Providers of derivatives and structured products faced many challenges in the past year. The low rate policies of developed countries spurred investors’ search for yield and forced providers to explore new ways of yield enhancement. On the other hand, the volatility in equity markets presented an opportunity for structured products as tools to monetize and sell the risk.
China surprised markets by devaluing its currency, while its stock market proved more chaotic than many expected. Spooked investors looked to diversify exposures and to mitigate risks. This led to interest in multi-asset products, which grew in popularity stimulating much creativity and innovation among providers.
In the meantime, capital requirement regulations cast a shadow over the structured product business model, threatening to reduce profitability and to cause a decline in volumes. Most providers anticipated this by investing heavily in automation of quoting and structuring processes, to enhance their capabilities and increase volumes.
In this landscape that the winners of The Asset Triple A Structured House and Products 2016 are presented as best in class performers in derivatives and structured products in Asia.
The Industry Leadership Award Asia – Cross Assets goes to Frank Drouet, head of global markets at Societe Generale (SocGen). This is the first time that The Asset has given an industry leadership award in the structured house and products space. With a career at the French bank spanning more than 25 years, and multiple roles in Asia and Europe, Drouet played a pivotal role in building up the derivatives business into the powerhouse it is today. He served as deputy head and then head of global markets for Asia Pacific since 2009. In April 2016 Drouet left Hong Kong where he was based for Paris in order to assume his current role.
SocGen has been a dominant player on the derivatives and structured products landscape in Asia for a long time. This year is no exception. In addition to the distinction of Derivatives House of the Year in Asia, the French bank wins country awards as Derivatives House of the Year in Korea and Japan. SocGen also takes the regional awards for Best Structured Product House, Best Rates Derivatives House, Best Credit Derivatives House, Best FX Derivatives House and Best Commodities Derivatives House.
After the acquisition of Newedge in 2014, SocGen has transformed itself into a derivatives-focused bank with advanced cross-asset culture and client coverage spanning local to regional to global. It has one of Asia's largest financial engineering teams, and onshore coverage in 10 markets across the region.
Benefiting from its five-year effort to build up a cross-asset structured product platform, SocGen claims the position of a sole true non-flow factory in Asia delivering these products. The emphasis on pricing automation has helped it to become an undisputable leader in the region.
Faced with a decline of demand for derivatives and structured products in Japan, SocGen placed a greater stress on the quality of service provided by its newly restructured united sales and structuring team. It has become a powerhouse in the variable annuity space and commands the largest market share in KIKOs on Japanese stocks.
While other market participants are shrinking or closing business in Korea, SocGen continued to grow by focusing on tailored solutions. Diversifying its offering in a low rate environment in Korea, the bank has entered the Arirang bond space in 2015. It is a leading provider of KIKO structures and has a large market share in hybrids and callable range accruals.
Faced with dramatic changes in interest rates in 2015, SocGen maintained its leadership position in rates derivatives in Asia. Meeting the challenges of low and negative rates, the bank adjusted to the investors' cautious approach to risk. It also pioneered onshore investment products in Korea, Japan and Taiwan.
To meet clients' desire for yield in the low-interest environment, SocGen has focused on multi-asset hybrids, which were eagerly welcomed, particularly in Korea. New offering of CLNs has helped the bank to reach a record trading volume in Asia, while it explored new markets, Thailand and Brunei, and invested in several automation projects to improve pricing and post-trade service.
The currency environment was challenging in 2015, especially in Asia, where investors were surprised by the devaluation of the renminbi in August. SocGen remained close to its clients, focusing on automation and strengthening its forex team to provide better service.
SocGen maintains its position of leading commodities derivatives house on the strength of the innovation of the products it launched during the awards period. Monetization of embedded optionality in physical contracts and a design for adapting for changing regulatory requirements in Japan stand out as creative and elegant examples of innovation for which the bank is well-known and recognized.
ICICI Bank wins the award for the Derivatives House of the Year in India and the Best Structured Product House in India. Leveraging its dominant position as India's largest private sector bank, ICICI has become leader in the country's relatively small and tightly regulated, but increasingly competitive derivatives market. Specializing in FX and interest rates products, the bank has weathered the rupee volatility by offering clients more conservative structures and improving efficiency by launching new digital platforms.
ICICI Bank continues to adapt to markets, as declining equities and low interest rates foster innovation and bring emphasis to timeliness and execution. Switching to more conservative risk-return payoffs for equity-linked products and variable coupon structures on market indices has allowed the bank to meet investors' needs and maintain its leadership position in the sector.
CIMB is named Derivatives House of the Year in Malaysia and Indonesia, Best Structured Products House in Malaysia, Indonesia and Thailand, as well as Best Credit Derivatives House in Thailand. The bank is a key player in Malaysia's derivatives market and a leader in Islamic interest rate products, which it has started offering in currencies other than the ringgit. Able to offer attractive yields thanks to its ability to warehouse products internally, the bank enjoyed continuing popularity of its interest rate structures, a substantial increase in CLNs, and expanded its range of commodity and equity derivatives.
Commanding almost a third of the market in structured products in Malaysia, CIMB Group continued to bring to market innovative products to help its clients deal with market volatility while providing exposures to new markets. A leader in conventional and Islamic structured products, it saw a 40% increase in issuance during the award period.
CIMB Niaga is one of the most active players in the derivative space in Indonesia. In a very competitive environment, the bank has become a leader in currency hedging solutions and interest rate space.
In a tightly restricted but evolving regulatory landscape of Indonesia, CIMB Niaga has retained its market leadership in INR and US structured products. With growing risk aversion among investors responding to market volatility, the bank offered more conservative structures and put emphasis on IDR denominated issuance, which grew almost by half during the award period. Efforts to improve client experience resulted in a substantial number of new clients.
After a banner year in 2014 in Thailand, CIMB managed to maintain the momentum in 2015, issuing new products, setting new records in size and expanding into new arenas, in particular credit and equity products. Adjusting to the country's economic slowdown and high market volatility, the bank strove to meet clients' needs with new structures.
CIMB has been capitalizing on liberalization of the regulatory restrictions on issuing structured products by local banks in Thailand and has seen its volume of issuance more than double in 2015. While still mostly dealing in CLNs, the bank introduced new underlyings and set up a local CLN issuance platform.
CTBC collects a series of country awards for Taiwan. It is named Derivatives House of the Year for Taiwan, as well as Best Flow Derivatives House, Best Rates Derivatives House, Best FX Derivatives House and Best Commodities Derivatives House.
CTBC has dominated Taiwan's derivatives market for more than a decade. It's a leading player in FX, rates, commodity and equity derivatives. It boasts the broadest regional reach, most integrated platform, and top exotic FX option warehousing capability. Its in-house warehousing capability allows it to self-manage rates risk and serve as a swap bank to other bond issuers, which enables CTBC to better compete with global banks.
Yuanta Futures earns the Highly Commended distinction in the Derivatives House of the Year Category for Taiwan, in recognition of its dominant position in futures and options market.
Cathay United Bank is named Best Structured Products House in Taiwan. While the market for structured products in Taiwan experienced decline in 2015, after a boom in 2013-14, due to economic uncertainty and stricter regulations, Cathay United Bank focused on product diversification, targeting retail business and developing its technology.
Credit Suisse wins the award for Best Equity Derivatives House for another year. Particularly strong in Japan, but with significant achievements across the region, the Swiss bank has recorded its best year in Asia. It credits the success to a diversified business model and a new product platform enabling electronic-only issuance of small-size products.
Yuanta Securities is named Best Equity Derivatives House in Taiwan. Capitalizing on Taiwan's regulators' relaxation of rules on warrants Yuanta Securities commanded the top market share of warrant issues and trading. It has also pioneered collaborating with domestic insurance companies, after those were allowed to engage in derivatives business.
ICBC wins the distinction for the Best Commodities Derivatives House in China. The focus of its business is gold. To adapt to fluctuations of its price and internationalization of the renminbi, ICBC strengthened partnerships with foreign counterparties. Its revenue grew by almost a fifth and it continues to claim the top spot in the country’s gold market, commanding more than half of the market share.
FTSE Russell wins the award for the Best Index Provider. It is recognized for its success in China-focused indices, as well as strengths in smart beta and ESG spaces.
Markit wins the Highly Commended distinction in the Best Index Provider category for its dominance and continued development of the fixed income index space, while Stoxx earns the Highly Commended distinction in the same category for technological innovation and new index themes.
The award for Best Structured Products – Commodities goes to CIMB Group for USD NPP Autocallable Oil Structured Product, meeting Malaysian investors’ appetite for short-term non-principal protected structures and allowing them to implement bullish view on oil price.
SocGen wins the award for Best Structured Product – Equity, for its SGI European Equity Low Volatility Premium Index, taking advantage of low volatility premium in Europe.
The French bank also wins the award for Best Structured Product – Credit, for Credit Linked Notes on Bank of China, which showcases the bank’s new automation capabilities.
SocGen’s FX Linked CMS Hybrid Notes win the award for Best Structured Product – FX. Its hybrid structure, with rates exposure, allows for a 2% yield enhancement compared to regular FX notes.
Reversible Convertible Notes on USD CMS 10Y, also from SocGen, are recognized as the Best Structured Product – Rates. The product allows investors to benefit from potential US rate hikes.
The award for Best Structured Product – Multi-asset, goes to Credit Suisse for its implementation of a New Efficient Variable Annuity Scheme in Japan, which allowed for significant reduction of product fees and enabled its partner DFL to launch new VA structures in the current low-rate environment.
CIMB wins the award for Best Structured Product – Multi-asset in Malaysia for its CIMB Fund-Linked Floating Rate Negotiable Instrument of Deposit (FRNID), allowing investors to gain exposure to funds while mitigating the downsides associated with investments in unit trusts.
To view the full list of winners, please click here.
