Six banks have set up a multi-issuer network for structured products in Asia with a view to boosting price competition and transparency in a market that has struggled to regain traction since the 2008 financial crisis.
The consortium – comprising Barclays, BNP Paribas, Goldman Sachs, HSBC, JP Morgan and Societe Generale – launched the multi-issuer network yesterday.
Contineo, the newly established company running the network, will now seek to sign up private banks and encourage their relationship managers to use the platform. Each joining firm will be subject to the same flat annual licence fee.
The wealth management arms of the founding firms are likely to be first joiners to the network on the buyside, said Contineo’s managing director, Mark Munoz.
The driving force behind the establishment of the network was growing demand from an increasingly wealthy client base for more structured product choice, he added.
The ability to request quotes from six issuers on one network should increase competition, said Munoz, and would boost transparency in a region where it is lacking. “We want to be the WhatsApp for messaging in terms of connecting the buy-side and sell-side,” he noted.
Relationship managers at private banks typically request prices for structured products from banks individually, limiting the number of quotes that can be sourced and taking up time and effort. Some 10-20% of relationship managers’ time is spent on price discovery, said Thomas Suessli, Asia head of Vontobel Financial Products.
Vontobel launched its multi-issuer platform – Deritrade – in Asia in January last year. Suessli declined to identify which banks are issuing through the platform or provide volume figures.
It does not charge a flat fee, but Suessli declined to confirm whether fees are charged as a percentage of the value of transactions.
After submitting a price quote on that Deritrade, issuers receive feedback on where their quote stands in the queue – indicating how competitive it is – which is very valuable to them, said Suessli.
Similarly, data on quote requests and transactions completed on the Contineo network will be available to both buy- and sell-side subscribers.
Asked if Deritrade had sought to connect to Contineo, Munoz was non-committal: “We’ve met with some of the largest technology providers out there, and they’ve expressed interest in connecting”.
However, Vontobel’s Suessli said: “I would rather them join ours than we join theirs. The market is ready for something like Contineo.” Talk about its establishment had stimulated discussion about multi-issuer platforms, he added.
Contineo’s data centres are located in Hong Kong and Singapore, but member private banks do not have to be based in Asia. But they must have an existing relationship with one of the six initial issuers.
The firm intends to test the platform with the founding issuers over the next two to three months, then carry out testing with private bank users and ultimately go live in the first half of this year.
Initially, equity-linked notes, knock-out equity-linked notes, fixed-coupon notes, daily range-accrual notes, accumulators, decumulators and over-the-counter options will be supported, in a product range similar to that offered by Deritrade.
An advisory panel comprising buy-side subscribers will advise on new products to be introduced on the Contineo network.
Law firm Clifford Chance advised on the establishment of Contineo, along with AG Delta, the technology company that designed the platform.