A plethora of new products in the credit derivatives market means that investors, and sometimes bankers, struggle to keep up with developments. Natasha de Teran asks why some products take off easily while others strain to build traction.Credit derivatives have been the hottest and fastest growing sector of the over-the-counter (OTC) derivatives market for some time now, drawing in players in ever-greater numbers.
Banks could profit from the burgeoning repo market if their collateral management is sophisticated enough, yet few have attempted to integrate this function. Natasha de Teran reports. With the increasing focus on risk-reduction and the imminent arrival of Basel II, the fast-growing repo market – in which the seller of securities agrees to buy them back at a specified time and price – is likely rise to prominence and expand beyond recognition.Banks that are already at the forefront of secured lending will profit from this growth but, as more assets are added into the acceptable collateral pool, sophisticated collateral management capabilities will become imperative.
Retail investors are crying out for better yielding investments and bankers are rushing to design structured credit-based solutions in answer to their demands. But are retail markets ready for them? Natasha de Teran reports.Strict regulations and desultory market conditions have tested banks’ ability to develop and deliver attractive products for retail investors. Years of lacklustre performance have driven the consumer end of the market away from traditional equity markets towards evermore diversified investments, and bankers have rushed to develop new products to attract them, based on commodity, rate and other multi-asset pay-offs.
Exchanges and clearing houses, faced with compressed margins and increasing competition, are looking outside traditional sectors for growth opportunities and delving into over-the-counter markets. How are banks turning this threat to their advantage? Natasha de Teran investigates.Gone are the days of strictly marked territories, when exchanges and their clearing houses had a guaranteed stronghold on specific markets. The concept of these being “sleepy” utilities has not yet faded but both are starting to change the ways they do business – even, in some cases, by encroaching on areas that used to be the unchallenged preserve of banks or brokers, their principal customers.
Gauging the health of the world’s foreign exchange market is an awkward business, but every three years the Bank for International Settlements takes its pulse as best it can. Edward Russell-Walling reports. The last time the Bank for International Settlements (BIS) brought out its stethoscope, in 2001, the FX heart was found to be beating rather feebly. But the bank’s latest survey shows it to be pounding. Daily turnover shot up from an average of $1200bn in 2001 to nearly $1900bn this year, according to BIS. That represented a rise of 57% (36% at constant exchange rates), which was rather more than most anticipated. The consensus had been for closer to $1500bn. “We were all surprised,” admits Mansoor Mohi-uddin, UBS chief currency strategist. “No-one expected the jump to be this much.”
With its voracious appetite for raw materials and a shift in focus towards high value goods production, China is emerging as a trade giant. Bruce Alter, Aster Saleh and Zeno Chow examine how banks can participate in the country’s phenomenal growth by facilitating import-export flows.
In Deutsche Bank’s latest article on cash management consolidation, Bernd Friederichs and Paul Camp look at how relationships between banks are evolving into strategic service partnerships and the key questions regional banks should ask to leverage a buyer’s market.