the regulatory changes which had a major impact on what people did and how. The new framework really put into perspective the complexity of delivering new products. Every platform had to adapt to the new guidelines and we had to focus on addressing any issues relating to Mifid 2 and Priips.

Towards the end of 2018 and YTD, the focus seems to be on connectivity with issuer and distributors seeking ways to effectively facilitate the access to platforms. SG became an issuer on UBS internal private banking platform alongside other investment banks such as UBS, Vontobel, and Barclays, and we have done that with other banks as well.

Connectivity is a big driver and we have seen it with SG Market which we extended so clients can now access via the web interface and we also launched an API to enable access.

We have recorded increased activity over the last two years on SG platforms. The number of products and notional transacted on SG Markets is growing

constantly. We’re now processing over 100,000 products/quotes on the platform per month and that’s driven by the number of users but also new places we’re connecting to (UBS, Riverrock, Lynceus, PrivatAm via API).

Most of the developments have been around pricing, booking and document automation, with the next phase focusing on life cycle management. We are now investing in automating the full life cycle of these products by streamlining the backoffice process.

The key factor for us is that it is a front-to-back solutions for structured products providers from pricing, pro-/pre-trade documentation (term sheets in multiple languages…), STP trading and the whole regulatory workflow. Within a minute of a trade going through the client will get all of that. The platform offers a full front-to-back environment to manage structured products, and new functionalities such as the advisory tools to support clients in idea generation, and the support in the secondary market (valuation data, event data, etc), and then overarching that if the client does not want to use a website but prefers to plug into one or many elements of the into your own internal systems clients can do that with the SG Markets API.

The feedback we get is that it is easy to use. A number of new entrants seem to be replicating what other platforms already offer and we take that as a reinforcement that we have done the right thing and others are following our steps. One of our main differentiator is that we have an offering very few investment banks can match out there, with hundreds of products and strategies as well as.

We have the ability to price and trade what people want and we’re working on expanding the products available beyond autocall, participation notes, and CLNs as well as a huge catalogue of global underlyings. The other two areas are that we’re now open to connectivity and integration to other platforms and clients via our API which is a significant step to move beyond the email pricers we see. The API has ma SG Markets multi-channel irrespective of how do you want to connect with us. We also think our advisory tools will open up new opportunities for market participants.

Key Facts

Number of issuers connected: One - SG

Number of distributors connected: 1000+

Notional transacted in 2018: Not disclosed. Over 75% of all the tickets we process in the platform are fully STP. Most tickets are fully automated (booking, pricing, documentation) compared to the traditional workflow. Over 700k quotes are made through the platform and 90% of quotes are requested by clients themselves. Trade volumes increased 40% in 2017

First issuance/secondary issuance: Primary and secondary trades executed on the platform account for 48% and 52% respectively

Pricing delivered directly to relationship managers: Yes. We’re directly connected to the other platforms and our prices are delivered directly to the RMs.

IT budget/Increase from last year: Budgets are ongoing and a constant challenge. This business is about looking at efficiencies and bring the cost out on the issuing and selling as well as operational and IT processes as well.

SG Markets - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? 2,000+

How many payoffs are covered (Americas, Asia, Europe)? 21+

Error Rate (%)- 1.4%

Min ticket size ($k) - 50K

Max ticket size ($k) – Up to $10m (depends on underlying)

Educational Material (Y/N)? YES. Full tutorials provided for products

Do you include product recommendations and ideas? YES. Our Basket Optimiser tool provides on-the-fly product ideas, with the top 20 baskets proposed

Do you include research (Y/N)? YES

Do you offer news (Y/N)? NO

Mobile/App Accesible (Y/N) YES – responsive website

Automated Lifecycle Notification (Y/N?) NO

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). 5 mins

What liquidity/secondary trading is offered? Executable online secondary market

What post-trade services can you provide?

Valuations, Event reporting, Online confirmations, Documentation, Electronic contract signature

How long does trade execution take? Trades & Order acceptance at the time of placing (immediately)

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Six (can be fewer depending on personal preferences that have been set)

How do you ensure the security of transactions and client data? Encryption technologies with multi-factor authentication

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? YES

Do you offer STP trades for sale to Offshore investors (Y/N)? YES

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? YES

Do you provide immediate termsheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? NO

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? YES (IN SOME REGIONS)

What features do you plan to add in the next 12 months? More new products, additional trade idea tools, a new lifecycle service and enhancements to our AP

UBS EQUITY INVESTOR

Overview

UBS was a pioneer in the single issuer platform segment with its UBS Equity Investor (EQI) platform. This platform was rolled out in 2002 to serve its adviser clients in the Swiss market and has since been launched in different regions globally.

Equity Investor is an electronic interface that allows private banks, securities firms and wealth managers to input preferences for a structured product by selecting parameters, such as barrier, strike and maturity, and get a price.

The platform also allows users to create an investor-approved term-sheet and submit an order with straight through processing, a unique capability in markets like the US.

The platform is a ‘one-stop shop’ that is completely automated for information gathering, decision making, execution and monitoring purposes.

Having issued over US$66bn in notes globally into the US, Asia and multiple markets in Europe since inception, UBS is one of the largest automated structured note platforms in the market.

In 2016, UBS traded almost US$6.7bn across approximately 50,000 trades through UBS Equity Investor, and in 2017, the bank traded over US$8.9bn across more than 51,000 trades (Source: UBS Internal Data). In 2017, they saw US$1 bn in notional transacted through EQI in the US – this was the largest annual notional executed in US EQI since launch.

The platform provides live pricing and allows users to issue their own personal product, starting at a minimum investment amount as low as CHF 10,000 in some regions. Advisors can define their preferences by selecting parameters such as barriers and tenors to receive automated live

pricing. The tool provides access to a large suite of underlyings – for instance, over 200 single stocks and ETFs are currently enabled in the US version of Equity Investor.

Equity Investor is one of the oldest automated platforms with a significant history of trades and notionals executed via the tool in each region. Since its inception over 10 years ago, more than US$66 billion in notional has been traded on the platform globally with over 500,000 trades executed.

The platform offers front-to-back automation (pricing-termsheet generation-order submission) thereby allowing new product creation in a matter of minutes. There are also trade blotters for advisors to monitor outstanding trades along with lifecycle event notifications. Equity Investor is the only platform that can do straight-throughprocessing of notes for US investors with notionals as low as US$100,000, thereby allowing financial advisors to customise notes for their investors.

UBS EQI offers a robust process that has been tried and tested in multiple regions over more than 10 years. Globally, we are currently available to over 11,000 users.

Key Facts

 Since inception, over US$66 billion in notional traded across more than 500,000 notes. These numbers represent primary trades.

 In 2016 and 2017, each year, over 600,000 quotes for primary trades were provided globally.

 EQI also has secondary market quoting and execution capability.

 EQI has the capability to integrate certain risk, compliance, and governance controls, checks, and reviews.

(Source: UBS Internal Data)

UBS Equity Investor – Technical Capabilities

How many underlyings are covered (Americas)? 281

How many underlyings are covered (Asia)? 761

How many underlyings are covered (Europe)? 439

How many payoffs are covered (Americas)? 13

How many payoffs are covered (Asia)? Eight

How many payoffs are covered (Europe)? Seven

Error Rate (%) - Seven bps (0.07%)

Min ticket size ($k) - 10K

Max ticket size ($k) – 250,000K (The sales desk would require prior notification for a trade of this size - assuming the underlying is liquid enough, it would take under a minute to use admin controls in order to change the underlying-specific size cap to 250 million USD to allow the trade)

Educational Material (Y/N)? YES. Product Information and payoff diagrams provided

Do you include product recommendations and ideas? NO

Do you include research (Y/N)? YES (This is currently possible, but will need to be revisited in January 2018 due to Mifid II regulations)

Do you offer news (Y/N)? YES (This is currently possible, but will need to be revisited in January 2018 due to Mifid II regulations)

Mobile/App Accessible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES This WENT live in January

How long is quotation held? (minutes). One min for instant execution; Good-for-day and good-for-week levels

What liquidity/secondary trading is offered? We allow automated quoting and execution of secondary sell-backs to the issuer

What post-trade services can you provide? We provide trade blotters for monitoring of active, called and expired trades with a termsheet depository.

We provide notification of upcoming expirations, barrier breach, early call and expiry. Corporate action handling, one-way secondary market ( i.e. liquidity),

How long does trade execution take? The full process from clicking on “request quote” to, receiving a preliminary termsheet, then clicking on “submit order” and receiving a final termsheet could be done in 2 minutes

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Assuming this structure was available in the specific region, a user could completely execute this trade without any manual touchpoint

How do you ensure the security of transactions and client data? UBS standard authentication, including 2-factor authentication for external access; annual penetration tests, distinct user role profiles with need-to-know access; segregation of Production data from development

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? YES

Do you offer STP trades for sale to Offshore investors (Y/N)? YES

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? YES

Do you provide immediate termsheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? US - Y Registered Public securities, Asia - Private securities, Europe - Private securities

What features do you plan to add in the next 12 months? Longer subscription periods, more payoffs, more features (e.g. quanto settlement), more markets

UNICREDIT – MY.ONEMARKETS

Overview

In September 2012, HypoVereinsbank (HVB) began to offer a special service to private investors. Using the my.onemarkets product configurator, private banking advisers and selected financial advisers in the bank’s branches can help investors design a custom-tailored solution in a matter of minutes for a minimum investment of €10,000.

The my.onemarkets platform has established itself since 2013 when it was integrated into UniCredit’s German retail network and as of 2014 into its Eastern European banking network.

The onemarkets platform provides a venue where structured products can be manufactured to service different client profiles. The platform operates within a financial advisory setup in a private banking and retail network

Investors can choose from a range of products, including: reverse convertibles (classic, protect, express protect); express certificates (classic, plus); bonus certificates (classic, cap); reverse bonus cap certificates; and capital-protected notes (classic, cap).

Around 135 underlyings are available. The platform allows investors to change individual parameters to adjust the risk-reward relationship in order to meet their needs. Products are issued at the push of a button and the platform is integrated into the advisory process, with key investor documents (the Produktinformationsblatt, or PIB) and marketing documentation automatically generated.

The individual International Securities Identification Number can also be used on the onemarkets website to obtain information on the product during its entire life cycle. Although the products are generally not listed, they can be sold at the daily price on any stock exchange dealing day.

My.onemarkets provides an integrated advisory

approach can be used to develop custom-tailored solutions with the client that lead to increased customer satisfaction. Fast automated issuing of the product leaves more time to perform a needs analysis during the meeting with the client. Around 8,800 products, with a volume of approximately €330m, since its launch.

Currently, 40 to 50 transactions with an average investment of €37,500 are being performed per day. My.onemarkets is currently being used in the German HVB network and in other UniCredit banks in Central and Eastern Europe.

Differentiating factors

The onemarkets platform is a product management platform that supports the entire product life cycle for structured products.

Unlike other typical structured products platforms which are pricing and booking tools for product managers, my.onemarkets was designed to be used during the advisory process in our client network as well as the private bank. My.onemarkets acts as a sort of robo-advisor as it offers tailor-made structured products from €10,000 onwards.

The platform also provides full documentation, and can be used to create investment protocols or showing product explanations via videos or brochures.

Additionally, Unicredit’s sales force provide training sessions explaining the functionalities of the my.onemarkets platform.

For self-directed investors and direct banks, UniCredit offers my.one direct, a tool that can be white-labelled and integrated into the infrastructure of online banks, enabling self-directed investors to create leverage knock out products such as turbo classic, turbo open end and mini futures tailored to individual risk profiles and appetite, instead of having to search the market for a particular product.

Unicredit My.onemarkets – Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? Depending on client preferences/steering

How many payoffs are covered (Americas, Asia, Europe)? Depending on client preferences/ distribution channels, the payoffs can be steered.

Error Rate (%)- 0%

Min ticket size ($k) - €10,000K

Max ticket size ($k) – Depends on payoff and client preference

Educational Material (Y/N)? YES

If yes, provide brief details. Explanatory videos as well as product factsheets are provided, newsletters, magazines in addition regular advisor training sessions with certifications are given.

Do you include product recommendations and ideas? We have our own marketing department that works on ideas.

If yes, how often and how many?

Do you include research (Y/N)? YES

Do you offer news (Y/N)? YES

Mobile/App Accessible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? NO

How long is quotation held? (minutes). N/A

What liquidity/secondary trading is offered? Secondary is automated/integrated

What post-trade services can you provide? Fully automated documentation, audit function, coupon and maturity notices

How long does trade execution take? Depends on setup of the partner

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Complete process is automated; there are 400 automated steps

How do you ensure the security of transactions and client data? Platform does not deal with client data

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? NO

Do you offer STP trades for sale to Offshore investors (Y/N)? NO

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? NO

Do you provide immediate termsheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? Depends on partners preference

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? YES

Does the platform cater to public offerings in the respective regions (Y/N)? YES

What features do you plan to add in the next 12 months? No comment

What differentiates your platform? Platform fully integrated into advisory process with creation of regulatory documentation (multi-lingual) in use since 2012

JP MORGAN’S SI360

Overview

The new JP Morgan’s SI360 structured products platform went live in 2018 as the bank sought to develop an infrastructure that could be scaled to increase the connectivity between the bank’s investment products catalogue and its clients.

JP Morgan’s SI360 issuance platform was designed to address the current limitations of, and provide the necessary core tools to, a financial advisor using structured products in their clients’ portfolio, the platform focuses on delivering best in class support throughout the entire trade lifecycle – from pre-trade education and analytics to point of sale decision making and post-trade/life cycle support.

The approach taken by JP Morgan in designing this platform – entirely focused on meeting the documented and widespread needs of our primary advisor users – has proven differentiated in the industry and has fueled the highly successful rollout in 2018.

As a platform created to cater to advisor users with all levels of product familiarity, the journey through SI360 for many first time users of structured products begins with a comprehensive library of customized and proprietary educational videos which delve into topics across a range of topics both fundamental (SI 101) and specific (tax treatment). Beyond our content library, one of the core achievements of SI360 is helping advisors easily navigate the breadth of structured investments available in the market at any given point in time, a function that appeals to novice and power users alike. Our user-interface provides multiple choices to the advisor as to how they’d like to view offerings available in their network as well the ability to search and sort deals in subscription by a range of factors, and several

of them at once if they wish. Most importantly, SI360 offers detailed information, including deal documentation and analytics around the product’s hypothetical historical performance, for every CUSIP posted. Having this information available on-demand has drawn rave reviews from advisors as it aids in contextualizing how complex products would have performed over varying periods of time and market conditions.

JP Morgan understands that the client experience of a structured investment doesn’t end after the point of sale – rather, it’s only the beginning. Unlike any previous platform, SI360 delivers the visibility and transparency advisors have been asking for around product performance and secondary pricing across the entire life of the investment. This critical functionality was created specifically to address the most common frustration experienced by advisors utilising structured investments in any meaningful way: keep track of performance and explain how statement values are derived. By providing event notification, complete with explanations, as well as secondary market price decomposition (value broken down separately by bond and option value), SI360 finally delivers, at the click of a button, the information that advisors require to efficiently and accurately ascertain the performance and pricing of a structured product over its entire holding period.

The greatest testament to the success of SI360, and the validation of the focus and functionality it provides, is the massive growth witnessed over the course of 2018 – from a handful of users at the start of year launch to nearly 10,000 onboarded clients today. Additionally, the replication of the advisororiented capabilities by competitor platforms in 2019 clearly highlight to J. P. Morgan that the services pioneered by SI360 are the missing ingredient in the US market, and make SI360 the clear choice for Best Technology Platform in 2018.

BARCLAYS’ BARX COMET

Overview

Launched in 2006, BARX Comet is an online global multi-asset platform which provides pricing and electronic execution capabilities for Structured Investments.

Available within Barclays’ electronic execution platform BARX, Comet allows users to efficiently tailor a bespoke product with access to a wide range of global underlyings across multiple asset classes.

Key elements

Key features of BARX Comet include:

 Customisation of structured investment payoffs

 Efficient price discovery, including flexibility to solve for a variety of parameters

 Multi-pricer feature to price and compare variations of single asset products

 Flexibility across a range of products and global underlying assets covering Equities, Foreign Exchange, Interest Rates and Hybrids

 Automated term sheets and documentation

 Click and trade functionality with real-time execution

 Quote history and trades done view

BARX Comet has a multi-asset class scope and covers equities, commodities, foreign exchange, inflation, interest rates and hybrids.

 Bookbuild new issues without the legwork

 Access daily secondary market liquidity across multiple asset classes

 Create bespoke structured investments online

 Stay informed with updates on barrier events and corporate actions

 BARX Comet is a global platform which provides pricing and execution for equities, foreign exchange and interest rate derivatives.

 Available on the award-winning BARX IS platform, BARX Comet allows you to efficiently tailor a bespoke product across a wide range of global underlyings.

Customisation, real-time execution, integrated offering, bookbuilding, secondary market trading just like any other liquid asset, lifecycle management, global coverage

GOLDMAN SACHS MARQUEE

Goldman Sachs Marquee is an open architecture web technology platform for providing a variety of services and capabilities to institutional clients. The Marquee platform was originally conceived in 2011 and is now a global team of product managers, designers and engineers working hand-in-glove with Goldman’s traders and sales people. Initially designed to allow the firm to externalise some internal tools to its clients, it has evolved into a platform to deliver a comprehensive range of digital services.

Powered by a cross-asset infrastructure designed from scratch, Marquee offers access to market insights, analytical tools, execution services, and data services flexibly through desktop, web,

www.structuredretailproducts.com

mobile, or programmatically via APIs. These applications and services span the investment cycle across asset classes, enabling clients to connect with the bank’s content, trade ideas, analytics and execution capabilities as well as to monitor and optimise trades after execution.

One of GS Marquee’s first applications, since spun out into an independent consortium-backed company, was SIMON, which stands for Structured Investment Marketplace and Online Network. SIMON was specifically designed to help the bank’s clients learn about structured investments and execute transactions, opening up a new thirdparty distribution channel among independent and regional firms, and access to thousands of advisors.

Chapter 3 Platform Profiles

Multi-issuer

AG DELTA DEALSTATION (ASIA)

Overview

AG Delta’s fintech platform for equity-linked structured products was launched in 2014 to target private banks in Asia-Pacific. AG Delta is a B2B2C fintech company that digitally connects the Wealth Management and Investment Product Provider ecosystem.

The online Digital Wealth Platform, cuts through the noise, the regulatory compliance gaps and lack of product provider choice making the complex world of investments more relevant, safer and accessible for clients and their end clients.

Best Execution: the multi asset best execution connectivity hub enables maximum efficiency for the best client experience across the entire trade lifecycle. Financial advisors and dealers can abide by the requirements and principles of Mifid 1 and 2. Financial advice can be acted upon swiftly with real choice given to customers.

Digital Advisory: powered by proprietary matching algorithms and data, artificial intelligence tech. Our digital recommendation engines crunch data and link investment opportunities with personalised client profiles & preferences. Financial Advice will be RELEVANT and TIMELY and augmented with Robo services.

Compliance: powered by a Compliance-as-aService Open API that covers KYC investment. Suitability and cross border regulatory controls. Supporting an Open API approach compliance can be injected into all stages of the advisory process financial advice will be suitable and appropriate across regulatory jurisdictions.

The MIP focuses on efficiencies by eliminating manual email pricing processes, with an electronic platform to support requests for quote/execution to

an extensive panel of trading counterparties and a wide universe of product payoffs.

Unique elements of this platform include streamlining workflows between relationship managers (RMs) and dealers, and between dealers and issuers. This involved normalising communication standards across many global issuers not just for quotes/requests for execution, but also processes, documentation & events during the pre-trade-post trade lifecycle with a comprehensive electronic workflow supported across structured products and note/OTC derivatives payoffs.

Key elements

Dealstation has seen over US$1.5tr transacted across all asset classes and wealth investments in the platform. AGDelta’s is seeking to change the paradigm from a pull (reverse enquiry) to push (smart morning runs, wizards, data driven ideas/ research, quotation sheets that provide more independent DIY capabilities for RM’s to explore suitable solutions for clients whilst freeing up time for execution desks and product specialists to review trends and themes to share based on top down and bottom up views.

The platform addresses cross border marketing, and investment suitability issues (Mifid 2, US 871m) regtech services as APIs so they can be injected not just at or pre-trade but at the ideation stage of an advisory process. The aim is creating Netflix and Apple store effects in the financial industry with various players contributing to the ecosystem vs a monopoly. The platform is a reminder for all banks and fin tech platforms that not one-size-fits-all. Manufacturers and distributors will have to learn to open their systems to survive.

AG Delta Dealstation – Technical Capabilities:

How many underlyings are covered (Americas, Asia, Europe)? AG Delta has no limitation of Underlyings in the Platform as long as they are supported by Issuer Banks

How many payoffs are covered ((Americas, Asia, Europe)? AG Delta has no limitation of Payoffs in the Platform as long as they are supported by Issuer Banks

Error Rate (%)- Not applicable

Min/ Max ticket size ($k) - No limitation as long as they are supported by Issuer Banks

Educational Material (Y/N)? YES

If yes, provide brief details. Features Guide(s), Dealer and RM User Guide(s)

Do you include product recommendations and ideas? YES

If yes, how often and how many? Our platform offeres content publishing for Ideas and recommendations. The frequency of publication is up the user(s)

Do you include research (Y/N)? YES

Do you offer news (Y/N)? YES

Mobile/App Accessible (Y/N) Under development

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). This depends on the Issuer Banks, the platform is flexible to cater any duration

What liquidity/secondary trading is offered? AG Delta platform is catering Unwind functionality and can do secondary market. However in Asia this is not yet market practice due to short tenor practice

What post-trade services can you provide?

Event confirmation, monitoring, notification and documentation to complete post trade services

How long does trade execution take? This depends on the complexity of the payoff, but for flow products it is as quick as issuer banks execute a trade

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? The execution of more complex payoff depends on the issuer banks. AG Delta offers price discovery, execution and STP all in one

How do you ensure the security of transactions and client data? Through our industry-proven architecture and technology

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to investors in all regions including offshore (Y/N)? The restriction as of who can or cannot trade on the platform is configurable in the platform

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? YES

What differentiates your platform? 1. Uniqueness: First multi-issuer execution industry platform, today we cover 18 issuers on the platrform 2. Creativity: Won numerous platform awards in the category including Best Innovative Client platform and Best E-Commerce Platform.

BLOOMBERG DLIB (GLOBAL)

Overview

In 2014, Bloomberg launched its Derivatives Library DLIB, a platform to structure, distribute, price and risk manage derivatives, structured products and dynamic strategies. DLIB is integrated with Bloomberg Profesional Services (BPS) data and solutions such as Desktop and Server API, Excel, the Multi Asset Risk System (Mars) and BVPM — Bloomberg’s portfolio functions that are part of its independent valuation services.

Bloomberg has invested across the board in structured products, with the aim of providing a comprehensive and reliable suite of solutions in an end-to-end workflow. The focus has been to enhance firms’ operational efficiencies with: markets monitors, data analytics, structuring, pricing, execution, sales and connectivity tools, and solutions for order, risk, collateral and lifecycle management as well as regulatory compliance. As a result, Bloomberg has a large community of clients around the globe who get tremendous value from Bloomberg’s Terminal and Enterprise products.

Bloomberg’s Derivatives Library, DLIB, is particularly popular with the structured products community. DLIB offers a completely new way to create and price structured products by making the process easier, but not at the expense of flexibility. DLIB scripting capabilities supports unlimited coverage including complex and hybrid structured products on hundreds of thousands of underlyings. Scripts can become templates, which users can manipulate and customise by entering desired input parameters.

Deals can be shared easily, which facilitates agreement between counterparties. The solution also offers generic life-cycle capabilities and related analytics, such as the probability of hitting a barrier, early redemption or reaching a maximum gain.

DLIB helps broker-dealers scale their structured products coverage to meet growing demand from the buy side, as well as comply with new regulations such as Mifid 2 and Priips. It creates efficiencies that allow brokers to spend more time advising their clients on the best time to unwind deals and roll investment in new products.

The solution supports various instruments such as cash equity and fixed income, mortgages, listed and OTC vanillas, as well as structured products. For example, many clients appreciate Bloomberg’s

ability to provide an extensive list of pre-canned referenced data shocks, historical events and crises, as well as custom scenarios so that they can anticipate upside and downside risks to their portfolios, and drill down to perform what-if analysis without the need to have different systems for structured products and for other instruments. Moreover, once the structured product is created, all Bloomberg’s front to back solutions will work on the fly without any additional effort needed. These solutions support: idea generation, backtesting, back & grid pricing, valuation, intraday and end-of-day mark to market, scenario analysis and stress testing, as well as management of: lifecycle events, cash flow, liquidity, collateral and XVA (with the latest Isda SIMM methodology), front office risk (with advanced bucketed Greeks and P&L explanation), market risk/VAR, counterparty risk and regulatory compliance with FRTB’s standard model and Priips.

DLIB is also seamlessly integrated with Bloomberg’s market data, news and analytics, community and compliance products, order management systems, electronic trading solutions and sales trader workflow. As a result, clients have most of what they need to do business all in one place, and with real consistency across teams in the front office, middle office, risk, operations, finance and compliance.

Bloomberg’s technology is fully scalable and adaptable to meet client needs. Its solutions can be integrated with in-house or third-party vendor systems thanks to Bloomberg APIs and feeds. Bloomberg also provides managed services to further support its clients.

Over the past year, Bloomberg has made some significant enhancements to its offering across all front to back suite of enterprise products. A few examples are listed below.

Enhanced automation

Bloomberg has made various workflows seamless by deploying technology that allows users to automatically map a structured product contributed via ISIN or CUSIP to the equivalent DLIB structure. This provides unprecedented transparency to the structured products market, and removes the need for clients to manually input data related to an existing, issued structured product.

More customisation thanks to APIs

Bloomberg has also invested considerably in

its programmatic API, to open up its crossasset pricing and risk system and its individual components for both the buy side and sell side. Clients can now consume analytics, data, pricing and risk output programmatically.

Expanded coverage for regulatory capabilities

Among other changes, Bloomberg has expanded its Priips and Summary Risk Indicator (SRI) analytics to support Mifid product governance regulation. Clients can now compute SRI for a wide range of products beyond the Priips regulation and including bonds, equities, funds and ETF - all in one solution. Bloomberg has also added automatic Credit Quality Step (CQS) calculation, and expanded to additional emerging market currencies.

Enhanced market data framework

Bloomberg enhanced its market data capabilities by adding more coverage for less liquid underlyings, notably in Asia, and has improved analytics and discovery by using machine learning technologies.

Bloomberg has also improved the modelling for equity volatility surface by adding proxy volatility surface for underlyings with less liquid listed options.

Furthermore, Bloomberg has enhanced its crosscurrency curves and CSA curves to improve accuracy of pricing and provide an arbitrage free framework for CSA curves and risk calculation.

New Enterprise credit curve management system

Bloomberg has also built an enterprise-wide credit curve management infrastructure for CDS dealers, credit risk managers and counterparty risk trading. This framework allows users to create proxy curves using other reference entities and sectors and blending the best available sources with proxy logic to give the best possible estimate of CDS curves. This has enabled clients to enrich their structured products pricing, especially when it comes to credit hybrids, CLN and funding modelling of structured products notes.

Supporting the Libor transition

With the introduction of the new indices (e.g. SOFR, Sonia, ESTR, etc.) as an alternative to Libor, Bloomberg introduced pricing transparency and analytic support for a suite of new products to meet this new need. New Ibor based yield curves were built and integrated into its pricing and structuring applications, to allow users to price structured products created from these new indices.

Adding cheapest-to-deliver discounting in XVA

Bloomberg’s XVA product has been enhanced to support intrinsic cheapest-to-deliver (CTD)

discounting for cash collateral where collateral support annexes (CSAs) permit multiple currencies as eligible collateral.

XVA Sensitivities

The ability to calculate the sensitivities of XVAs to movements in interest, rates, counterparty credit spreads and FX rates are included in Bloomberg’s XVA product. Interest Rate Risk (KRR) and Parallel 01s, Credit Key Rate Risk (CKRR) and Parallel Credit Spread 01 (CR01) by reference entity and FX deltas can be added to an XVA batch. This enables clients to analyze, for each combination of XVA book and metric, the sensitivities attributed to these individual risk factors used in calculation of their XVAs.

SA-CCR EAD calculations in XVA

The calculation of regulatory Exposure at Default (EAD) based on the Standardized Approach to Counterparty Credit Risk (SA-CCR) has been added to XVA. Clients can analyse, for each individual netting set, the regulatory SACCR EAD requirement and the individual asset class contributions underlying the PFE add-on component. A Capital Valuation Adjustment (KVA) metric to calculate the lifetime cost of this regulatory capital requirement has also been added.

Differentiating factors

Bloomberg’s offering for structured product markets provides exceptional depth and breadth. Users get access to Bloomberg’s data, analytics and end-to-end workflow solutions covering all asset classes. They also benefit from the ability to connect to both local and global markets and to a large community of market participants. With more than 5,000 technologists, mostly developers, Bloomberg is well-positioned to offer solutions that meet the needs of the sell side and the buy side across their entire enterprise.

DLIB enables innovation and new product launches, and allows users to get to market exceptionally fast and use their resources more efficiently, thanks to its generic design and realtime calculation capabilities. Bloomberg’s crossasset and structured products pricing libraries are powered by state of the art quantitative models and innovative numerical techniques, to capture the market dynamics and provide accurate valuation and risk for the various asset-classes. Bloomberg’s integrated offering also helps clients navigate the ever-changing regulatory environment and notably to comply easily and efficiently with Priips.

www.structuredretailproducts.com

FINIQ (ASIA AND EUROPE)

Overview

FinIQ EQ Connect is a Multi-issuer communication Platform for pricing and order execution of equity linked structured products and OTC derivatives, and was launched in 2014. The platform is designed for the private banking and wealth management industry.

The firm has two main offerings that cater to two different business needs.

First offering is an on-premise trade booking, order management, and trade life cycle management system for Treasury, retail wealth and private banking segments for structured investments, bonds ,FX, shares, funds, insurance and other investment products. This is offered independently, as well as offered integrated with the multi-dealer cloud platforms that the company offers. FinIQ on-premise system makes up for 60% of FinIQ’s business with 30+ large buy-side banks as its clients. The platform includes the FinIQ UCP toolkit which allows users to structure products and apply/ check variations ‘on-the-fly’.

FinIQ Market-Connect Platforms are browser/cloudbased execution platforms, which cater to bestprice execution for

 EQ Connect: equity derivatives and structured products

 FXD Connect: Single leg and multi-leg FX options and structures

 FX Connect: for Spot, forward, swaps and NDFs

 FI Connect: fixed income bonds.

The functionalities covered include price discovery, order execution and documentation for flow and non-flow products.

Key elements

We’re a fully independent (owned by employees and ex-employees) with every market participant. We have been profitable since we launched the business 18 years ago. This is very important for clients seeking long-term partnerships and solutions.

The number of clients using a platform is important but it’s more important how they are using it. If I give you access for free to my platform you will take the offer but maybe you will not use the platform because it’s free so our model is to charge for access and we have noticed that the usage is very high.

The best way to judge the usage is by the volume of requests and trades executed. The average number of pricing requests coming through FinIQ on a good day is about 100,000 requests. No other platform comes close to that kind of notional. This includes trades from Asian as well as European clients.

With US$15 billion + per annum of orders relating to primary issuance, shows the platform is recording significant activity, considering we don’t offer buyback or secondary market trading yet. This figure does not include FX and FX derivative products.

Having an electronic execution system where you can do equity structured products, FX linked structured products, and FI bonds is not offered by any other platform worldwide. FinIQ is also the platform where you can do order capture, market venue execution, compliance checks, trade booking, valuation, documentation and life cycle management. None of the other technology providers cater to all these seven broad functionalities.

Some of the tools being launched as new such as life cycle management are functionalities that FinIQ has had for a number of years now (knockins, knock-outs, redemption alerts, etc). Our main edge is that we’re totally independent and have no conflict of interest with any issuer of distributor.

Also, in the past year, we focused on innovation in the AI and machine learning for the structured products industry and will be rolling out our new offerings soon.

It is difficult to compare platforms like for like because most of them are conceptualised differently. Neutrality is also paramount to succeed in this segment and one cannot afford to be biased to any party. There is a significant fragmentation in the platforms’ market at all levels. Currently, we are in talks with a number of potential clients in Europe, which suggests there is room to grow our business.

Key Facts

Number of issuers connected: 23 issuers pricing equity linked products. 13 counterparties for Cash FX and FX derivatives.

Number of distributors connected: 11 buy-side clients live and two more close to go live on the EQ Connect platform for Equity linked structured products and OTC derivatives

Notional transacted in 2018: US$15 billion (This figure does not include FX derivative products).

First issuance/secondary issuance: EQ Connect platform caters to primary issuances of the equity linked structured products and OTC derivatives

Pricing delivered directly to relationship managers: Yes via the platform, depending on the business workflow requirements of each bank

FinIQ – Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? N/A

How many payoffs are covered (ASIA)? FinIQ covers 8 most traded flow products in Asia and Europe

Error Rate (%)- N/A

Min/Max ticket size ($k) - N/A

Educational Material (Y/N)? Bank can attach and distribute educational material

Do you include product recommendations and ideas? Banks do it. System allows it.

Do you include research (Y/N)? NO

Do you offer news (Y/N)? NO

Mobile/App Accessible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). Depends on the agreement between the buyside and the sellside banks, post which FinIQ subsequently displays the timer for each quote request

What liquidity/secondary trading is offered? Not yet

What post-trade services can you provide? Lifecycle notifications from issuers

How long does trade execution take? Trade execution time depends on the sellside counterparty

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? One interactive session. Min 30 secs.

How do you ensure the security of transactions and client data? Our EQ Connect platform is ISO certified, and fully complies with the requirements of the industry

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? NO

Do you offer STP trades for sale to Offshore investors (Y/N)? YES

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? YES

Do you provide immediate termsheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? Notional based dynamic pricing is dependent on the sellside banks

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? FinIQ only charges an annual subscription fee, and does not charge based on product revenue

Does the platform cater to public offerings in the respective regions (Y/N)? This is part of the plan going forward

What features do you plan to add in the next 12 months? 1) Regulatory features including high speed booking, high speed documentation, and high speed reporting. 2) Client self-service tools for simpler variants of structured products. 3) More automation in post-trade life cycle space

HALO (US)

Overview

Halo Investing was launched in 2015. The Chicagobased company is the only independent multi-issuer technology platform for structured notes in the United States. The US company operates in five continents.

The firm owns Halo, a structured products platform aimed at advisers seeking to go beyond traditional structured note calendars by creating and executing virtually any payoff. Halo’s platform offers financial advisers pre-trade analytics, instant pricing, and best execution functionality along with a post-trade lifecycle management suite. Halo offers can be deployed as a Software-as-a-Service (SaaS) solution as well a marketplace solution. Halo also uses issuance automation and additional sell-side tools to lower the costs of issuance around the world.

Halo Notes offers a menu of over 6,000 ideas, updated all day/every day, as well as the ability to customize strategies for low notional minimums and near-instant execution. The platform has the capacity to quote on custom trades at US$100K minimum investment sizes.

The platform is set to reduce distribution costs, resulting in better pricing for the customer and more coverage for issuers. Halo is seeking to make the structured note market more efficient by adding transparency, liquidity and automation around price discovery, connectivity and execution.

Halo’s technology is aimed at helping advisors to save time in sourcing, purchasing and managing structured notes, and uses AI to parse market data to find better investments and achieve greater returns.

Halo Investing partnered with South Africa’s Absa Bank (formerly Barclays Bank Africa) in 2018 to develop its click and trade capabilities with a ‘white-labelling’ twist. Absa has now deployed Halo Notes to replace Barclays’ Barx IS platform which was available whilst part of the Barclays Group. This is just one example of the platform’s success in 2018/2019. Halo has signed up a number of broker dealers all over the world.

Earlier this year, Halo closed a Series B round of financing that included strategic partners of Allianz and William Blair. With its funding Halo seeks to continue its international expansion, grow its secondary market offerings and expand its product set to offer other define outcome investment products. The company’s pre-money valuation was one of the highest in the country for Series B.

The fact that Allianz and William Blair invested shows Halo is going into new product sets such as indexed annuities with Allianz as well as making progress with the broker-dealer community given Chicago-based investment bank and financial services firm William Blair signed up.

William Blair Circle, a subsidiary of William Blair & Co, only allowed structured notes to be bought in a very limited basis prior to Halo. After doing due diligence including the review of other US platforms such as Luma and Simon, it not only white labelled Halo but also invested in it. Neither Allianz nor Blair have a board seat so Halo retains its independence.

In addition to its headquarters in Chicago, IL USA, Halo is quickly growing its offices in Singapore, Trivandrum, India and soon to be Abu Dhabi, UAE.

Halo works with over 20 banks globally and while doesn’t disclose its notionals traded, this year, Halo’s platform will have the highest notional traded through it compared to all other US platforms. In 2020, it will be the platform leader in notional traded globally.

Halo delivers the most extensive pre-and posttrade analytics to aid advisors in making informed decisions across 5 continents. It offers best-inclass lifecycle management tools, improving risk management and trade monitoring for Advisors, Trade Desks, and Compliance teams.

Halo also runs a proprietary competitive auction process for live trades, promoting transparency, price competition, and best execution. It focuses on independent secondary liquidity, an issue currently in the market.

Key Facts

Number of issuers connected: Not disclosed

Number of distributors connected: Not disclosed

Notional transacted in 2018: Not disclosed

First issuance/secondary issuance: Not disclosed

Halo – Technical capabilities

How many underlyings are covered (Americas)? 2700

How many underlyings are covered (Asia, Europe)? 3500 and quickly growing

How many payoffs are covered (Americas)? 20+

How many payoffs are covered (Asia, Europe)? 20+ and quickly growing

Min ticket size ($k) - 1K, primary calendar + secondaries. 100K primary custom

Max ticket size ($k) – N/A

Educational Material (Y/N)? YES

If yes, provide brief details. Qualitative education pieces on structure types. Risk and suitability along analytics suite

Do you include product recommendations and ideas? YES

If yes, how often and how many? AI-based recommendation engine

Do you include research (Y/N)? YES

Do you offer news (Y/N)? No, though do provide sentiment data and tactical trade ideas around news and events

Mobile/App Accessible (Y/N) In development

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). Typically same day

What liquidity/secondary trading is offered? YES,

on any structured traded through platform or not

What post-trade services can you provide? Lifecycle management and liquidity

How long does trade execution take? INSTANT

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? 1, touchpoint with instant pricing

How do you ensure the security of transactions and client data? Encryption

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? YES

Do you offer STP trades for sale to Offshore investors (Y/N)? YES

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? YES

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? n/a, higher notionals can see better price improvement in Halo’s auction mechanism

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? NO

What features do you plan to add in the next 12 months? Continued globalisation of platform. Enhanced Portfolio fit and risk tools. More Secondary trading functionality.

What differentiates your platform? Independent Multi Issuer platform with robust pre- and posttrade management that has configurations to every global geography. Full Lifecycle management, Primary and Secondary Trading, Issuance Automation and Sell-Side tools. Quick turnaround for innovation.

MODELITY/STRUCTURES (GLOBAL)

Overview

Established in 2000, Modelity Technologies Inc. is a privately held company focused on providing banks, insurance companies and other financial institutions with a flexible platform for financial modelling and portfolio analytics. Modelity’s offering consists of Modelity/Advisor, a fully configurable financial model libraries, and Modelity/Structures, a platform for creating and delivering financial analytic content.

Based on Java, Modelity/Structures is developed as a cross-platform solution, enabling it to run smoothly within most operating systems, wide range of internet browsers, database providers and application servers. Modelity/Structures is implemented in an N-Tier Architecture. Modelity/ Structures is available as a Software-as-a-Service (SaaS) or as an in-house implementation.

Modelity/Structures also offers performance reporting. Various aspects of product logic are visually illustrated to assist client understanding samples (e.g. Asian, Cliquet); outperformance; knock-out, knock-ins, barriers, tunnels, ranges; accrued coupons; weightings (e.g. Rainbow, Momentum); and conversions (e.g. in reverse convertibles).

Modelity/Advisor is a financial modelling platform providing advisors with individualised portfolio analysis, control and management tools.

In mid-August 2018, German-based fintech firm Lucht Probst Associates (LPA) acquired 100% of the shares in the Israeli tech company.

Modelity recently developed Unicost, a system for monitoring regulatory reporting (costs & charges, product governance) between Mifid manufacturers and distributors and marketplace, a fully automated multi-dealer platform for the issuance and processing of personal investment products. Modelity also offers a solution that satisfies all aspects of a Kid generation process: from calculating all the required metrics to generating the final documents as required by the Priips regulation.

We see a lot of healthy competition in the platform business, which pushes each platform provider to find its own niche/differentiator in order to stand out from the crowd. We see the next evolution in the

market one that would come from digitalization at the distributors side. We see that Digital synergy, across multiple services, between the platform provider and the distributor leads to enhanced sales. We can spot three specific areas where the focus needs to be:

 Make sure you understand your client’s profile, as you would have in the non-digital era.

 Make sure you follow the market trends

 Continue to provide after sales service and documentation for better service level and interaction with clients.

We see great demand for low ticket products. Client finally have a way to invest in their own bespoke product with a ticket as low as US$5K. Retail banks branches report back that clients are very pleased and “efreshed by this new offering, this in turn is translated to higher client content with the banks services and higher level of loyalty from the clients to the bank.

Differentiating factors

With the Modelity platform the buy-side receives issuance functionally (RFQ and trade) but also trade ideas, analytics, regulation compliance (KID, MiFID II), term sheets generation, performances reports, booking and position management, mark to market prices, mid-office transaction/process management, interfaces to Bank’s core systems (such as: deposit system, accounting systems, data warehouse), best execution logic – customised to the buy side bank, and more.

Modelity’s operational system integrates with the bank’s core system and acts as an extension of the core systems for complex products.

Modelity has leveraged its existing technology to launch two new solutions: Modelity/FPP (Financial Products Platform) and Modelity/Marketplace.

Modelity/FPP is a fully operational system that automates, manages and operates financial products throughout their lifecycle while Modelity/ Marketplace acts as a gateway to sell side institutions that trade in financial instruments. This is a scalable solution that can also be used with Modelity/Optimizer, a software module that assists structurers, arrangers, IFAs, private bankers and professional clients to create/select products.

Key Facts

Number of issuers connected: 8

Number of distributors connected: Over 40

Notional transacted in 2018: Confidential

First issuance/secondary issuance: First issuance

Pricing delivered directly to relationship managers: Yes

IT budget/Increase from last year: ~50%

Modelity/Structures - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? There is no constraint on the number of underlyings on the Modelity platform, as it is effectively the constraint of the specific Issuer you trade with. For example, 1 of the issuers on the platform supports a fully automated process (STP) for 960 American, 361 European and 1464 Far East underlyings.

How many payoffs are covered (Americas, Asia, Europe)? 22

Error Rate (%)- N/A

Min ticket size ($k) - 5K

Max ticket size ($k) – No Limit

Educational Material (Y/N)? YES. Modelity’s materials covers the complete lifecycle of the product, from product design, through presale materials, to post launch and secondary market, and finally maturity reports. Modelity provides Interactive flash presentation including a product performance simulator. Educational videos; Payoff logic illustrations; Interactive future scenarios (and possible product outcomes), including touch/multi touch support; Sales persons training tool (quiz); Narration (voice); Performance reporting. Modelity also provides the Kid reports through the platform.

Do you include product recommendations and ideas? YES

Do you include research (Y/N)? YES

Do you offer news (Y/N)? NO

Mobile/App Accesible (Y/N) NO

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). Been determine in each transaction from 30 secs to 120 minutes. Yet this is fully configurable .

What liquidity/secondary trading is offered? Will be offered in the future.

What post-trade services can you provide? Mifid 2 regulation Materials (EMT + EPT); Priips Kid reports for live products; Mifid 2 Transparency and costs information; Performance reporting - Reporting and visualisation mechanism that produces reports showing the actual performance of live products and their underlying instruments; Event Monitoring - Constant monitoring and timely notifications regarding various events during product lifetime (also part of the KID Monitoring solution); Maturity and settlement reporting.

How long does trade execution take? 5-30 secs depending on payoff.

How do you ensure the security of transactions and client data? Modelity is ISO 27001 certified for information security management systems.

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you provide immediate termsheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Does the platform cater to public offerings in the respective regions (Y/N)? Yes. Modelity provides financial institutions with the ability to exponentially expand their financial products offering (e.g. deposits, notes) to clients from different market segments, particularly retail clients. The platform will function as long as the institution is permitted and able to trade in those regions.

What features do you plan to add in the next 12 months? FX Linked Structured Products; Risk Management.

NUMERIX ONEVIEW (GLOBAL)

Overview

Numerix entered the platform’s segment via a partnership initiative launched in March 2015 with Leonteq, Avaloq and DBS to launch an integrated multi-issuer investment products distribution system (IPDS)

The expected launch of the Land initiative collapsed less than a year later on the back of conflicts of interest and the lack of “absolute neutrality”.

However, Numerix built Oneview to serve the needs of DBS Bank of Singapore.

Oneview was conceived as a front-office platform that can be connected to whichever treasury or back-office system a client would require. The wider goal is to become a managed services provider, but for the most part the platform is deployed as an onpremise software installation. The platform uses an HTML5-based front-end and supports FIX messagebased connectivity and email-based connectivity to the traders as well as to the counterparts.

Regarding post-trade activity, Oneview uses as Avaloq as a middle-to-back system to support the post-trade aspects. The connectivity between counterparties is usually either FIX, FpML or other feed formats.

Oneview also offers access to Numerix CrossAsset library a comprehensive collection of models and methods, allowing institutions to price any conceivable instrument using the most advanced calculations. Users also can access to a range of calibration options for generating valuations.

We see increased interest in mid-level and lower tiered sell side and buy-side firms wanting to become more active in the structured products space, particularly in EMEA and the United States. The reason why can be looked at from two perspectives. One is from the customer angle meeting the desire for clients who are searching for higher yields in a low interest rate environment. Then there is the financial institution’s perspective, which is to generate additional revenues.

Market conditions are a prime influencer that leads to higher demand for structured products.

However, as a result of this growing investor appeal,

competition between issuers is tightening. So firms need to be able to innovate quickly to meet market demand and beat competitors. Today, a competitive edge can be attained by hosting a technology infrastructure that delivers speed, precision and flexibility from structuring and pricing to hedging, risk analysis and lifecycle management.

With revitalised market demand, a shift to electronic trading, and demand for product innovation, we introduced a new module, Oneview for Trading.

Differentiating factors

Numerix is a leading provider of capital markets technology applications. As a technology vendor, Numerix empowers banks and buy-side institutions (wealth managers/private banks) to aggressively grow and confidently manage their structured products business. Numerix’s solution, Oneview for Trading, provides a complete real-time infrastructure for structured note issuance and management.

Leveraging a next generation technology architecture, Oneview for Trading enables issuers and distributors to profit from market opportunity by delivering speed, precision and flexibility from structuring and pricing to hedging, risk analysis and lifecycle management. Fully integrated into a bank’s IT infrastructure, this real-time solution keeps pace with fast moving underlying markets. With tradeable real-time quoting and real-time risk calculations for even the most complex structured notes, it gives users the tools and insights they need to rapidly grow their business, along with the flexible structuring tools needed to meet market demand for new product types.

Numerix has deep experience dealing with the valuations of complex derivatives and their hedges. As we’ve realized our front-to-risk vision, Oneview for Trading reaches upstream to where the products are created, and where bigger margins are being pursued.

Key elements and differentiating factors include:

 Reduce Time to Market

 Holistic Risk Management

 Automated Workflows

 Real-time Quoting & Risk

Numerix Oneview - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? Unlimited by platform, limited to what institution can trade.

How many payoffs are covered (Americas, Asia, Europe)? Over 25 payoffs and variations across FX, EQD, IR, CR, CMDTY, Hybrids (OTC and note form)

Error Rate (%) - N/A

Min/Max ticket size ($k) – Configurable depending on institution

Educational Material (Y/N)? YES. If yes, provide brief details. Via Numerix Support Portal. The Numerix customer porta is a hub of training manuals, educational materials, documentation, and videos on Numerix products.

Do you include product recommendations and ideas? YES, Idea generation, dissemination, publishing fully supported

If yes, how often and how many? Configurable depending on institution’s requirements

Do you include research (Y/N)? NO, but technology has ability to get feeds from institution’s preferred research provider

Do you offer news (Y/N)? NO, but technology has ability to get feeds from institution’s preferred news provider

Mobile/App Accessible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). Configurable based on product type and institution’s requirements

What liquidity/secondary trading is offered? N/A

What post-trade services can you provide? Trade life-cycle management, position management,

portfolio valuations, trade documentation management

How long does trade execution take? Depends on client.

How many touchpoints would there be for pricing a US$150K uncapped call on the S&P 500 from origination to execution? Depends on institution.

How do you ensure the security of transactions and client data? All clients data is encrypted in transit and at rest. Appropriate segregation of duties is implemented as access to data is based upon need to know principle. Detailed audit trial is maintained at infrastructure and application levels.

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? As an enabling technology it can connect to institutions STP system in real time.

Do you offer STP trades for sale to US, Hong Kong and offshore investors (Y/N)? Yes, technology doesn’t limit the functionality by markets or jurisdiction

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? We do not connect to individual investors directly; our platform is B2B

What features do you plan to add in the next 12 months? Today, clients using Oneview for Trading are seeing incredible value, completely transforming and simplifying a historically complex process, and leveraging a single, unified platform for running their structured notes business. We will continue to advance the functionality within the technology to meet customer needs.

What differentiates your platform? See above.

OTCX/RESONANCEX

Overview

Digital provider ResonanceX and the multidealer request for quote (RFQ) platform OTCX partnered in March 2019 to launch a fully integrated solution enabling price discovery, integration with automated pricers and STP booking combined with a new generation of life cycle management tools. The partnership aims to give the buyside the ability to automate processes and introduce efficiencies in their workflows from an end user perspective, and the sell-side the opportunity to expand its reach and connectivity with distributors.

The OTCX platform was launched in 2014 to bring functionality and product design to the OTC market, and to buy side firms, including institutional asset managers, hedge funds, sovereign wealth funds and private banks. The platform does not share its infrastructure with other firms or services.

Over the last year, OTCX has broadened its structured note coverage with support for additional underlying asset classes, as well as the panel of issuers quoting on the OTCX. The platform’s price discovery and trade booking platform covers vanilla equity-linked notes, but also fixed income, commodity, and currency underlyings, and credit-linked notes (CLNs).

Launched in the UK in 2017, ResonanceX entered the structured products market as a new digital platform aimed at enabling the end-to-end automation of the issuance and administration of structured products. The ResonanceX platform aims to capitalise on the partnership with OTCX to develop new distribution channels for structured products for high net worth investors, family offices, and asset managers.

ResonanceX develops front office tools and performance analytics required during all pre and post-trade activities. The company is currently focused on structured products and solves issues faced by Private Banks, Asset Managers and Financial Advisors by providing superior lifecycle management, alerts & notifications, and intuitive performance visualisation.

While not part of its immediate value proposition,

ResonanceX pioneered the use of blockchain asset custody for structured products during a world-first issuance conducted in the FCA regulatory Sandbox.

The industry has come a long way from the early days when it was trying to move away from emails to a system that would provide an order trail, best execution reporting and many other features that were done manually in the past.

The message private banks and the buyside conveys is that they need a fully integrated solution. OTCX has become a workflow specialist over time and by combining this expertise with ResonanceX’s life cycle management capabilities, we can offer a much more robust set of tools.

As the markets enters a new phase where price discovery is no longer the priority and technology will play a bigger role, the two firms believe the new product will provide the basis to provide a truly independent all in one service with a single logon, improved data and transaction workflow.

Differentiating factors

We remain one of the few independent outfits out there. Other than functionalities and new features we have developed for our clients, the focus for us is to make a success of the integration and leverage the technology to go live with a new front-end in September and some trades.

Partnerships are an interesting way to develop new initiatives and grow the market but for us it is very important to prove that these partnerships are meaningful and commercially successful.

In addition, we want to stress the message of how easy the flow of information is going to move between the two systems as we’re not creating something that will require investment from the sell-side

The combination of OTCX and ResonanceX is also giving as an edge globally because we will be the only platforms which is actually live and connected to the sell-side in the three regions. Some of the consortiumled platforms are moving very slow because of the nature of the stakeholders.

Key facts

Number of issuers connected: 18 issuers (mainly tier one)

Number of distributors connected: Buy-side: More than five major buy-side firms

Notional transacted in 2018: US$ 5 billion and growing in 2019. We have done around 15,000 RFQs which have resulted in 12,000 transactions on the platform in 2019.

First issuance/secondary issuance: First issuance

Pricing delivered directly to relationship managers: No. At the moment, the trading desks deal directly with the issuers before the post-trading life cycle process begins. From the moment you put issuers in competition we have a tool that can manage all the term sheets. The work we’re doing with ResonanceX will expand the capability of autopricing for issuers to get indicative levels that they can share effectively with RMs and advisers talking to end investors.

IT budget/Increase from last year? We have plans to continue investing on the platform but we are developing our capabilities in response to our client needs.

OTCX/ResonanceX - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? All

How many payoffs are covered (Americas, Asia, Europe)? All

Error Rate (%)- Not applicable

Min/Max ticket size ($k) - NO minimum/maximum

Educational Material (Y/N)? NO

Do you include product recommendations and ideas? Not yet

Do you include research (Y/N)? NO

Do you offer news (Y/N)? NO

Mobile/App Accessible (Y/N) Not yet

Automated Lifecycle Notification (Y/N?) Y ES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). User decided

What post-trade services can you provide? Service-level metrics, KPI’S for issuers

How long does trade execution take? Price discovery and negotiation can be started and completed in a matter of minutes

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? On average 11

How do you ensure the security of transactions and client data? All data fully encrypted both in transit and at rest

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US, Hong Kong and offshore investors (Y/N)? YES

Do you provide immediate term-sheet generation (Y/N)? YES it’s a new module that will go live in September

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? NO, coming soon

Does the platform cater to public offerings in the respective regions (Y/N)? NO

What features do you plan to add in the next 12 months? Morning grid, auto-pricing, Issuer feedback, secondary market engagement, event notification, various data analytics functionality (we are already live with several issuers on auto pricing, so next 12 months is about growing the connectivity)

What differentiates your platform? Issuer neutral. We’re fully cross-asset (Fixed Income, FX, Commodity underlyings) and we have global underlyings coverage - can cater for all payoffs. We also have a global presence. The platform is delivered through a web browser, so no external software installation required.

VIRTU RFQ PLATFORM

Overview

Virtu RFQ-hub Platforms (formerly ITG RFQ-Hub) launched its structured products offering in 2014, and has been was the first independent multi-issuer platform in Europe, deployed in Switzerland as well as in France, Benelux, Germany and the UK.

Virtu RFQ-hub Platforms is a broker neutral, multiasset bilateral trading platform that sends and manages requests for quotes electronically. This platform provides standardised and customisable RFQ process to find a broader choice and a deeper pool of liquidity.

The structured products offering ITG RFQ Platforms has followed a business model that is based on several blocks of development including customisation; payoff and product development (new payoff for UK and France); workflow (private placements, public offering, book building, grey market, secondary market) including an internal workflow for private banks; (data/statistics (more efficient than a standalone feedback); connectivity and regulatory (aligning the platform to help our clients meet their regulatory requirements too around Mifid 2, Priips, RDR, etc.).

Over the last five years, private banks using RFQhub were looking to connect to the network to have an audit trail to be compliant with all the other asset classes traded within the bank such as equities, bonds, ETFs, etc.

Over the last 18 months, we have closely worked with the issuers to create and provide a protocol of connectivity for structured products in Europe to cover the workflow from pre trade to post trade. The conclusion is that Virtu RFQ-hub can now meet the requirements around connectivity. These PBs are not only looking for pricing automation, but also transfer their data from RFQ Platforms to other third-party software providers that can manage the life cycle of these products in an automated way. We are working to also help them increase the penetration ratio with RMs by providing them with a user friendly retail version of RFQ-hub for RMs as an educational tool to make them more aware of the ins and outs of dealing with structured products.

Connectivity remains a challenge for platform

because the level of automation in the sell- and buy-sides is not levelled. There is a lot of data around usage and trading coming from the sellside that needs to be captured in order to feed it back to the buy-side. We see scope for growth around platforms and automation in the structured products markets as private banks are now implement digitalisation across some functions and businesses. Structured products are a complex business that is benefitting from technology. On the one hand, market players can growth their business, streamline processes and increase volumes, and, on the other, bring transparency to the market.

Key elements

Being part of a big group focused on technology for market making, work flow and trading gives us a very positive set up. Our expertise is really about pre-trade services including price discovery, execution and connectivity with a special focus on the execution module. Virtu RFQ-hub is a crossasset platform and the volume going through the platform includes structures linked to equity, commodities, FX, credit, etc.

We offer a protocol of connectivity for the issuers so that they understand that RFQ Platforms will become a hybrid platform offering access to institutional and retail flows. This will be complemented with risk management tools so that those RMs will be ready to access click and trade platforms.

We are working with both the buy- and sell-sides network to identify and develop the functionalities that will make a difference and add value to RMs beyond connectivity.

Notional transacted in 2018. In 2018, we had €6 billion worth of structured products volume traffic on RFQ Platforms which is a 21% increase year on year. Most of the volume transacted on the platform was recorded in Switzerland, Benelux, France, Germany and the UK.

What is the change in your IT budget for platforms? How much increase from last year?

Our IT budget is set to increase. We have 20 people dedicated across sales, support, developers, etc.

Virtu RFQ Platform - Technical Capabilities

First issuance/secondary issuance? 100% first issuance

Pricing delivered directly to relationship managers? Our pricing is delivered to primary dealing desks at private banks.

How many underlyings are covered (Americas, Asia, Europe)? No underlying restrictions.

How many payoffs are covered (Americas, Asia, Europe)? No payoff restrictions.

Error Rate (%) - Not applicable

Min ticket size ($k) - At discretion of the issuers.

Max ticket size ($k) - No Maximum

Educational Material (Y/N)? YES. RFQ Platforms has a custom module available that is used as an educational tool.

Do you include product recommendations and ideas? Not at the moment. European issuers have been reluctant so far.

Do you include research (Y/N)? NO. Uncertainty due to MIFID II research unbundling regulation.

Do you offer news (Y/N)? NO

Mobile/App Accessible (Y/N)? NO. RFQ Platforms is a not a web-based tool; the application must be installed. The creation of a web tool is currently under consideration.

Automated Lifecycle Notification (Y/N?) NO

Archive Available with Notifications (Y/N)?

Clients can access transaction data and customised reports. Audit trails (including integrated chat) is avalaible and exportable to Excel & Adobe PDF.

How long is quotation held? (minutes). At the discretion of the issuers.

What liquidity/secondary trading is offered?

RFQ Platforms aims at covering private placement/ bookbuilding for public offerings, grey market and secondary market.

What post-trade services can you provide?

Performance-driven statistics for issuer reviews: access to integrated statistics on issuer performance, hit ratios and alpha generated, etc.

www.structuredretailproducts.com

How long does trade execution take? Clients usually indicate an expected answer time in RFQ Platforms when they launch the auction process.

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Payoff customisation and further instructions: Open a quote ticket, select a series of parameters in drop-down menus to customise the payoff; or clone a past similar trade and adjust a few parameters.

How do you ensure the security of transactions and client data? The firm maintains a dedicated information security function led by the chief information security officer which offers information security, physical security, patch management, vulnerability management and computer security incident handling.

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? NO.

Do you provide immediate term-sheet generation (Y/N)? NO. Issuer provides all necessary documentation.

Do you provide dynamic pricing to incentivize higher notional (Y/N)? NO, pricing is at the discretion of the issuer.

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES. Clients can request multiple structures and underlying quotes within the same RFQ. This functionality is used as a pre-trade tool for clients to evaluate the best payoff before execution.

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? YES. RFQ Platforms charges a variable fee on the executed notional. Buy-side participants are not charged by RFQ-hub.

Does the platform cater to public offerings in the respective regions (Y/N)? YES. Communication is bilateral-clients can request public offering in the respective regions from participating issuers.

What features do you plan to add in the next 12 months? More features - customisation and standardization are compatible; more payoffs; more workflow - trading life cycle covering private placement, book-building, grey market, secondary market in RFQ-hub’s ongoing development; more connectivity.

COMMERZBANK PRIMEGATE (EUROPE)

Overview

Primegate was integrated into Société Générale’s systems following the French bank’s acquisition of Commerzbank’s equity markets & commodities (EMC) division during the summer of 2019.

Primegate was launched in 2014 as an issuance platform aimed at German and Swiss listed products providers. Primegate offers a new approach towards transparency with displaying clients’ names and the trades they execute. Primegate differentiates itself through the trading process, by connecting the client with the issuer so that no intermediary is needed to execute the trade. All issuers pay the same amount on fees.

In January 2017, Commerzbank launched Wunschzertifikat, a new online platform to offer bespoke structured certificates to retail investors in Germany. The new platform allows investors to design their own products in a few steps and get the product priced in real time on request by Commerzbank and Société Générale, the only other issuer that has onboarded on the platform. Once the product is issued investors get an issue code via SMS.

Currently, investors can issue and price five product types (warrants, discount certificates, bonus certificates, capped bonus certificates; and reverse convertibles for private investors) in the platform. Primegate offers 27 product types and a suite of around 500 underlying’s.

Primegate is able to provide customers with different front-to-back solutions to access our Investment Products via different digital channels including third party platforms (Working with a number of the most important third party investment product venues that provide customers with price discovery and execution services); direct connectivity (Communicating directly with the customer’s IT infrastructures either via FIX connections or using our state of the art email connectivity interfaces); and via the exchanges (Facilitating the price discovery and issuance of Investment products within the most important exchanges for those customers who prefer to transact in these venues).

Sale of EMC business to Societe Generale has put Primegate under review until the end of the year.

Despite the shift towards automation, there are challenges around harmonising products from all banks, especially with regards to booking systems, how the risk is looking, how the hedging of the delta is done, etc.

In Europe, on the structured products side, there will be consolidation and on the OTC side there will definitely be more because it is so different with all the trades and all the payoffs.

Differentiating factors

The platform has a front-end open to the public via the open internet. The main advantage of Primegate is that it offers a snapshot of a price streaming quotes to the market through an issuance platform. Investors can buy the products issued fully independently with their broker, or via Bloomberg, or whatever is their regular channel.

Once a product is issued it will appear within a few minutes on the stock exchange fully tradeable because you get immediately your identifier for the product, immediately you get the final legal documentation, which in Germany requires the final terms and the key investor document.

Primegate is also targeted at German asset managers that advice their clients about investment portfolios. The platform’s game is no longer about pricing a product but how to manage the product in your systems and to get the product distributed onto the market efficiently.

Primegate uses common market technology and operates in Java. It is quite flexible because it uses common infrastructure, a real IT application and not an application which is managed on the trading floor at an investment bank. The platform is totally integrated in the IT department of the bank. Primegate is being integrated into Société Générale’s systems following the acquisition of Commerzbank’s equity markets & commodity (EMC) division by the French bank earlier this year.

Commerzbank Primegate - Technical Capabilities

How many underlyings are covered (Americas)? 205

How many underlyings are covered (Asia)? N/A

How many underlyings are covered (Europe)? 415

How many payoffs are covered (Americas)? 10

How many payoffs are covered (Asia)? 0

How many payoffs are covered (Europe)? 10

Error Rate (%)- 4,5 quote cancel

Min ticket size ($k) - 0

Max ticket size ($k) – €10 million

Educational Material (Y/N)? NO

If yes, provide brief details. N/A

Do you include product recommendations and ideas? No, but planned

If yes, how often and how many? NO

Do you include research (Y/N)? There is an option to filter underlyings based on client specific research

Do you offer news (Y/N)? YES, different categories

Mobile/App Accessible (Y/N) YES, fully responsive

Automated Lifecycle Notification (Y/N?) NO

Archive Available with Notifications (Y/N)? NO, but planned

How long is quotation held? (minutes). Up to 15 mins

What liquidity/secondary trading is offered? All products are listed on an exchange, market making by issuers

What post-trade services can you provide? Client will be notified when first quote is available on the exchange

How long does trade execution take? One click to issue the product, 2-60 seconds to confirm the trade including legal documentation

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? N/A

How do you ensure the security of transactions and client data? Recent authentication and authorisation methods are protecting the client and transaction data

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? NO

Do you offer STP trades for sale to Offshore investors (Y/N)? NO

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? NO

Do you provide immediate termsheet generation (Y/N)? YES, HTML email and legal documentation

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? Driven by the issuer on the platform

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? NO, but planned

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? Trade based model

Does the platform cater to public offerings in the respective regions (Y/N)? YES

What features do you plan to add in the next 12 months? Post-Trade-Services, Heatmap/Multipricer, New product types (Knock-Outs), Onboarding of new issuers

What differentiates your platform? Same rules for all issuers, no preferences, fastest pricing is on position one in the grid, streaming quotes instead of snapshots

Common infrastructure, Börse Stuttgart as a premium partner, Agile project team.

CONTINEO (ASIA)

Overview

Contineo a multi-issuer platform went live in Hong Kong and Singapore in January 2015 as an issuer-neutral service covering the Asia-Pacific region. Contineo is backed by a consortium comprising six investment banks namely Barclays, BNP Paribas, Goldman Sachs, HSBC, JPMorgan and Société Générale, a technology firm AG Delta, as well as SIX Swiss Exchange.

The platform connects institutions to access structured products through a fully integrated solution covering services from price discovery and order completion to term sheet delivery. The platform was originally designed for dealing desks at private banks and is now used also by investment counselors and relationship managers as it offers FIX Protocol standards to create a uniform pricing and order messaging system across all payoffs. The fee structure of the Contineo platform is currently based on an annual licence fee that is charged to both the sell-side as well as the buy-side.

Contineo also offers data analytics tools and lifecycle management service including compliance and regulatory reporting; lifecycle management (event confirmation, barriers monitoring, notification and documentation to complete post trade servicing); internal and market performance analytics (volume breakdowns per payoff, sector etc.); as well as market trends and pricing analysis.

We are in talks with a number of players in Europe out of which some are already using Contineo in Asia Pacific to offer them the same set up for their activities in the European market. Contineo was started as a region centric platform but we’re now entering a second phase of development.

We see scope to create more straightforward business opportunities and synergies in other Asian markets but we’re also being approach at the same time by players in Europe seeking to have access to the tools and functionalities Contineo offers.

Differentiating factors

We don’t charge any fee on the trades executed on the platform, that’s a differentiating element with other providers. Contineo is fully neutral, we are not a broker and we do not issue Contineo products.

Our clients access the platform via a subscription

fee; Investment banks to reach out their various distributors; Private banks to put all their issuers in competition in one click. We offer multi-connectivity as a service, and we have issuers offering single dealer platform capabilities also pricing on Contineo. As a platform, we offer a similar service to that offered by technology vendors. However, our model is very different from such platforms as we are not a pure vendor house but a consortium player with strong capabilities in technology. Our strength lies in the business and technical standards adopted by leading investment and private banks on our network and the ability to shape together the future of the industry, as a group. We also are the only transaction network that aggregates proprietary data into actionable insights.

The biggest challenge the market and Contineo are facing is the unification of tools and penetration in Europe. The structured products markets in Singapore, HK, Japan and Korea are well developed and we could have a similar risk as in Europe where we could end up with a number of platforms in each market.

Platforms will need to be multi-jurisdictional to remain competitive and relevant for the market as a whole. As opposed to seeing our link to product issuers as a handicap to our independence, having the support of a large number of issuers gives Contineo an element of security and commitment.

Contineo is currently working on network and technology aspects, which at launch will allow subscribers in Europe to easily access their counterparties through a web-based interface, a set of open application programming interfaces (APIs), or direct FIX connectivity.

Key Facts

Number of issuers connected: 15 issuers in Asia

Number of distributors connected: 8 private banks in Asia

Notional transacted in 2018: Not disclosed

First issuance/secondary issuance: Primary (100%).

Pricing delivered directly to relationship managers: Yes, and direct execution by RMs is also available.

IT budget/Increase from last year: Not disclosed INVESTMENT BANK-LED

Contineo - Technical Capabilities

How many underlyings are covered (Americas)? 750 actively traded

How many underlyings are covered (Asia)? 650 actively traded

How many underlyings are covered (Europe)? 300 actively traded

How many payoffs are covered (Americas)? NA

How many payoffs are covered (Asia)? 8 payoffs: Equity Linked Note, Knock Out Equity Linked Note, Fixed Coupon Note, Daily Range Accrual Note, Bonus Enhanced Note, Accumulator, Decumulator, Vanilla Option.

How many payoffs are covered (Europe)? 4 payoffs in 2020 pipeline: Phoenix Note, Eagle Note, Reverse Convertible, Airbag Note.

Error Rate (%)- NA

Min ticket size ($k) - US$200K

Max ticket size ($k) - US$5m to US$10m

Educational Material (Y/N)? NO

Do you include product recommendations and ideas? NO

Do you include research (Y/N)? NO

Do you offer news (Y/N)? NO

Mobile/App Accessible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). Depending on the Issuer. Usually until the end of the day.

What liquidity/secondary trading is offered?

Tap On to add a new market order to a launched product

What post-trade services can you provide?

Lifecycle events notifications and monitoring, Direct

Booking, Compliance and Audit trail reports.

How long does trade execution take? A few seconds to a couple of minutes depending on the payoff and the issuer. Clients receive the execution status and details in real-time.

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Two touchpoints via the platform: 1 to get prices from multiple issuers, and 1 to select the price and place the order request. A final third touchpoint would be to download the final termsheet from the platform

How do you ensure the security of transactions and client data? Contineo provides to each private bank their own set of applications and databases, secured and segregated from other client databases.

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? NA

Do you offer STP trades for sale to Offshore investors (Y/N)? NA

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? NA

Do you provide immediate termsheet generation (Y/N)? NO

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? NO

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? Subscription fee only, Contineo doesn’t charge any fee on transactions.

Does the platform cater to public offerings in the respective regions (Y/N)? NO

What features do you plan to add in the next 12 months? 1. New payoffs, 2. Enhanced lifecycle & post trade services, 3. New Communication tools.

LEONTEQ CONSTRUCTOR

Overview

The Leonteq Constructor is a state-of-the-art click and trade structured products platform that enables real-time structuring, calculation and launch of structured products.

Leonteq’s platform has 10 different issuing entities and can generate over 100,000 product documentations daily. It includes automated lifecycle management services and pre-trade client suitability checks. The company holds one of the largest universes of structured products, including over 2,000 underlying securities (equities, indices, exchange-traded funds, interest rates, currencies, commodities as well as credit single names and indices) and 90 payoffs. Each year, Leonteq processes more than 28,000 new issuances and over 67, 000 secondary market transactions on the platform which allows for public offering as well as private placements (including listing on SIX and Frankfurt Exchange).

With our Smart Dashboard, we offer a consolidated overview of pricing and trading activities on the platform with tailormade watchlist functionalities, up to date documentation and export functions.

The platform offers functionalities such as the Underlying Optimizer which computes all combinations for a given universe of investment, to help meeting yield target expectations. Developed in house by Leonteq, the Underlying Optimizer is a dedicated algorithm using a mix of Monte Carlo and machine-learning techniques which can extract the 30 highest yielding combinations within seconds and every proposed basket can be viewed directly in the pricing form with live prices.

The platform’s Equity Screener offers a recommendation list and analyst research, based on the users’ own qualitative and quantitative criteria.

The Range Pricer enables users to price many combinations of product parameters such as barriers, autocall trigger levels and strike levels.

Trends is another unique feature that helps users to identify most priced and popular products, sectors with sector heatmap, product type underlying and respective geographical breakdowns.

With the introduction of Mifid 2, Leonteq recognised an increasing need for guidance from structured

product investors, which is why we launched a unique client profiling system – helping clients to master latest regulations while focusing on serving their client base.

In mid-2018, Leonteq defined a number of key strategic initiatives with a focus on completely renewing the investment experience for clients and partners based on a fully digitalised approach.

 Leonteq launched a new digital marketplace initiative in 2018 to fully transform the company’s structured products offering. Using the latest advances in technology, Leonteq aims to provide its clients with a completely new investment experience by giving them external access to applications, services, market and product data (including artificial intelligence and robolytics for automated and customised proposals and roll-overs).

 As part of its digital marketplace initiative, Leonteq also redesigned its platform for Actively Managed Certificates (AMC) in the first half of 2019. This innovative solution for asset managers is designed to customise and implement an investment strategy offering greater flexibility, cost efficiency and transparency.

 Leonteq continued to advance its Smart Hedging Issuance Platform (SHIP) project, SHIP made good progress in the first half 2019 with a total of three hedging counterparties providing external quotes. Leonteq is currently onboarding up to three additional hedging counterparties and expects to connect them to the platform in the second half of 2019.

Differentiating factors

Leonteq’s technology platform was built from the ground up using the latest, state-of-theart infrastructure and programming languages. Complex structures are customised in real-time, and 2bn product computations can be produced in two minutes. We offer front-to-back integrated solutions, servicing the entire value chain of structured products.

Leonteq is also a white-labelling and service provider for banks where the company offers its integrated technology platform.

Key facts

Number of issuers connected: 10 manufacturers including Leonteq, Raiffeisen, EFG International, Cornèr Bank, JP Morgan, Deutsche Bank, Crédit Agricole CIB, Aargauische Kantonalbank, Standard Chartered Bank, PostFinance. Leonteq also aims to connect additional third-party issuers through a fully automated brokerage set-up in the coming months.

Number of distributors connected: More than 1,000 clients are serviced each year

Turnover 2018/H1 2019: CHF 28.8 billion/ CHF 15.0 billion

Platform assets (outstanding volume) 2018/H1 2019: CHF 11.9 billion/CHF 13.8 billion

Pricing delivered directly to relationship managers: Yes

IT budget/Increase from last year: We have continuously invested in the platform’s maintenance and further development. Our capital expenditure has amounted to more than CHF 120 million since inception.

Leonteq Constructor - Technical Capabilities

How many underlyings are covered (Americas)?

Approx 1,100

How many underlyings are covered (Asia)? Approx 500

How many underlyings are covered (Europe)? Approx 500

STP - YES

How many payoffs do you offer? 90 (covering the entire global landscape of structured products, 8 including notes and OTCs)

Error Rate (%) - N/A

Min ticket size ($k) - CHF 20,000

Max ticket size ($k) – CHF 10 million (for STP)

Educational Material (Y/N)? YES – Factsheets which provide a short description of the redemption and coupon mechanism

Do you include product recommendations and ideas? Investment ideas (no recommendations)

Do you include research (Y/N)? NO

Do you offer news (Y/N)? We provide regular platform development updates to our users

Mobile/App Accesible (Y/N) Coming soon

Automated Lifecycle Notification (Y/N?) YES

How long is quotation held? (minutes). Five minutes

What liquidity/secondary trading is offered? Tradable for CHF 250K (or equivalent) during market hour for both bid and ask

What post-trade services can you provide? Lifecycle management notifications, liquid secondary market, updated termsheets with corporate actions and events, product reports, updated PRIIPS/KID, barrier at risk notifications

How long does trade execution take? <30 Seconds

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? 1 to 2 touchpoints

How do you ensure the security of transactions and client data? Full in-house platform hosted in Switzerland and regulated by FINMA

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? N/A

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

I s there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? YES (in selected regions, including Switzerland)

LUMA (FORMERLY ATLAS)

Overview

Luma Financial Technologies is the creator of Luma, a fully customisable, multi-issuer, buy-side platform that helps financial advisors more efficiently learn, create, order and manage market-linked investments (i.e. structured products).

Luma was originally developed by Navian Capital, a structured products wholesaler in the U.S. With strategic backing from Bank of America Merrill Lynch and Morgan Stanley, Navian Capital spun out Luma into a separate entity in July of 2018.

In May of 2019, Navian Capital’s wholesale business was sold, thus making Luma completely independent across wholesalers as well as issuers.

Luma was launched in 2011 making it the longest tenured multi-issuer platform in the U.S. market. Luma is based on a cloud-based infrastructure and provides easy integration into major clearing firms via customizable deployments that support the particular controls and workflows used by each client.

Luma has four primary modules as follows:

 Learning Center provides a single gateway to customized educational content that brokerdealers need to review and to certifications they must acquire before being allowed to transact in structured products.

 Creation Hub is where advisors can access Luma’s Product Creation Tool for the efficient bidding and pricing of custom structures.

 Product Marketplace gives advisors one place to access all available offerings, compare products, place orders, review past orders and access product documentation.

 Lifecycle Manager closes the loop on the product lifecycle by helping advisors stay on top of all posttrade activities from coupons to calls to maturities and more. With automated alerts and notifications, advisors can better manage their client portfolios and be proactive in providing guidance.

2018 and the first half of 2019 were an extremely active periods for Luma. Not only did the company divest its connection to Navian Capital’s wholesale business, Luma also released their Product Creation Tool, revamped their Lifecycle Manager interface,

improved their support for UITs and continued to add payoff structures to their platform.

When the wholesaling business of Navian Capital was sold in May of 2019, Luma took the final step in becoming a fully independent platform, objective across issuers and wholesalers. Within three months of that sale, the largest wholesaling firms had presence on Luma.

Continuing to innovate within its Lifecycle Manager module, Luma released several upgrades that further improve the user experience for advisors and buy-side clients. These include proactive event notifications in-app and via email; enhanced visual dashboard elements; portfolio level views; more powerful drill down capabilities on portfolios and upcoming events; book reporting and analytics; and smart recommendations.

Differentiating factors

Luma not only offers customization to fit each firm’s unique operational and compliance processes, it can also be white labelled to allow for consistency of client brand and customer experience.

Luma is well-suited to help firms implement compliance guardrails for structured products. This includes controls such as advisor certification (no access to structured products without proper training), product access (only by program, desk, training level, etc), order authorization (automated routing of orders for approval), order documentation (all required materials submitted with each order).

As a buy-side solution, Luma is multi-issuer, multiproduct and multi-wholesaler. Luma’s pricing does not result in favored presentation of products from any one issuer or wholesaler.

Luma was among the first solutions to provide posttrade tools to help advisors stay on top of holdings and to facilitate appropriate follow-up when product events take place.

Luma’s Product Creation Tool automates the reverse inquiry process, making one of the most manual workflows in structured products transactions more streamlined and efficient.

Luma - Technical Capabilities

How many underlyings are covered (Americas)? Luma supports all major US Indices, Proprietary/ Dynamic Indices, ETFs and single stock underliers.

How many underlyings are covered (Asia, Europe)? All major Asian and European indices with optionality are included.

How many payoffs are covered (Americas)?

The system architecture also allows additional structure types. The platform also supports Index Annuities and Structured UITs.

How many payoffs are covered (Asia)? Luma allows for the addition of any structures not already included in the Americas.

How many payoffs are covered (Europe)? Luma is aligning with EUSIPA standards where applicable.

Error Rate (%) Pricing coming from multiple investment banks, our error rate in providing at least 1 accurate level is nearly zero.

Min/Max ticket size ($k) Each issuer on Luma has their specific ticket size.

Educational Material (Y/N)? YES. Education and training is fully customizable for each buy side.

Do you include product recommendations and ideas? Yes. Scheduled and on demand.

Do you include research (Y/N)? Yes. Issuer created research

Do you offer news (Y/N)? NO

Mobile/App Accessible (Y/N) YES.

Automated Lifecycle Notification (Y/N?) Y ES.

Archive Available with Notifications (Y/N)? YES.

How long is quotation held? (minutes). Luma utilises the specific requirements of each issuer and allows buy side clients the ability to customise and enter the required quotation time frame.

What liquidity/secondary trading is offered? A customised book of business is created for each purchaser with tracking of performance of the structure to help provide clarity on secondary trading levels.

What post-trade services can you provide?

Advisor/Buy Side Client customized book of business complete with: Term sheet repository; Performance reports; Secondary liquidity quoting; Product life cycle event notifications (maturity, calls, corporate actions, etc.); Smart product recommendation; Issuer data reconciliations; Portfolio viewing; Book reporting/analytics

How long does trade execution take? Per the specific requirements of each issuer.

How do you ensure the security of transactions and client data? Multiple levels of security both around access to the system as well as data encryption.

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? Customised order completion is in place with many national custody and clearing firms, and is designed to align with buy side client’s specific compliance, operational and trading processes.

Do you offer STP trades for sale to US investors (Y/N)? YES.

Do you offer STP trades for sale to Offshore investors (Y/N)? Not currently live in production.

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? NO.

Do you provide immediate term-sheet generation (Y/N)? Luma provides documentation for any CUSIPs transacted on its trading or RFQ systems.

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES.

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES.

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO.

Does the platform cater to public offerings in the respective regions (Y/N)? YES.

What features do you plan to add in the next 12 months? Separate OTC auction pricing linked to multi issuer paper; Secondary trading execution; Structured UIT product set, including STP; Indicative RFQ workflow and pricing; What differentiates your platform?; Objectivity – Multi-Issuer, Multi-Product and Multi-Wholesaler; Advisor Centric System Design; Fully Customissable; Product Life Cycle Support

PRIVATAM PARITY

Overview

In 2014 Privatam were pioneers in providing a technology platform to wealth managers and today five years later we are evolving the Parity platform to new levels of sophistication. Our goal has always been simple. We want our clients to have more time to think and make smart decisions for their clients, based on three key pillars: Discover, Price, Follow.

Each pillar is comprehensibly covered with 000’s of products, Algo and Research generated ideas, connectivity to every major Issuer and the clearest reporting on products and portfolios. Capabilities such as universal backtesting, beautiful product documentation, views on current trends and data driven alerts, white-labelling and visualisation of information all come as standard as you would expect from such a well established leading platform.

PARity sits at the core of Privatam’s growing business supporting Asset Managers, Private Banks , Family Offices and Third-Party Investment Platforms and is the foundation along with our extensive human expertise on which the company is built.

The recent release of the PARity version 4i begins the next stage of technical revolution moving on from the provision of information to anticipating Client requirements using the proven technical capabilities of PARity alongside Analytical, AI and Machine Learning techniques. These exciting new developments have also lead to partnerships with several investment platform providers to make PARity available to their users too, further extending the PARity community

For us the highlight has been the demonstrable link between the success of our business performance and technology adoption, our passion is being translated into client satisfaction and for us this is the ultimate goal.

Privatam with Parity is not looking at competition, Privatam looks at his wide range of clients since 2014 to learn from them, earing what they say. We felt a bit alone in this market when we started and it’s a fact that today, there is more and more platforms being born and more are coming. It’s a good news for professionals investors, making their lives easier. The big challenge for them is not to get

lost in this marketing bubble between the fake news and the real platforms.

Thanks to our clients with thousands of amendments request since five years, the platform is today 100% completed, simple and user-friendly. We are still now improving it based on our clients usage, fine tuning and amending any details of it to make it even more unique every day. Parity is so powerful that It has been very challenging to make it simple, now a junior investor will understand how to use it in a click.

In 2019, Parity has 500 asset managers and small private banks users, handled eight billion of structured products since inception, generated 200,000 smart investment ideas to its users. Privatam is directly connected with all the major investment banks, building deep partnerships and working very closely with them, with our daily flow since 2014.

Key elements

For 5 years Privatam has been the only true combination of fintech and independent solutions provider for structured products in the world. Our extensive trusted business partnerships built over this period with Issuers, Clients and Partners enables Privatam, to be at the leading edge of industry development both as a consumer of services but also helping define those services. The strength of the vision is shared across our company, technology and innovation is not just a nice tool at Privatam , it is in the DNA of our culture.

Parity has been able to adapt to any issuer specific concerns, solving huge numbers of issues and made it very easy for issuer to work with. Parity is established as the premiere independent multiissuer platform that fully supports the full “Discover - Price - Follow” structured product process with both advanced AI based algorithmic and human expert generated content and advices.

Parity does everything and is real! It’s a proven stable and complete platform used on a daily basis by numerous professionals investors. As a pioneer, Parity launched in 2015 the “new wave” of independent multi-issuer platforms and does it all for investors, totally free of conflicts of interest.

BROKER

Parity - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? 1.5K intraday, 5K EOD

How many payoffs are covered (Americas, Asia, Europe)? 11

Error Rate (%) - Not applicable

Min ticket size ($k) - 100K ?

Max ticket size ($k) – No Max

Educational Material (Y/N)? Coming Q4 2019

Do you include product recommendations and ideas? YES

Do you include research (Y/N)? YES

Do you offer news (Y/N)? Yes with sentiment analysis

Mobile/App Accessible (Y/N)? YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). All quotes are time stamped and held in the system, as with all Issuer quotes they are indicative

What liquidity/secondary trading is offered? Full list of Privatam’s products in the secondary markets

What post-trade services can you provide? Portfolio analysis/reporting, cashflow projections,

event/barrier monitoring, automated opportunity generation

How long does trade execution take? N/A

How many touchpoints from origination to execution? All executions go via pour experienced Structuring desk.

How do you ensure the security of transactions and client data? All at is hosted on encrypted cloud planforms

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notional (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? Q4 2019

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? No, the platform is provided free to our Privatam Clients and our Partner’s Clients

Does the platform cater to public offerings in the respective regions (Y/N)? NO

What features do you plan to add in the next 12 months? Offer the PARity Community a chance to contribute and share in the platform’s sucess Education , advanced Portfolio analysis and optimization, more targeted user engagement with specific opportunities and ideas.

RIVERROCK – LINKEDTRADE

Overview:

Launched in February 2018, LinkedTrade is a digital structured products multi-dealer platform developed by RiverRock Technology Solutions, a fintech arm of RiverRock, an independent alternative investment management company.

LinkedTrade is a software-as-a-service (SaaS) platform targeted at private banks and asset managers seeking to provide their owns clients with a 360° solution for designing and trading bespoke structured products including suitability assessment, price comparison and lifecycle monitoring. LinkedTrade is a digital marketplace and multidealer platform with a focus on bespoke ideas, price discovery, execution, and post-trade management.

After Asia and the US, the digital transformation is now moving fast in Europe. There are several platforms available in Europe, some specialising in Life-cycle management others in Request for Quotes. LinkedTrade has a holistic approach and offers “a la carte” services with all the modules connected to the same database to cover the endto-end process. This approach is paramount as we are experiencing a fast increase of the number of transactions for smaller and smaller issue sizes.

Our Buy-side clients are looking for a solution to digitise their entire investment process from pretrade to execution and post-trade. The power of platforms such as LinkedTrade is the scalability and the ability to provide a high level of service to an unlimited number of customers.

Starting toward the second half or 2018, we have seen a stronger interest from the European private banks for digital SaaS solutions that could be used on a global scale.

We have developed two business models to answer the market needs: LinkedTrade Software as a Service and LinkedTrade Electronic Broker.

Decades ago the engineering and issuance of structured products was mostly done by the investment banks only.

There are now over 100 intermediaries/brokers in

BROKER DEALER-LED

Europe, but the intermediary and voice brokerage segment of the market has become under pressure following the latest regulatory requirements, a general compression of the margins and higher expectations from the clients regarding the services provided. As with any market becoming mature, the current set up is not sustainable and is slowly being replaced by electronic platforms as it already happened with the equity and bond markets.

Moreover, new opportunities provided by artificial intelligence highlight the need to implement it to our industry and to provide buy-side institutions with a live digital assistant supporting both the product design and the distribution of their investment solutions.

LinkedTrade provides solutions to the main drivers:

Regulation: audit trail of all transactions, Mifid 2 and Priips documents management.

Education: marketing factsheets are available for all pricings to better support the education and the distribution.

Costs optimisation: an end-to-end Multi-Dealer Platform allows massive costs reduction for Private Banks and Independent Asset Managers and consequently provides a good ROI.

Operational risks: the increasing number of products being issued (more tailor-made solutions are now offered with lower Notional investment) presents a real challenge with higher operational risks and costs.

Enhanced client service: faster product design with instant price discovery, best execution and posttrade management.

LinkedTrade services are centered on a core database. All modules can communicate with each other to offer the end-to-end solution private banks and asset managers are looking for.

We are both a Tech Vendor and an Electronic Broker, meaning that our in-house structured products specialist team is using LinkedTrade every day. LinkedTrade gets live feedback on a daily basis and can update the roadmap according to our clients’ needs.

Key Facts

Number of issuers connected: Our Multi-dealer pricer is connected to 10 investment banks and provides live tradeable prices for most European payoffs within 15-45 seconds); Our additional RFQ module, designed to cover most complex products, can be used with all issuing banks.

Number of distributors connected: Not disclosed.

Notional transacted in 2018 : Not disclosed

First issuance/secondary issuance? We are only dealing with the primary market (first issuance)

Pricing delivered directly to relationship managers? Yes, LinkedTrade is a multi-dealer platform designed to put the relationship managers and asset managers in the “driver’s seat” for the design, the execution and the management of their products. We offer our customers the most comprehensive tool kit for them to service their end clients in the best possible way at every stage of the investments process.

What is the change in your IT budget for platforms?

How much increase from last year? Understanding our clients’ short-term and long-term needs lies at the heart of our approach. Technology developments are our priority and we adapt our IT budget accordingly to provide our clients with the best solution.

Linkedtraded - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? Over a 1,000 underlyings

How many payoffs are covered (Americas, Asia, Europe)?

Error Rate (%) - N/A

Min ticket size ($k) – The minimum ticket size depends on the issuers

Max ticket size ($k) – No limit

Educational Material (Y/N)? YES

Do you include product recommendations and ideas? YES

Do you include research (Y/N)? NO

Do you offer news (Y/N)? NO

Mobile/App Accesible (Y/N)? NO

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes) – It depends on the issuers

What liquidity/secondary trading is offered?

What post-trade services can you provide? Lifecycle management, product events and product reports

How long does trade execution take? An execution could be done in less than 1 minute if the user did not have read the legal documentations.

How do you ensure the security of transactions and client data? LinkedTrade environment is highly secured and all client data are isolated and encrypted. We regularly perform scans and penetration tests to ensure that any potential vulnerabilities are quickly found and patched.

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? NO

Do you provide immediate terms-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

DELTAQUEST STRUKIS

Overview

Zurich-based Strukis was launched by DeltaQuest AG in early 2019. The new fully independent multiissuer platform was built with the support of qualified financial market experts from Codeplant GmbH and has developed its own software to simplify the monitoring and analysis of structured products.

The platform is targeted at asset managers, family offices, banks and institutional investors as a solution to ease the difficulties wealth management companies face in accessing structured products and the lack of pricing transparency.

The platform offers click and trade functionalities, and offers a pre-trade tool – Roadrunner, which provides ideas around structured products offered by partner companies. This ideas can be converted into templates of products that can then be priced and transacted on the fly.

The platform can already generate pre-final term sheets, similar to the Priips Kid. For each idea, the platform generates a document (in three different languages) with an indicative price that can then be shown and discussed by the end investor before executing the trade.

The platform covers the main structures used in Switzerland including reverse convertibles, barrier reverse convertibles, autocalls, discount certificates and credit-linked notes.

The minimum required notional to transact a trade on Strukis is CHF50,000 (€44,900) and we charge CHF200 (or the appropriate amount in another currency), which is 4bps - more or less what a broker would charge a manufacturer

The platform applies a fix ticket fee compared to the standard industry percentage commission and every issuer has the same conditions. We wanted to provide easy access to our customers so that we made the access to the platform completely free. We charge for each trade transacted on the platform which we believe is a fairer set up as we don’t charge according to the volume of each transaction.

Highlights

The platform was launched with the mission to bring some competition to the Swiss market which

is dominated by two platforms owned by issuers of structured products and to address the lack of trust in the market because of the perception of conflict of interests in the way existing platforms are set up.

The platform is offered as a portal so that any adviser or wealth manager can log in and configure any structured product for which he/she will get an indicative price. The platform’s engine allows to build different structures and run a ‘beauty contest’ among issuers to get the most competitive price and trade the product within minutes.

The platform’s main target market are wealth management firms as well as small and medium-size Kantonal banks with no structuring or trading desks of which there are around 20 of them in Switzerland, as well as external asset managers of which there are about 1500 in the country.

Asset management companies are being forced to automate and streamline their manual processes so the more the platforms space grows the more transparency there will be in the market. Our initial goal is to take a 1% market (and 2% after a successful fund raising) share of the Swiss primary structured products market as that would provide us with enough turnover to run the platform and expand our software solutions.

Differentiators

We want to provide an independent hub for investors to build and transact products that has no connection to any advisor, brokerage firm or investment bank to avoid any conflict of interest.

We want to differentiate ourselves with other platforms in the market by providing a superior user experience. The firm wants to make it easy for relationship managers to navigate this market with a very simple, intuitive front-end.

Our investment has been directed to those areas that were really necessary and where we can offer a stronger experience to the end user.

Next 12 months

We are building our offering based on demand and client requests. We see scope to expand our offering of underlyings and payoff types accordingly.

Education remains a key element to get the market moving forward. We need relationship managers to speak and engage regularly with investors to explain how these products can extract value and used as any other instrument in a portfolio. We are using our demo version to offer access to potential clients and promote the capabilities of the platform.

We’re in talks with Avaloq as they have shown interest in our platform. This shows that some big players out there are keeping an eye on new developments and functionalities that can improve their offering.

One of the areas where we want to improve our offering automatic pricing from each issuer but as with many of the functionalities we have in the platforms this is not dependant on us but the issuers. Sometimes issuers don’t have the technical capability provide automatic pricing and others don’t seem to want. We’re happy to do off-trades and provide them with enough turnover for them to be able to justify automatic pricing.

We are working with a second tier one issuer to provide automatic pricing within one month or so

but we don’t have this from the other two issuers with which we still use the chat.

Other functionalities such as post-trade tools have not been developed in full. We may want to provide a more visual experience with graphics and tables for advisors to see where their clients’ investments are

KEY FACTS:

Number of issuers connected: four issuing banks

Number of distributors connected: 10 distributor firms

Notional transacted in 2019: Not disclosed

First issuance/secondary issuance: Primary issuance. We don’t want to compete in the secondary market so most of the activity in the platform was related to the issuance of products.

Pricing delivered directly to relationship managers: YES

IT budget/Increase from last year: Not disclosed

VONTOBEL DERITRADE (EUROPE AND ASIA)

Overview

The Swiss financial institution Vontobel launched its single issuer platform deritrade in 2008 in Switzerland, becoming a multi issuer platform (MIP) in 2013. Vontobel was able to eliminate domestic competition from other independent providers such as derivative.com (by acquisition) or StructuringLab and Xicor, which no longer participate in the market.

Currently there are eight issuers on this platform: Vontobel, JP Morgan, Deutsche Bank, Société Générale, UBS, BNP Paribas, Basler Kantonalbank, and Zürcher Kantonalbank with around 80 banks and more than 500 financial intermediaries using the services. Vontobel is in the process to further expand its services, beyond the current availability comprising Europe, Singapore and Hong Kong.

Deritrade is one of the few completely automated platforms, including clearing and settlement as well as lifecycle management. It is only available to professional advisers, asset managers and private banks and can generate different quotes from different issuers for the same bespoke product for a minimum of CHF 20,000.

Since the launch of deritrade in 2013 when the volume transacted through the platform reached CHF 600 million, trading activity has continuously increased. In 2015, the platform transacted an issuance volume of over CHF 2 billion, reaching CHF 4 billion in 2016. Subsequently, in 2017, the figure stood at CHF 4.6 billion and was topped again last year with CHF 6 billion According to deritrade, transacted volumes further grew by 50% in 2019 on a year-on-year base.

The platforms are becoming more and more sophisticated – which is good for the users who benefit from continuous innovation. Lately, deritrade launched autocallables and express certificates as well as structured products combined with a life insurance.

The platform continues to expand and grow. Most issuer banks have now developed internal pricing platforms, which is having an impact in the reverse enquiry setup.

Deritrade has seen how platforms in other industries went beyond the automation around trading and execution as they had the capacity to connect into the custody account of end clients. They are working on solutions to achieve the same look-through but they also need the willingness of the buy-side to integrate

third party APIs. Deritrade believes there is potential for strong growth in this segment and new developments that will improve significantly the way advisers interact with product manufacturers and clients.

Diferentiators

The platform makes it easy to tap into the advantages of such solutions while allowing new structured products to be tailored and issued in quickly. Relationship managers can therefore react flexibly to client needs or interesting trends and efficiently harness opportunities arising in the market.

The platform is opening up new dimensions in terms of quality of the decision-making information, transparency, and the efficiency of structured products – all for the benefit of service providers and clients. deritrade’s open architecture approach provides both: a high level of price transparency and price competition to ensure true best-execution capabilities in real-time. The SmartGuide functionality is using extensive quantities of digital data held by deritrade to foster an improved decision-making processes based on machine learning.

deritrade has also introduced new functionalities to meet regulatory requirements such as integrated product-suitability testing.

Key Facts

Number of issuers connected: 8

Number of private banks connected: around 80

Notional transacted in 2018.

More than 800,000 requests led to over 36,000 transactions in 2018. The traded notional on deritrade amounted to CHF (~USD$) 6 billion.

First issuance/secondary issuance? deritrade supports primary and secondary issuance.

Pricing delivered directly to relationship managers? Yes

What is the change in your IT budget for platforms? How much increase from last year? These figures are not disclosed, but platform operators in general should have increased IT budgets to stay on top.

Deritrade - Technical Capabilities

How many underlyings are covered (Americas)? 500

How many underlyings are covered (Asia)? 200

How many underlyings are covered (Europe)? 420

How many payoffs are covered (Americas, Asia, Europe)? 21

Error Rate (%)- N/A

Min ticket size ($k) - 20K

Max ticket size ($k) – N/A

Educational Material (Y/N)? YES

If yes, provide brief details. USER GUIDE /USER MANUAL

Do you include product recommendations and ideas? YES

If yes, how often and how many? WEEKLY

Do you include research (Y/N)? YES

Do you offer news (Y/N)? NO

Mobile/App Accesible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). 40-60 seconds

What liquidity/secondary trading is offered? Issuer standard

What post-trade services can you provide? Smartguide roll-over suggestions, dedicated account managament team

How long does trade execution take? 2-4 seconds

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Three (pricing form, simulation, trade)

How do you ensure the security of transactions and client data? SSL certificate

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? YES

Do you offer STP trades for sale to US investors (Y/N)? NO

Do you offer STP trades for sale to offshore investors (Y/N)? NO

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? NO

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? YES

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? NO

Does the platform cater to public offerings in the respective regions (Y/N)? YES

What features do you plan to add in the next 12 months? New UX Design/New Autocall Offering

What differentiates your platform? Real Multi Issuer Platform covers 70% of the sell-side of the Swiss Market. Innovative and powerful straight through processing with end-to-end booking into core banking systems.

HPC IP SKYLINE

Overview

French asset management boutique HPC IP rolled out in early 2019 Skyline - a new life cycle management tool which is now live in its website and can be used to generate bespoke reporting, as well as for portfolio construction and price discovery.

The French company has fully automated the workflow for structured products with document generation tools, reporting, after sales, and marketing. The platform connects to distributors and issuers’ platforms through APIs and other methods to get pricing ‘on the fly’ from some issuers.

The platform is mostly used for price discovery and lifecycle management purposes.

HPC IP uses In-house powerful pricing and optimization tools which allow to optimize payoff and underlyings by running a same pay-off on a large number of underlyings and ranking the outcome according to pricing aggressiveness. This ensures clients trade the pay-off and underlying that are best in line with their investment objectives.

BROKER DEALER-LED

The platform offers access to a 30+ issuers network ensuring the best pricing possible and a diversified credit risk as well as to a large range of underlying assets: equity, credit, rates, commodities, and FX.

Prior to trade, HPC IP generates a one-pager marketing document for its client detailing the product’s risks, rewards and mechanisms of the product. This is to make sure investment advisers understand the product terms prior to the transaction.

Skyline offer one single channel for origination, execution and settlement.

Key Facts

Number of issuers connected: 35 in 2018

Number of distributors connected: Not disclosed

Notional transacted in 2018: €7 billion cumulated traded nominal. More than 800 structured notes transacted in 2018.

First issuance/secondary issuance: Not disclosed

HPC IP Skyline - Technical Capabilities

How many underlyings are covered (Americas, Asia, Europe)? All

How many payoffs are covered (Americas, Asia, Europe)? All

Min ticket size ($k) – US$200K

Max ticket size ($k) – US$50m

Educational Material (Y/N)? Y, on demand If yes, provide brief details. Automated Marketing (White label available), Webinar,Training Sessions

Do you include product recommendations and ideas? No recommendations

If yes, how often and how many? Weekly Newsletter

Do you include research (Y/N)? NO

Do you offer news (Y/N)? NO

Mobile/App Accesible (Y/N) YES

Automated Lifecycle Notification (Y/N?) YES

Archive Available with Notifications (Y/N)? YES

How long is quotation held? (minutes). Not relevant

What liquidity/secondary trading is offered? Daily

What post-trade services can you provide?

Lifecycle management and liquidity – Automated lifecycle management, portfolio statistics, calendar with anniversary (coupons, redemptions), white label automated reportings

How long does trade execution take? Depend on underlying – if payoff is simple and underlyings liquid, it is a matter of a few minutes

How many touchpoints would there be for pricing a U$D 150k uncapped call on the S&P 500 from origination to execution? Not relevant

How do you ensure the security of transactions and client data? RGPD & Internal control policies

Does your platform offer full same-day execution/ Straight-Through-Processing (STP) (Y/N)? Not relevant

Do you offer STP trades for sale to US investors (Y/N)? Not relevant

Do you offer STP trades for sale to Offshore investors (Y/N)? Not relevant

Do you offer STP trades for sale to Hong Kongbased investors (Y/N)? Not relevant

Do you provide immediate term-sheet generation (Y/N)? YES

Do you provide dynamic pricing to incentivize higher notionals (Y/N)? Not relevant

Does your platform offer a grid pricing view of multiple structures and underlyings (Y/N)? YES

Is there a platform or participation fee to participants in addition to any product revenuebased charges (Y/N)? Not relevant

Does the platform cater to public offerings in the respective regions (Y/N)? NO

What features do you plan to add in the next 12 months? Cannot disclose

What differentiates your platform? SKYLINE is a powerful after sales tool, one of the best of the market. Thanks to Lexifi partnership, we can handle any specific features and are not stuck only to simple & vanilla payoff. We are able to code internally any payoff using Lexifi proprietary language.

FEEFTY

Overview

Feefty is one of the newest entrants into the structured products platform space. Launched in June 2019 in France by a team of four partners with a structured products background, this click and trade platform is targeted at professional investors, private banks, family offices, insurers and institutional investors, to search for, design, price, trade and monitor structured products with total autonomy.

Highlights

Digitalisation is taking over every single business, assurtech, regtech, neobanks, robo-advisors, it is everywhere, but barely in the capital markets space. Investment banks have made progress offering online pricers but on the distribution side the business model is outdated.

Our analysis is clear. There is a real lack of autonomy, simplicity and transparency in the way investors get access to structured products.

Since launching on June 6 things have moved very fast, and, we have dozens of daily connections on

the platform. We started with the French market but will be rapidly heading to the international market.

Differentiating factors

The platform is available on any device, whether it is a smartphone, tablet or PC, and the search engine provides access to hundreds of thousands of structured products on a best execution basis.

There is an automatic alerting system which helps investors monitor their products and clients are allowed to integrate their existing portfolio of structured products, which then also benefit from the automatic alerts.

The platform is 100% digital from first market quote through digital signature of any transaction to the post trade analysis. Our fees are fully transparent: for 0.50% of notional, users can access our execution and our advice from a dedicated team

Users can also access Feefty’s proprietary dashboard and manage their investments from anywhere on their mobile device. We provide independent and unbiased best execution

SIMON MARKETS

Overview

SIMON Markets LLC (SIMON) was launched by Goldman Sachs in 2014 as a single online platform for financial advisors to learn about and access structured products.

In 2015, the first full year of SIMON’s operations, Goldman attracted thousands of advisors from 18 brokerage firms, representing client assets close to US$2tr. Without a retail sales force, Goldman had historically been unable to reach smaller brokerdealers and non-Goldman investment advisers.

In 2016, Goldman opened SIMON to competitors, allowing SIMON users to buy structured notes not only from Goldman Sachs, but also from rivals such as Wells Fargo, CIBC, and TD Bank Group.

According to a Harvard Business School report, Goldman Sachs’ Digital Journey, published in September 2017, two key factors influenced Goldman’s decision to move to a multi-seller platform: reach and variety of offerings. Moving to a multi-seller platform resulted in a significant increase in customers and trade value. During 2016, the number of SIMON users jumped nearly 500%, from 2,400 users to 15,000 users. There were thousands of active users on the platform each month, and trade value increased by over 300% from 2015. As a result, Goldman’s structured note sales increased fourfold from 2013 to 2016.

At the end of 2018, the U.S. investment bank sold its majority equity ownership in SIMON to a group of structured product issuers including Barclays, Credit Suisse’s NEXT Investors, HSBC, JP Morgan, Prudential and Wells Fargo, with Goldman retaining a minority stake in the new company.

SIMON Markets was launched as an industry-wide single solution for structured products for any Series 7-licensed advisor. Under the new set up, the platform offers a broader range of products as the majority of structured products offered by the original SIMON platform were from Goldman Sachs. The platform’s structured products offering was expanded in the second quarter of 2019 to cover fixed indexed annuities while the addition of structured annuities to the platform is under review.

The platform, which is available through its website or as an API, provides educational, performance

analysis and lifecycle management tools from pretrade education and analytics to the actual trade and post-trade performance analysis.

The platform is targeted at financial advisors from wirehouses, regionals and independent brokerdealers seeking to streamline the processes around structured notes.

SIMON has created a consistent language and a standardised nomenclature to make the products more transparent, and provide more clarity on their appropriateness to the end client. By working with those issuers on the platform and its investors, the standardized nomenclature, built on top of the SIMON product schema (that creates a consistency in product definition), makes SIMON’s signature post-trade performance analysis possible.

Structured products have attracted interest from regulators like the US Securities and Exchange Commission (SEC) and prompted fines for a number distributors. Structured products carry risk and are complex, but with greater transparency, they can also provide appropriate risk-managed solutions for clients.

One of the main features of the platform is its broad range of educational resources for financial advisors on structured products, and materials covering two hours across 60+ modules, with potential to deliver end-client content over time.

Differentiating factors

 Award-winning educational content that has been mandated in a number of firms

 Unparalleled API integration with issuers and distributors to streamline connectivity

 Biggest footprint of adoption and penetration of the various structured investment platforms

 Simplified and standardised nomenclature across the asset class, in close collaboration with issuers/ distributors

 Extended lifecycle management tools to include more robust performance tracking and analytics

 Delivered a complete single-solution for distributors with redesigned and feature-loaded Marketplace 2.0

 Extending platform into insurance products and other categories

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Chapter 4 Buy-side Survey

SRP conducted a survey of over 100 senior buy- and sell-side executives who are either users or clients of single- and/or multi-issuer platforms globally.

To set the scene, one of the survey’s first findings was that a majority of respondents (71.9%) revealed they only used platforms in up to one-quarter of transactions. Only 17.5% of people polled use platforms significantly (for between three-quarters and 100% of their transactions) but 45% said they didn’t use platforms at all.

Only 17.5% of people polled use platforms significantly

Building on the previous finding, multi-issuer platforms (MIPs) were found to be the preferred set up for transacting and executing structured products globally. The survey shows that 75% of respondents favoured MIPs compared to 17% for their single-issuer (SIPs) counterparts. These figures compare to 71.74% and 28.26%, respectively, in 2018.

Thirty percent of respondents cited access to better prices as the main reason they favoured MIPs, though the convenience of having ‘everything in one place’ (23%), and ‘more choice’ and ‘efficiency’ (both 17%) followed close behind. Respondents also spelled out the reasons why SIPs remain a valid proposition with ‘familiarity’ (22%) outlined as the most valued characteristic followed by ‘flexibility’ and ‘better prices’ (both 14%), as well as ‘best execution’ and ‘faster transaction time’ (seven percent each).

The big picture

Looking at the overall picture, users of platforms valued automation of pricing and execution the most as they can reduce the time to get a product from the idea to transaction stage in a timely manner. Respondents from all over the world had their say.

A Swiss product provider said that platforms “help me get pricing [more quickly]’ and are good “for trading small sizes but not for big sizes, [because of] the commission”.

Which type of platform do you prefer for transacting/executing

Which type of platform do you prefer for transacting/executing?

A senior executive from an asset manager in Hong Kong said the automatic comparison of prices from different counterparties was a key functionality but highlighted “limited pricing capability for certain less traded underlyings” as well as IT teething issues.

Centralisation of post-trade services and market lifecycle management are also seen as key features, especially in the case of MIPs. According to one USbased respondent, “distributors would benefit from having access to all their products in one place on one MIP rather than rely on multiple single-dealer platforms for these services.”

The chief executive of a US distributor said that platforms are extremely good at “creating transparency and life cycle management and education”. But he said a downside was that “structured products are something that is sold face-to-face and the platforms eliminate human interaction, so finding potential new buyers and soliciting them can be difficult”.

According to one senior adviser from South Africa, platforms help with product knowledge but “don’t allow you to on-board the client much quicker than anticipated as clients prefer to have a human touch”.

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A US-based distributor told SRP that both types of platforms have their own distinct advantages: MIPs offer the ability to compare multiple issuers simultaneously on price (price discovery during the auction process) while single-dealer ones normally entail “a more customised experience and better trade lifecycle management” despite restricting the user “to one dealer only”.

Single-dealer platforms “often give access to powerful portfolio management tools as well,” added the US distributor.

Devil in the detail

While platforms can help with a range of transaction services including bookings, recordkeeping, portfolio management, execution and post-trade verification, there are functionalities that they don’t necessarily provide or areas where improvements still need to be made.

One area where this is the most visible is customisation

One executive from a large Singaporean bank said platforms are “good at giving fast pricing but bad

Factors encouraging the use of platforms

at giving pricing for non-flow structures”. “I can get very simple structures on the platforms but I cannot get exotic structures, and I’m forced to go straight to the issuer,” they said.

This is a thought echoed by a senior executive at a firm in the Nordics. “The flexibility is great with trading and minimum issue sizes, you can try things many times efficiently without hassle,” they said. However, the lack of credit structures and nonequity asset classes are a shortcoming.

A Swiss private banker said that there is the “danger of too much choice”. “We want partners on the platforms whom we can grow with to tackle challenges we might face – like innovation for example. Platforms are great for mass customisation but [they] don’t cater for special tailor made or niche solutions,” they said.

Another area is efficient access to information.

A distributor from Ireland said that from a regulatory standpoint, pricing comparison platforms are important “but don’t necessarily give the best pricing”. “We had to manually contact the banks and we observe clear differences in the prices,” they said.

Another Spanish private banker said platforms don’t give the full picture of the market because by using platforms, clients can miss key information on other parts of the markets.

“Everyone has a black box to analyse volatility. It comes down to methodology and this is an issue,” they said. “Underlying content with corporate actions, volatility and regulatory is missing.”

A third aspect is the lack of a human element

A senior executive at a UK-based intermediary firm said that platforms could give a “ballpark figure of price but are bad at generating ideas”. “You always need a human behind it to give some input on the structuring. This is what we really need eg advice on maturities, etc,” they added.

Another UK executive at a major wealth management firm said that although platforms can give you access very quickly at the click of a button, “you still have to have all the distribution agreements in place with the individual banks. I want to have one agreement and access multiple banks through that broker. If I can only have one distribution agreement with that broker and with different banks, there’s no real benefit.”

TOP PLATFORMS

Single-issuer

Respondents favouring single issuer platforms over MIPs pointed at pricing and standing relationships as well as the available research from investment banks.

Having a direct line with a structuring desk is highly rated as existing agreements and contracts can also facilitate a trade. Single-issuer platforms are also seen as reputable and a way to access pricing quickly.

The single issuer platform with the highest number of mentions was Société Générale’s SG Markets.

“You can put in multiple criteria for single search outcomes and is adaptable into streamlining. SG appears to be improving constantly and this pleases me and works well for us. We have used it for four years,” said a US advisor.

Goldman Sachs’ Marquee came second with an executive noting its secondary market capabilities. “We have used it for a year and it’s been a good service,” they explained.

BNP Paribas’ SmartDerivatives came third also on the basis that it is “quite competitive on most of products and has a lot of payoffs with strong credit”.

A private banker using SmartDerivatives for over five years said that the platform offers “services other banks don’t and allow us to trade by email.”

Multi-issuer/Multi-asset

Respondents advocating for MIPs did it on the basis that these hubs are better suited for firms with “global relationships” seeking “best execution”. MIPs are also seen as “more efficient” and “time-saving” as distributors can get “all the information in one place versus having to enter the trade on different platforms”.

The MIP with the highest number of mentions was Bloomberg. This was not necessarily because of its structured products capabilities as it is used more for “data gathering” and for “looking at tickers and back-testing, but not so much for pricing purposes”. However, the Bloomberg terminal is widely used in the market for price discovery because it is “easy to setup” and has “a lot of counterparties already signed”.

“[We’re] big fans of Bloomberg because it encompasses a lot of things in one place and adds value to the user,” said one respondent. “Clients can send requests via the Bloomberg chat, and ask me for prices via the chat, email or phone. Bloomberg has multiple sales people in the chats, prices are shown very quickly with client details shown in the chat. It is fast, clear, and tidy.”

Leonteq came second with one respondent pointing at “familiarity” as the main reason for using the Swiss platform for over four years. “They’ve been very active. The platform is competitive and in terms of optimisation it is the best available,” they said.

US platforms Luma, Halo and Simon shared the third place because of their growing profile in the market and because they offer a way to “see what deals are on the calendar or for education”.

Luma and Simon have one advantage: they carry “a lot of investment from underwriters”.

Contineo and FinIQ were also mentioned for different reasons. One respondent said that Contineo’s robust pool of issuers allows private banks to automate the business and have power at a “product design”, bringing “efficiency and scale” to the Asian business. FinIQ is also considered a “powerful platform not only for structured products but also for bonds and equities”.

“FinIQ have all the issuers we deal most commonly with and we find it easier to use than others,” said one respondent that has been using this platform for six months.

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What factors would encourage you to use platforms more?

The reasons to increase the use of platforms varied among respondents including “broader distribution and reach” and well as “an efficient way to deliver educational tools”.

Although not all platforms offer all the functionalities mentioned, respondents noted a number of relevant factors that would make platforms appealing to their businesses including “quick and reliable price discovery with executable levels from multiple dealers”, “interconnectivity between brokers we interact and deal with in a centralised platform”, “critical mass”, “end-to-end support for trade lifecycle, starting from price discovery through auctions, trade execution and secondary market support”, and “transparency”.

One respondent noted that platforms are “efficient and eliminate human error, save time and are great for productivity”.

Another respondent highlighted that platforms are “user friendly” and offer “prices and speed, but also the back end process” which allows to “settle trades quickly” in a “transparent” environment.

Platforms are also putting the right tools in the hands of distributors to “understand structured products”, and “eliminates tediousness of filling out lots of details, e.g just e-signature”.

They make it easier to communicate with financial advisors about the attributes of a particular product concerning the payoffs and you can do it easily, back-test it easily, said one respondent. There’s an education component which is better and the life cycle management component which helps to bring in new advisors for increased penetration and also the ability to give more transparency to the process for the advisors.”

A US distributor stated that there is a need to “invest more in tech” to “grow third party business”.

“There are a lot of manual components in platforms but hopefully will become more and more automated and make it easier, more integrated,” said another.

A Swiss private banker noted that distributors are “trying to move more business onto platforms as a lot of businesses commoditises the clients’ payoff requests for us. It allows us to be more efficient, faster processing, lower costs. Therefore we can offer more competitive pricing for clients, faster response times and lower minimum amounts for clients.”

“There needs to be a much higher volume of transactions to make you use platforms and to make a case for it”

Platforms also provide “information for clients in one place”, as well as “seamless process for stakeholders”.

“Selling structured products requires lots of licensing and most of the platform users have varying degrees of licensing. Platforms can help with regulatory compliance too,” said one respondent from Singapore.

According to a senior executive from a French distributor, despite offering quicker, accurate pricing, and being cost effective platforms are lacking “autonomy and transparency (the way structured products are billed), and there should be more “clarity about how the products are designed and used”.

A respondent from a global wealth manager said that there is a need to have “a much higher volume of transactions to make you use platforms and to make a case for it”. However, platforms “eliminate the interactions with the salesperson which is bad as it is good to get trade ideas from face to face”.

A respondent from an Asian wealth manager said that platforms would be more appealing if they expanded their capabilities and ability to price more exotic payoffs and more underlyings.

35% of respondents said when they highlighted lack of human contact a as a limitation

“Most of the time you are limited by underlyings and only the most liquidity of stocks are available as underlyings on these platforms,” said the wealth manager, adding that usage would increase with more transparency in the pricing.

“Pricing can be very tricky the actual price the bank gives is different to a screen price so if I knew I could get an accurate price on something I would be more comfortable using it.”

Look out

The survey did not reveal any red flags around the use of platforms. But respondents highlighted the need to continue evolving and improving functionalities, and noted several issues.

An Italian distributor echoed what 35% of respondents said when they highlighted lack of human contact a as a limitation. The human element is also present when 12% of respondents said they missed advisors not being able to take responsibility for an investment.

“I prefer face-to-face interaction, clients tend to prefer this as well in my experience,” they said. “Most people prefer to make decisions by a consultant advisor and not online solely as this is a very difficult decision especially with structured products to understand the attributes and the risks, especially HNWI clients aren’t very tech savvy. They want risk assessments done by advisors.”

Pricing (12%), including price discrepancies between the platform and issuing banks, and complexity (four percent) came up yet again as potential challenges to wider uptake. A US distributor said that the biggest drawback, in their view, is that some of these platforms “are still very complicated and complex”.

A senior executive from a global private bank said that platforms tend to work for templated

Limited choice Slow

Complex

Technical reliability/breakdown

Price disaparities

payouts, but often fall short when payouts are non-standardised/supported or if the structure needs optimising which would result in more standard interaction with dealers outside the platform.

“While platforms help in taking the information and making it less complex to the financial advisor, this doesn’t go all the way,” they said. “It doesn’t make me believe structured products will become commoditised products therefore you need a high level of subjectivity and human interaction to ensure the industry is successful.”

According to this executive, fragmentation of dealers across multiple platforms can also be an issue. “Ideally there is a small selection of platforms where majority of dealers participate,” he said.

Fifteen percent of respondents see lifecycle management as an opportunity for development

Other shortcomings experienced by platform users include lack of market data (four percent) including “last-minute changes to trade terms requiring rerunning of auctions or restarting the process from the start” as well as “use and dissemination of distributor data”.

What would make clients stop using platforms?

No inclusion of market information

If is requires too much personal data

Too slow

Lack of quick and reliable technical support

Client preference

Inconvenient

Data breach

Lack of human support in certain circumstances

Not providing su cient liquidity

Weak pricing Margin

Overly complex

Mispricing

Lack of technical reliability

“It’s important to know which dealers/market participants have access to historical trading data from distributors and that the sensitive data protection/market data protection is compliant with data protection regulation,” said one respondent.

What aspect of service would make you stop using a platform?

Among the reasons to stop using a platform “not being able to control our own proprietary information” would be a trigger for a European distributor who also pointed that another reason to stop trading on platforms would be “in cases where functionality and value-add to the trade lifecycle is limited”.

“Platforms can become obsolete and more like a ‘nice to have’ rather ‘need to have’ tool,” said the executive.

Another respondent said that “connectivity issues, such as firewalls and protocols” could also be a factor beyond credit”.

“Mispricing, losing good prices and system issues. The trading floors of banks have different axes e.g. one bank will be more aggressive in one stock and volatilities etc. The platform is not telling us this kind of information. It can be useful but have to mix the platform world with the reality of the market. But if you have whole

information then often you can achieve the best price of what you are looking at in the platform,” said one respondent.

Other factors include counterparty risk, credit risk, and other inefficiencies including “breakage in product lifecycle, issues in liquidating products in volatile markets”.

“If I don’t have my usual trading partners on the platform then i probably won’t be using,” said one respondent, adding “a platform must be simple to use and if it gets too complicated it is bad”.

“It needs to be free to access and seamless in that everything works automatically. If you have to exit the platform to do emails or old fashioned communications then the user experience is broken and the client is unhappy,“ said a senior executive from a French firm.

What gaps do you see in

the

structured products platforms space?

As the structured product platforms evolves, market players and users have identified a number of missing items and functionalities in many areas including the ability to execute and complete efficiency around lifecycle of products.

Fifteen percent of respondents see lifecycle management as an opportunity for development.

IncreasedrangeofpayosMoreunderlyings/assetclassesPortfolioanalytics

LifecyclemanagementEducationandmarketinfo

SecondarymarkettradingAccesstotechnicalsupport MDPprovide documentation SafeguardsagainsthumanerrorEuropeanMDPReducepricingIncorporationofBlockchain Pricingmethod transparency Allpricingononeplatform

“Platforms need to cover the whole process from designing and launching a product all the way through to the product maturity,” said a Chinabased wealth manager.

A private banker from Singapore added that currently only half of the cycle is covered. “The final documents have to come from the issuer so it is not a fully end to end process ie the platforms are not doing everything,” they said.

A private banker with global reach said that not a single MIP “has all the issuers just yet”. “I’d like to see more products offered. Platforms are still evolving but lifecycle management is not being addressed as it is not commonly automated,” they said. “This poses a challenge in the market. We are a global bank and having a global provider would achieve this perfectly ie certain platforms only in certain regions.”

20% of respondents who said they would like to see platforms offer an increased range of payoffs

A respondent from a global private bank said the platform’s landscape “has become very fragmented, and each offering has different features and capabilities which leads to a poorly streamlined overall experience as a distributor”.

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“In Emea, in particular, there seems to be no MIPs that have been able to get a critical mass of participants on their platform, and often the main use of these platforms becomes price discovery in auctions,” they said.

An asset manager from Switzerland added that “coverage and prices for secondary markets needs to be improved”. They conceded that while there are enough issuers, “payoff aren’t diverse enough. “Sometimes when we want to add a new payoff that is pushed back from the issuer,” they said, reflecting the opinion of 20% of respondents who said they would like to see platforms offer an increased range of payoffs.

Another respondent from the US said that platforms “still need portfolio analytics” and pointed that “cross asset rates and commodities are underrepresented whereas equities make up the majority”.

One gap identified by a European private banker is that “the majority of platforms show the same figures so you can’t differentiate effectively between buy- and sell side and this means that all the payoffs seen in the platforms are always payoffs where you might be selling or buying off volatilities,” they said. “For the last two years we are trading up and down strategies.”

Beyond missing products, one respondent noted that in Asia Pacific autoprices only cover very vanilla/plain product. “Features that are more exotic require manual pricing and turnaround times

are much longer,” they said. “Autoprices only works for well-traded stocks and there are a few that can’t be autopriced.”

Value added

Some of the most valued functionalities and benefits of platforms include connectivity, transparency, efficiency and timeliness in terms of pricing, but there are other functions praised by market participants including educational tools, and the possibility to interact with a broad number of clients.

Other aspects of added value offered by platforms include the ease of use, reporting, and flexibility while other functionalities such as secondary market, corporate actions, inventory tracking need to improve.

One respondent said that “having all things in one place and being able to slice and dice things and understand everything in an efficient in one account rather than a hundred” is one of the main benefits of platforms trading for its firm.

Accuracy, reliability, as well as the standardisation of API and email protocols has also improved with platforms, according to a US distributor.

“Having consistency of information and scale of services will allow us to appropriately educate clients and deliver appropriate solutions,” said the executive, adding “we need more choice. I don’t

trust the banks. The only way to keep them honest is competition. Or else banks are paid to be dishonest.”

An Apac banker said that having the ability and presentation of the info in a simple and clear format is also an advantage. “I know what I want to do and I want it done seamlessly,” he said. “I want templates which make my life easier and adds to the speed of the job.”

Another respondent said that platforms are also helping the structured markets to be more liquid. “Liquidity is most important for me. These platforms will increase competition and liquidity and client gets more prices more quickly, but obviously there is a point where the benefits go down to zero and beyond as I don’t want the client to go to all banks on the street to ask for all the same prices at the same time.”

“Platforms are helping to standardise the process but this is only good up to a point,” said another respondent. “The margins however are the drawback. Banks may not give up a lot of these margins so it is important only up to a point. But in future clients may ask 20 banks for a price, and margins will go down but the banks will fight against this.”

Platforms are succeeding in providing very user friendly interfaces, but execution and the pricing engine should be faster,” said another respondent. “I don’t wish to be waiting more than a few seconds for the pricing and execution. The prices should be accurate and tradeable so I can receive

What do clients value most?

the information and trade and execute easily and quickly using a user-friendly and easy interface.”

How do you prefer to deploy click and trade application via on-site hosted and managed service, as real-time, browser-based access delivered securely by private cloud or API?

PREFERRED WAY TO DEPLOY DIGITAL TOOLS

When it comes to the preferred way to deploy automated tools and functionalities, the survey unveiled that the preferred option to deploy digital tools in a safe and secure way is the ‘web browser via private cloud or API’ with 67%, with the remainder “indifferent” to the best way to deploying automation.

“More needs to be done to create consistency and standards that comply with regulatory requirements and benefit consumer perception of structured investments”

Dealing with regulation

Overall, platforms are helping issuers and distributors meet regulatory requirements as well as educating the market in understanding regulations.

However, a Swiss banker noted that “more needs to be done to create consistency and standards that comply with regulatory requirements and benefit consumer perception of structured investments”.

“This ties in with suitability because regulation is

basically concentrating on suitability to clients and not sure if platforms address that,” they said. “It is difficult to confirm whether they are complying. The biggest question is the access they allow you to have and execute this at the best price but I am assured this is being monitored.”

Another respondent said that it depends on the region “as broker-dealer platforms are all regulated pretty well”.

“Platforms are meeting regulations adequately and all the required documents are available from the platforms we are using,” said a European wealth manager. “Of course Mifid 2 will bring about further changes so we need to observe what the regulators will ask for in light of this but on the whole the platforms are meeting regulations.”

Another respondent noted that what needs to be regulated is “the fees they charge and what fees they are keeping given the work they are actually doing”.

“There needs to be more transparency on those fees in the context of Mifid 2. I think platforms are helping us all meet regulations but in certain regions, the industry through platforms can improve the way termsheets are created and also improve distribution to end client,” they said. “Greater scrutiny of transparency and also more about the creation of materials that are consistent and understandable by the clients in line with the regulations of that particular region.”

A European distributor said that it has become “more difficult to run a flow business without these approved platforms given the pre- and posttrade duties”.

“We don’t see any regulatory gaps but regulators need to keep reviewing what they have in place to maintain the high standards,” said the executive, adding that perhaps platforms should be more active in “helping with research, and assist in making the onboarding process simpler.”

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Chapter 5 Sell-Side Focus

BEYOND PRICING – ISSUERS PREPARE

Since our 2018 SRP Platform Report the digitisation of structured products distribution has continued to accelerate

In this year’s report we surveyed a group of leading structured product issuers to understand the impact and found some interesting results.

We asked the experts at inSPire, the specialist structured product manufacturing service provider, to take a closer look and assess whether manufacturers are prepared for this rapid growth of platforms.

It takes two

All marketplaces, including electronic platforms, are dependent on buyers and sellers coming together.

An electronic structured products platform will cease to be relevant without the functions and tools to attract the buy-side which is why the focus to date on structured product platforms has been on offering appropriate functionality to meet the buyside needs.

But successful platforms must also have a wide range of products available for their users, and in the case of multi-dealer platform and RFQ tools, products available from multiple providers. What makes a platform interesting to the product manufacturers?

100% of respondents ranked the size of the distribution opportunities and volume of activity going over the platform, as their top 2 factors when making their decisions

When asked about the most important feature that drive a decision to connect to a multi dealer platform or RFQ messaging service, all issuers confirmed that it is directly linked to the size of the potential distribution activity that the platform offers.

Fig 1. Joining a multi-dealer platform

When deciding to connect to a third party or multi-dealer platform what are the most important features to you?

Getting out there

Talk about digital distribution platforms is usually focused on the opportunities to expand structured product distribution to new markets and new clients.

Indeed, the industry appears to see its’ future success in offering users of structured products more flexibility to create and buy the products they need and to strive to make it ever easier to do so by simplifying the pricing and execution process.

This is not just restricted to pricing and execution. Alongside the growth in the adoption of platforms has been an expansion of the education tools to promote better understanding of products, in an effort to widen the interest in structured products as an investment class. This has included access to training and educational materials as well as tools to compare and analyse products. The platforms have also enabled faster access to transaction documentation and marketing materials and provided other functionality to make the buying process simpler and quicker.

Single-issuer platforms, multi-dealer platform and RFQ messaging tools all increase the speed at which

products can be structured and customised to meet client’s product requirements. Electronic pricing and execution reduce the costs of execution to the point where much smaller issuance sizes are viable.

Over 80% of respondents are offering issuance sizes of USD 100k or below with 60% willing to go to USD 25k or below. (see fig 2.)

Volumes are increasing and issuance sizes getting smaller. Are product manufacturers processes being digitalized to cope with the changing business model?

In the beginning

For the product manufacturers the starting point for issuing a new product ultimately involves providing a price. Platforms have enabled the mass distribution of pricing for a wide range of products and features.

Production of pricing on the fly for bespoke combinations of payoffs and underlying reference assets is now commonplace.

Banks that issue structured products have invested heavily in building out tools that would previously have been operated manually by trading or structuring teams. They have worked on improvements to functionality and latency so that the tools can be operated by sales people, and increasingly these pricing tools are connected directly to platforms to allow external users access to the pricing results.

This process is highly scalable, with all of the commercial benefits that offers. However, removing key parts of manual intervention from the process creates a new set of risks for issuers, and the need to make fundamental process changes to the way in which responsibilities are allocated. Pricing parameters need to be stored, maintained and updated in line with risk appetite and market movements.

For instance, firms must make decisions around issuance transaction size for automated quoting, the timeframe for which quotes are valid and the emergency brakes that suspend quoting when market conditions require it.

Most manufacturers operating through external facing platforms have already made this transition, as demonstrated by the results of the survey.

TACKLING THE SHIFT TO ELECTRONIC DISTRIBUTION AND ISSUANCE DIGITALISATION

Digitisation of structured product distribution follows a well-trodden path for financial products. Most investments into financial products are now made online - from deposits, to funds and even buying equities.

But structured products has always been a domain of higher complexity requiring experts and specialists. As electronic distribution tools bring rapid changes to the market place we look at how banks are preparing themselves for digitalisation of their issuance process to cope with the change.

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All issuers surveyed had existing automated pricing capabilities and 70% felt that this was comprehensive across the range of products and asset classes that they were responsible for (see fig 3.)

The work is not over though. There is a requirement to continually review the decisions made, the data

Fig 2. Minimum issuance size offered What minimum ticket size for primary issuance do you ultimately expect your issuance platform to be able to support? across the product range that you automate

being used, to monitor the connections to the platforms and re-evaluate the approach each time a new external pricing connection is made.

For those new entrants considering an electronic distribution model for the first time, they should be under no illusions that there is a large amount of process change to consider as well as the infrastructure required to run the processes.

Meet at my place

To understand structured product manufacturers views on the trends in electronic distribution we analysed their survey responses in this area.

The growth of multi-dealer platforms has clearly moved forwards a long distance in a short space of time. There is now a level of comfort for product manufacturers in openly competing on platforms and placing their products on the shelf alongside their competitors. This approach was not the mainstream view just a few years ago and, in part,

the change has been driven by best execution and margin disclosure regulation. However, the prominence and permanence of the platforms in the distribution chain is now clear.

Turning to the buy-side, we are seeing growing evidence of a strategic shift in their price discovery architecture, which threatens to reduce their dependency and usage of the multi-dealer platforms.

To develop their competitive offering and deliver a more digital execution experience to their clients, the large buy side firms need and expect their Relationship Managers and advisors to be able to access a wide range of different products (not just structured products) from a select group of manufacturers all in one place

80% of respondents saw connectivity to multi-dealer platforms as either their top or second priority (see fig 4.)

Only 10% of respondents identified growth of their manual sales effort as their key objective (see fig 4.)

As these firms invest in building their own tools and infrastructure to facilitate this, they are able to demand that product manufacturers provide pricing directly to their own internal platform, bypassing multi dealer platforms altogether.

Buy-side firms want to be able to complete the internal execution and client account bookings

Fig 3. Existing pricing capabilities

How would you rate the readiness of your pricing technology to support connectivity to external platforms and clients ?

Fig 4. Joining a multi-dealer platform

When deciding to connect to a third party or multi-dealer platform

are the most important features to you?

electronically in parallel with the external pricing and execution, not to log in to external platforms for pricing.

The survey responses provide evidence that product manufacturers have recognised this trend and appear to be increasingly devoting their focus to meet this demand, in place of further investment into their own single-issuer platform.

60% of respondents felt that connectivity to buy-side clients own platforms was their top priority (see fig 4.)

Development of single-issuer platform was the ranked the lowest priority by half of respondents (see

fig 4.)

Not that this trend signals the end of the multi dealer platforms. A large majority of banks intend to invest further in this connectivity and almost everyone believing that there will be more proliferation in the future.

Nearly 80% of respondents thought that platform growth trend would continue, most through the proliferation of multi dealer platform (see fig 5.)

Pulling the trigger

With a large increase in structured product buy side clients now accessing pricing for a wide range of products on electronic platforms, naturally the demand to be able to execute online has also grown - this is where it starts to get a little more complicated for product manufacturers;

 Can you be sure that the product selected is suitable for the marketplace or the distribution

5. Platform trends

Do you think the platform landscape is too fragmented and do you expect consolidation or further proliferation?

60% of respondents expected further growth or more proliferation

20% of respondents saw the emergence of buyside platforms driving further platform development

20% of respondents saw no material change

channel?

 Are the marketing materials, legal and regulatory documents available to be able to execute?

 How to make sure the order is fulfilled, the risk systems are updated and that any exceptions are picked up?

For banks offering products on their own single dealer platforms it is possible to create steps in the process to make sure these things are addressed but how do you manage when your pricing and execution is happening across multiple external platforms?

Regional language requirements and country specific regulation present additional hurdles. Complex requirements like Priips in Europe require a key information documents to be made available to the distribution channels prior to any sale to the end clients, including scenario analysis and risk indicators which must be calculated on demand.

The execution process can be complex, and manufacturers need to be able to meet these requirements in a frictionless environment with negligible marginal costs given the potentially small size of individual transactions. In the survey this was by far the most challenging area for issuers.

6. Internal issuance capabilities

How concerned are you regarding the ability of your issuance platform to cope with the demands of an increasingly automated trade execution model?

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Fig

Fig

70% of respondents highlighted this as an area of focus or concern with their existing capability (see fig 6.)

There has been an emergence of specialist service providers and technology solutions to meet specific challenges like Priips Kids. Manufacturers are increasingly able to leverage specific solutions and bolt these into their internal process and it is evident that they are increasingly comfortable to use them.

The lifecycle

For a product manufacturer, setting the product terms and agreeing the pricing is just the start of an issuance process that will continue throughout its life.

Solutions which enable the expansion of distribution channels and the customisation of products must be underpinned by lifecycle processes that ensure that the product is serviced effectively whilst minimising or eliminating the cost.

Manufacturers face the pressing challenge of upgrading internal processes to effectively handle the automated booking of these high volume of small size tickets. It is critical to ensure that these transactions are accurately reflected into their risk management systems as soon as they are executed but this is only one step in a much wider process.

Structured products are typically issued as securities which brings a range of securitisation processes into play including interaction with paying agency functions and clearing systems, filings with regulators, publishing of prices and documentation. Increasingly these parts of the chain are also adapting to the higher volume environment, but every step must be considered. The set-up of static data and market data, listing and other external pricing publication tools must also be factored into the process.

Half of all respondents highlighted concerns in their platform capabilities regarding legal documentation (see figure 6).

Legal documentation was cited as an area of concern for manufacturers automated issuance processes which does not come as any surprise. Legal documentation, which sets out the full details of the terms of the products, must be produced for

every single new issuance regardless of the size. Typically, these documents are issued based on lengthy legal programmes and regulatory approved prospectus and obviously must be 100% accurate every time. The speed of the execution process and the small size of the transactions removes the possibility of any manual checks or reviews, so specialist automation skills are required to ensure comprehensive testing and ongoing regression controls are in place.

Do you consider the following changes in the structured products market as opportunities or threats?

Lifecycle management is often last in the queue for automation when project budgets are handed out, but unless firms invest a proportionate part of their improvement budget in automating the processing of lifecycle events then the operational burden will balloon. Examples include barrier events and early termination, through to corporate actions, coupons or other payment events. Activity is not limited to managing the event itself but also making sure that the appropriate client communication and exchange notifications are completed in the timeframes expected.

Lifecycle Management was the joint highest area of concern highlighted by issuers in relation to their existing capabilities (see fig. 6)

Looking forward

We analysed the survey results to understand whether product manufacturers felt that the changing environment and new technologies created risks or opportunities for their business.

Fig 7. Opportunities and Threats

We wanted to understand how much these changes were leading to additional investment into product manufacturers issuance capabilities and what results they were expecting to achieve.

Most respondents were very optimistic, were investing in the future, and saw opportunities from the growth of platforms and technology.

The majority of issuers see both blockchain and the growth of “platform supermarkets” as opportunities (see figure 7).

After a period of under investment the survey results indicated that there is now a wave of new investment being made by structured product manufacturers in their processes and technology.

A significant majority are undergoing a strategic programme of platform development and all but one of the respondents indicated that there was strategic or tactical development programme underway already (see figure 8).

Despite the amount of time and investment already made more than half of those surveyed expected to increase their current levels of spending on development of their platform in the coming year (see figure 8).

Does process automation lead to costs going up or down?

The business case for investment in automation is often dependent on reducing costs. The logic is that when you automate a process, you remove the need to have expensive people involved.

The survey showed that there was a split of perspectives as to whether this was the actual goal. The majority of respondents expected their costs to reduce once the results of the investment are

www.structuredretailproducts.com

Increase Decrease 40% 60%

Increased efficiency

More straight-through-processing

Less manual resource

Higher volumes to support

New types of costs (technology support/service providers)

Costs to increase at slower rate than revenues

delivered. However, nearly 40% anticipated that costs may to continue to increase – they saw the role of automation as providing the processing capacity to ensure that growth in costs would be at slower rate than growth in revenues (see figure 9).

Cost mutualisation - the next big trend

Emerging to support the platform trend is an increase in availability, and appetite to use, specialist service providers.

Many banks have tried to reduce costs by leveraging offshore processing centres in lower cost locations. The resulting benefits have been limited, particularly in an area of fast-moving technology and more complex processes.

Further reductions in processing costs are required but without sacrificing expertise, flexibility and benefiting from the scalability that new technologies can bring.

Mutualisation of the cost of both upfront investment in the technology and in ongoing processing can be achieved through externalising activities with industry providers. As processes become more standardised and less proprietary, and the costs of developing and maintaining the technology to run them continue to increase, the logic for finding efficiencies through these external providers has become clear.

The survey clearly highlights a much more open approach banks now display to engaging with specialist providers to help them meet their challenges.

Fig 8. Internal issuance capabilities

Which of the following best describes your organisations current approach to investment into your structured products platform?

Fig 9. Results of investment in issuance platform Do you expect your overall costs, including the cost of team responsible for issuance processes, to increase or decrease following investment into your platform?

90% of those surveyed saw the use of external issuance services as an opportunity (see fig 7.)

Conclusions

The results of the survey have confirmed trends that have been observed and reported for some time.

Digitisation of distribution is happening

Platforms provide choice and speed of execution for clients, help manage regulatory compliance and reduce execution cost.

No single dominant channel has emerged

Product manufacturers need to be prepared to deliver their products to a range of different platforms as the marketplace continues to evolve.

Automation of product manufacturing is critical

Product manufacturers are investing more to ensure that their internal capabilities keep up with the changing business model.

External Issuance services will be part of the digitalisation solution

The benefits of accessing specialist technology and services on a mutualised cost basis have now become accepted as the processes become homogenised