Hedge Week: Contineo structured product platform goes live
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Asian Private Banker: Consortium-backed structured products platform goes live
The multi-issuer platform and messaging network currently has HSBC, BNP Paribas, Goldman Sachs, JP Morgan and Societe Generale on its sell side roster. It will distribute equity linked notes, knock-out equity linked notes, accumulators, decumulators, fixed coupon notes, DRAN and OTC options to private banks.
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Structured products: Centralised orders for Asia’s structured products
Combination “The benefit of Contineo for us is a combination of three things,” says Lemuel Lee, head of third party distribution, Asia Pacific, equity derivatives group, JPMorgan. “The first is efficiencies. A lot of this business is existing business, but to have a network where issuers and distributors congregate, we expect efficiencies in terms of the way we operate the business. The second benefit is from a cost perspective. In terms of where we invest in our technology resources, there is a finite amount of funding, so we need to be very nimble.
“Thirdly, ultimately, we hope it brings us to a wider network of clients, but that’s a double-edged sword because as you bring more efficiency into price discovery and competition, then naturally more players come into the market. Having said that, there may be clients we are not covering that join this network.”
Contineo charges annual licence fees to both the buy and sell sides. The platform allows the trading of: equity-linked notes; knock-out equity-linked notes; accumulators; decumulators; fixed coupon notes; daily range accrual notes and over-the-counter options.
“There are things that will be bespoke in nature that we will not be able to sell on the platform,” says Lee.
“The purpose for efficiency is that we will be selling commoditized products. I don’t think any of the banks or distributors have any plans at present to put through more bespoke products on the platform. That may be long-term.”
“Contineo is a very similar system to the way you book hotels on the internet now,” says Jeffrey Juan, managing director, head of EFS (equity and funds structured markets) solutions sales, non-Japan Asia at Barclays. “Every product provider has limited resources, so everyone has come together to create this platform. The older clients in private banking want to cut costs. The best way is to improve the IT systems to help do this.”
He says that client behaviour is changing. “They don’t want to receive prices from different product providers every day. They want a summary. If the industry doesn’t go this way, it would lead to each bank deploying ever-increasing resources to build our own systems to connect to each client, so why not do it together? It’s not about increasing business for us, but maintaining our current market share without incurring a lot of IT costs.”
Mark Munoz, managing director of Contineo, is coordinating the project.
He is keen to emphasise the greater convenience of the system, but the advantages in a world where regulators are demanding greater transparency from banks are also key.
Looking for the same thing “Previously, if somebody were to send a message to get a quote, they’d get maybe 10 messages back from different providers all through email,” says Munoz. “They’d have to assemble them together through Excel. It’s been very messy. All of the banks are moving off the voice and email because it’s not compliance-friendly. It works, but it’s obviously very difficult for them to do an audit or to get a trail of information back to an order. They’re all migrating into this platform and they’re all telling their clients to migrate into this platform. I think that as much as the private banks are looking for automation, the sell side are looking for the same thing.”
Along with players such as Vontobel and FinIQ, one of Contineo’s main competitors comes from the partnership between Singaporean bank DBS and Swiss firm Leonteq. The two announced late last year an initiative for the origination and distribution of equity derivative structured products. In March they followed this by linking up with two more companies, Numerix and Avaloq, to set up an integrated multi-issuer investment products distribution system (IPDS) with an initial focus on Asia Pacific.
“The partnership between DBS and Leonteq is to cater to a growing demand among Europe-based institutional investors for equity structures on Asian products issued by highly rated issuers,” says Calvin Yeap, head of equity derivatives trading, DBS Bank. “Currently, the notes distributed by Leonteq account for about a quarter of the structured equity derivatives notes DBS issues in Asia and Europe.
“The partnership between DBS, Leonteq, Avaloq and Numerix arose out of a need to find a solution to improve the efficiency and scalability of the entire trade life cycle, which will benefit both the buy and sell side.”
With equity derivatives as the starting point, he says Leonteq and Numerix, in consultation with DBS, will design, build and implement the IPDS, which will eventually span different asset classes and multiple issuers.
Automated Trader: Contineo structured product platform goes live
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Structured Retail Products: New consortium-backed structured products platform goes live
Contineo Structured Product Platform Goes Live
Contineo, whose on-boarding subscribers include Julius Baer, Barclays, BNP Paribas, Goldman Sachs, HSBC, J.P. Morgan and Societe Generale, is a messaging network facilitating transactions between buy- and sell sides. Managing Director Mark Munoz said Contineo’s go-live represented a new phase in the evolution of the structured products market.
“Contineo has been developed by the industry, for the industry,” he said. “Our agnostic platform is open to all participants and, through our Advisory Group, we are bringing the industry’s key players together for the first time to develop a set of standards that will benefit us all.”
“Automation is the way to go for structured product distribution and execution in Asia,” said Roger Meier, Head of Structured Product Sales Asia at Julius Baer. “Replacing email with a multi-issuer electronic platform will allow us to access products, have an overview of the market, and retrieve data in a streamlined fashion that we just don’t have today. In the future we envisage the evolution of things like common term sheets, post-trade data and more pay-offs.”
Contineo acts as a communications hub for products including Equity Linked Notes; Knock-Out Equity Linked Notes; Accumulator; Decumulator; Fixed Coupon Notes; DRAN and OTC Options. The platform was conceived in 2014 and began beta operations earlier this year.
For interviews with Mark Munoz:
Kristin Westlake, The Continuum Partners kwestlake@thecontinuumpartners.com /+61 416 219 358
About Contineo Limited
Contineo is the first industry supported, open messaging network for private banks and wealth management firms to access issuers of structured products. Together we are a community with a shared vision and purpose.
We believe that technology should be intuitive, easy to access, and available to all participants. This means creating an open messaging standard in concert with the buy-side and sell-side, and enabling access to all parties, including other certified technology vendors.
This mission is shared by our current subscribers, who recognize the importance of an open, efficient and transparent network.
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Asian Private Banker: Contineo adds Head of Operations role before going live
“Julie comes to us with strong international experience in financial technology operations, and expertise in the structured products space,” said Munoz. “We are fortunate to have her on the team and look forward to her contribution as we prepare to go live.”
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Carraway Group: Contineo adds Head of Operations role before going live
“Julie comes to us with strong international experience in financial technology operations, and expertise in the structured products space,” said Munoz. “We are fortunate to have her on the team and look forward to her contribution as we prepare to go live.”
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