Structured market leery of open systems
Yet brokerage firms' proprietary-only policy sparks risk concerns amid credit crisis
By Dan Jamieson June 2, 2008
Open architecture has been slow to come to the structured products market.
Structured products are unsecured debt obligations of the issuing brokerage firms, and despite growing concerns about Wall Street's financial strength, only one wirehouse sells outside products.
UBS Financial Services Inc. of New York has given its brokers a choice of issuers since 2006, said UBS spokeswoman Karina Byrne.
In addition to its own products, UBS offers products from Lehman Brothers Holdings Inc. of New York, Deutsche Bank AG of Frankfurt, Germany, HSBC Holdings PLC of London, and Barclays Capital, the New York-based investment-banking division of London-based Barclays Bank PLC.
Other than UBS, there's been no movement to open the doors.
Flows into structured products have almost doubled from $64 billion in 2006 to $114 billion in assets in 2007. Five years ago, in 2003, it was $28 billion.
The risk from a proprietary-only policy is that clients may not get the diversification they need, and they may pay too much when issuers don't have to compete.
Other than UBS, the only other traditional firms offering outside products are the private banking units at JPMorgan Chase & Co. of New York and Credit Suisse Group of Zurich, Switzerland, Mr. Styrcula said.
"If they did [use outside issuers], I would probably consider [structured products] a lot more seriously," said a Smith Barney rep who asked not to be identified.
For the full article, click here.
SPA-2008
Tuesday, June 3, 2008
NASDAQ to Host SPA Press Event on June 11
On June 11, 2008, the NASDAQ and the Structured Products Association (SPA) will co-host a media briefing to discuss why "structured products" represent the fastest growing investment vehicle for American investors.
With nearly 7,000 structured products sold in the United States in the last year, this investment class has been resilient in turbulent markets and nimble in monetizing current market opportunities.
The Structured Product investment class outsold closed-end funds and convertible securities last year and was third behind hedge funds and exchange traded funds in new assets. Structured Products are rapidly becoming a mainstream investment instrument for millions of American investors, taking its place along side mutual funds, exchange traded funds, closed-end funds and stocks and bonds in well-diversified portfolios. This presentation is intended to provide the press with an overview of the structured products investment class and this rapidly developing industry.
WHO:
John Radtke, Executive Director, Incapital LLC
Karen Fang, Managing Director, Goldman Sachs
Matt Ginsburg, Executive Vice President, Wells Fargo
Nikki Tippins, Managing Director, J.P. Morgan
Philippe El-Asmar, Managing Director, Barclays Capital
With nearly 7,000 structured products sold in the United States in the last year, this investment class has been resilient in turbulent markets and nimble in monetizing current market opportunities.
The Structured Product investment class outsold closed-end funds and convertible securities last year and was third behind hedge funds and exchange traded funds in new assets. Structured Products are rapidly becoming a mainstream investment instrument for millions of American investors, taking its place along side mutual funds, exchange traded funds, closed-end funds and stocks and bonds in well-diversified portfolios. This presentation is intended to provide the press with an overview of the structured products investment class and this rapidly developing industry.
WHO:
John Radtke, Executive Director, Incapital LLC
Karen Fang, Managing Director, Goldman Sachs
Matt Ginsburg, Executive Vice President, Wells Fargo
Nikki Tippins, Managing Director, J.P. Morgan
Philippe El-Asmar, Managing Director, Barclays Capital
IHT: U.S. to toughen regulation of commodities markets
by Diana B. Henriques
International Herald Tribune
Regulators of the nation's commodity markets will demand more information about investors to determine whether they are evading market limits on speculation and artificially driving up world food prices.
The regulatory agency, the Commodity Futures Trading Commission, also plans to initiate talks with bank regulators to ensure that adequate credit is available for the farm economy.
Finally, in an unusual departure from the secrecy that usually cloaks its enforcement actions, the commission will confirm that it is investigating the price spike that hit the cotton futures market in late February, a step demanded by cotton industry executives at a commission hearing on April 22.
The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.
But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market — from pension funds, endowments and a host of other institutional investors — through the new conduit of commodity index funds.
Billions more have come in from investment banks that are hedging the risk of complex bets, called swaps, that these same investors have made in the unregulated international swaps market, which dwarfs the regulated markets supervised by the CFTC
The commission has come under fire, most recently at a hearing on May 20 before the Senate Committee on Homeland Security and Governmental Affairs, for not doing enough to monitor the impact of these investors on markets that have such influence on family budgets nationwide.
Specifically, the commission will start requiring more information about index funds and, more significantly, about the clients on the other side of the unregulated swaps deals that are being hedged on the regulated futures exchanges.
The swaps market has traditionally be seen as off limits for U.S. commodity regulators, but the commission clearly is responding to congressional concern that investors may be using swaps dealers to evade rules that limit the size of their speculative role in regulated markets.
The commission is also putting the brakes on granting waivers that have exempted some commodity index funds from speculative limits, and is formally dropping proposed rule changes that would have extended a blanket exemption to all index funds.
In recent years, more than a dozen commodity index fund companies have been granted individual waivers, after successfully arguing that they were using the futures markets exclusively to hedge their obligations to the people who have invested in their index funds. But the commission now intends to "be cautious and guarded before granting additional exemptions in the area," according to the draft proposal.
The full article can be accessed by clicking here.
International Herald Tribune
Regulators of the nation's commodity markets will demand more information about investors to determine whether they are evading market limits on speculation and artificially driving up world food prices.
The regulatory agency, the Commodity Futures Trading Commission, also plans to initiate talks with bank regulators to ensure that adequate credit is available for the farm economy.
Finally, in an unusual departure from the secrecy that usually cloaks its enforcement actions, the commission will confirm that it is investigating the price spike that hit the cotton futures market in late February, a step demanded by cotton industry executives at a commission hearing on April 22.
The commodity futures markets play a key role in establishing worldwide prices for wheat, corn, soybeans and other foodstuffs, as well as energy products like crude oil and natural gas.
But in recent years, these markets have also become an attractive haven for investors seeking both profits from rising prices and protection against inflation and a withering dollar. As a result, billions of dollars have poured into the commodity futures market — from pension funds, endowments and a host of other institutional investors — through the new conduit of commodity index funds.
Billions more have come in from investment banks that are hedging the risk of complex bets, called swaps, that these same investors have made in the unregulated international swaps market, which dwarfs the regulated markets supervised by the CFTC
The commission has come under fire, most recently at a hearing on May 20 before the Senate Committee on Homeland Security and Governmental Affairs, for not doing enough to monitor the impact of these investors on markets that have such influence on family budgets nationwide.
Specifically, the commission will start requiring more information about index funds and, more significantly, about the clients on the other side of the unregulated swaps deals that are being hedged on the regulated futures exchanges.
The swaps market has traditionally be seen as off limits for U.S. commodity regulators, but the commission clearly is responding to congressional concern that investors may be using swaps dealers to evade rules that limit the size of their speculative role in regulated markets.
The commission is also putting the brakes on granting waivers that have exempted some commodity index funds from speculative limits, and is formally dropping proposed rule changes that would have extended a blanket exemption to all index funds.
In recent years, more than a dozen commodity index fund companies have been granted individual waivers, after successfully arguing that they were using the futures markets exclusively to hedge their obligations to the people who have invested in their index funds. But the commission now intends to "be cautious and guarded before granting additional exemptions in the area," according to the draft proposal.
The full article can be accessed by clicking here.
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