E-brokers for customized certificates to hit Swiss market

Reuters News
Posted: Oct 28, 2011 11:54 AM

By Oliver Hirt

ZURICH (Reuters) - Electronic brokers for customized structured products are set to hit the Swiss market next year, allowing investors to get even better deals from banks.

"2012 will be the year in which metatools are first used," said Christian Reuss, head of the derivatives exchange Scoach.

In the past banks devised structured products and then marketed them to clients. Now, however, with just a mouse click client advisors can select a product's maturity, currency and other features to create a made-to-order investment.

In Switzerland at least seven banks are offering 'design your own derivative' solutions: Among them are Vontobel's system Deritrade or UBS's Equity Investor.

Until now, clients had to compare offers by checking each banks' platform. Yet that process is too cumbersome for many wealth managers, and independent firms such as Structuringlab are stepping into the gap to synchronies what is on offer. They are offering so-called "Metatools."

"We want to get our platform online in the next few weeks," said Chief Executive Alain Bigar, whose six-person firm is focused on Switzerland for now but could expand its business to other countries easily.

"In a first version professional investors can create tracker and barrier reverse convertibles and compare the offers of various issuers," he said.

Rival Xicor is eyeing business in both German and Switzerland, and aims to launch in 2012, offering wealth managers, banks and institutional investors many different types of certificates.

"We've signed the first contracts with issuers," said Xicor head Philipp Kalb. "We've also got 'oks' on the client side. Now we've got to get clients and issuers on-line.

A similar scheme is being pursued by the Swiss financial data provider Derivative Partners. Its chief Eric Wasescha declined to comment.


The big unknown variable is what the bank Vontobel has planned. Market participants have speculated the Zurich-based institution, already one of the top three issuers, could set up its own metatool, which would aggregate what various banks are offering.

Georg von Wattenwyl, in charge of structured product distribution at Vontobel, declined to reveal exactly what trick the bank has up its sleeve.

For more than a year Deritrade has been open to other counterparties and automatically searches for the best price for options components, von Wattenwyl said.

"In coming months we will expand the platform with a lot of smaller and also some bigger additions -- always with the goal of better supporting the client as he manages his portfolios," von Wattenwyl said.

Some sector observers have speculated that Scoach, the derivatives exchange part-owned by SIX, which operates the main stock exchange, was considering participating in a centralized customized product tool, as the platform is known in industry lingo.

Were Scoach to participate in such a centralised tool, this would boost its profile.

"We've conducted talks but they didn't lead to an agreement," Reuss said, adding that Scoach was still fundamentally interested in participating in a venture.

"It's possible that we'll take up negotiations again with a market participant at a later date," he said.

Yet even if Scoach winds up not participating in a Metatool, the company is still keen on profiting from the growing interest in customized products. Scoach is currently working on a new trading segment for structured products that are neither listed nor even sold publicly.

"For these products we plan to use the asset of our good infrastructure in a modified form," he said.

(Writing by Catherine Bosley; Editing by Jon Loades-Carter)