Risk.net: Multi-issuer Platforms Clash Over MIPs’ Purpose
Contineo and deritrade are divided on whether MIPs are simply an information exchange hub or an all-inclusive tool enabling private banks to check, trade and manage structured products
Multi-issuer platforms (MIPs) are jostling over more than just customers. Contineo describes an MIP primarily as a hub where private banks can exchange information with issuers, while deritrade offers a competing definition, saying these networks should go further and facilitate all activities linked to the trading of structured products.
Hong Kong-based Contineo went live in June, challenging deritrade, a platform by Swiss banking group Vontobel that launched in Asia in early 2015. MIPs provide the buy side with standardised access to structured product issuers, simplifying price discovery and reducing costs and risks compared with direct dealer-to-client transactions.
Six key regional structured product issuers – Barclays, BNP Paribas, Goldman Sachs, HSBC, JP Morgan and Societe Generale – have pledged to issue structured products on Contineo, which is active only in Asia. Vontobel’s platform currently has only one issuer – Vontobel’s investment bank – on its roster in Asia, though it boasts seven buy-side subscribers in the region compared to Contineo’s one.
Speaking at the Structured Products Asia conference in Hong Kong on September 1, Mark Munoz, Contineo’s managing director, said an MIP should be seen as a “messaging hub” where issuers and private banks can find information on the prices and popularity of different structured products.
“Think of it as your WhatsApp or WeChat that you use for getting information from point A to point B. It is not the all-singing, all-dancing solution – that’s not what an MIP is about.”
In contrast, Anup Gupta, in charge of deritrade and financial products distribution in the Asia-Pacific region, said Vontobel’s platform was designed to provide not just product prices but also full life cycle management of each trade, as well as relevant documentation.
“We don’t just cover the pricing and trading aspects. We look at pre-trade, at-trade and post-trade activities as a complete MIP solution. That needs to be there in order [for an MIP] to make sense for both investment banks and private banks,” he said.
Gupta added that Vontobel’s all-encompassing platform could generate substantial efficiency savings by automating client booking and confirmation orders, and drive up sales thanks to its speed. Compared with the traditional way of achieving best execution – telephoning a variety of issuers and waiting for indicative prices to be passed back – an MIP accelerates the process by listing all the prices on its interface.
While Contineo’s Munoz agreed on the volume-boosting potential of MIPs, he argued that the real prize would be the data on pricing, structuring and sales that the platforms could offer users. “When you have an MIP that can deliver those kinds of analytics and show what is being traded in the market, feeding that data back to the private banks and investment banks all of a sudden gives them a whole new set of data to say, for example, ‘Oh, I’ve been focusing on the wrong area for the past months and I need to shift it based on what I see on the analytics side’.”
Pre- and post-trade services could also benefit from innovation, Munoz added, but outside the confines of an MIP as he defines it: not so much a bolt-on to private banks’ existing infrastructure as an intermediary between issuers and distributors. “With MIPs you can see trends, and those trends can be drilled down into product classification, and you end up being able to see the hit [sales] rates across different products in different banks,” he said.
Gupta’s definition of an MIP also raised questions from Jean-Marc Eber, founder and chief executive of Lexifi, a supplier of sales and distribution software for structured products providers. He said it was important for private banks using MIPs to maintain their own trading records, contract terms and post-trade management systems rather than outsource the responsibility to the platforms themselves.
“Centralising data in an MIP is going to be interesting for private banks, but they must be able to have full control over the contracts they are buying or selling and be able to reflect precisely the contract described on the MIP system in their own systems,” he said.
