agenda eusipa derivative map - structured products · pdf fileeusipa derivative map a new...

EUSIPA Derivative MapA new standard in product categorisation across Europa

Structured Products Europe, Park Plaza Victoria, London

Eric WaseschaExecutive Director, Swiss Structured Products Association SSPAMember of the Board, European Structured Investment Products Association EUSIPA

19 November 2009

Short profile of the association and its goals

Introduction to the product categorisation and its logic

Initiatives of our membersCollateralized investment solutions

Product risk rating

Questions & Answers

19 November 2009 www.eusipa.org 2

Agenda

EUSIPA Facts

Founded in 2008

Based in Brussels

Founding membersAustria (ZFA), Germany (DDV), Italy (ACEPI), Switzerland (SSPA)

1. Contact with regulator

2. Uniform standards

3. Product transparency

& understandability

19 November 2009 www.eusipa.org

Profile & Goals

3

EUSIPA – Members 2010


Code of Conduct (planned)

I. Issuer: The solvency of the issuer is to be openly disclosed at any time.

II. Underlying Assets: The underlying assets are to be disclosed in a transparent form and have to be indentified free of doubt.

III. Product: The description of the products follows the principle of product clarity in a balanced and comprehensible manner.

IV. Price: Products are to be offered at a price which stands in an adequate relation to the product structure and the market situation


Code of Conduct (planned)

V. Trade: The issuer guarantees a liquid market for his products.

VI. Compliance: The issuer commits himself to the compliance of these principles. He provides the organizational conditions to deal with conflicts of interests and the trading of his employees.

VII. Education and Training:In this new part issuers of structured products will be obliged to provide training documents especially targeted to sales people, resellers and investors (online, print, seminars).

VIII.Product Classification:The European product classification will be inserted.


EUSIPA Derivative Map

Hierarchy and grouping for similar product types

Payoff charts of product types

Description of main characteristics

Available, free of charge www.eusipa.org

Poster (70 x 100cm)

Flyer (30 x 42cm)

Order a free copy on our website www.eusipa.org!

19 November 2009 7


2 main categories: Investment / Leverage

5 subcategories

25 product types



Investment ProductsCapital Protection(Payoff with unconditional floor on downside)

Yield-Enhancement(Payoff capped on upside)

Participation (Payoff open up- and downside)

Leverage ProductsWithout Knock-Out(Payoff with full leverage on down- and upside)

With Knock-Out (Payoff with full leverage on down- and upside)



Description of market expectationPayoff profileSummary of product characteristics


All product types are represented in the EUSIPA Derivative MapSome of the product types are known in all member countries…… other product types may be not available in all member countries


Supporting Partners

Associations, stock exchanges, issuers and other market participants

Commitment to use the eusipa categorisation or its respective national version




Bloomberg Screenshot

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Benefits for all market participants

Strenghtening product transparency in general

Usefull tool for investors, advisors and other stakeholders alike

Comparability across countries

Meaningful market statistics and data feeds

Improved and consistent communication within the industry

Interesting initiatives of our members

Ambition:Minimizing issuer risk

Initiative of Scoach Switzerland and SSPA

Depositing of collateral (stocks, cash) by issuer at SIX Swiss Exchange

Fair value of outstanding issues and value of collateral is calculated by SIX Swiss Exchange (daily)

Different „haircuts“ according to collateral quality

Competitive cost structure (approx. 30-40 Bps in total, 9 Bps for SIX plus cost of collateral for issuer)

Going live in September 2009, 3 issuers already participating, more to follow


COSI – Collateralized Secured Instruments

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IssuerInvestor

…invests in a COSI structured product

… Market making for the product

Deposit of collateral

Sells collateral in case of an issuer default and compensates the investor with the equivalent of the transaction

Daily valuation of collateral and fair-value for open-interest


Benefits for investors:

Eliminating issuer risk

Competitive fees

Benefits for issuers:

Lower costs than special purpose vehicles (SPVs)

Fast roll-out of new products (within days)

Overcome of counterparty limitations

Solution for formerly „unreachable“ investor segments

Potential substitute for ETFs



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Ambition: Comprehensive and yet easily applicable risk classification system for advisors as well as for private investors…

Structured products risk figure implemented by DVV, ZFA and SSPA

Method: Value at Risk (VaR)“If I lose money, how much could I most probably lose?”

VaR might indicate that with a probability of 99 percent, a certain investment will lose no more than a specific amount in a given investment period

Example: A 13% VaR tells us that a loss on a EUR 10,000 investment should with high probability not exceed EUR 1,300 within the next 10 days


Risk Rating

18


SSPA risk figure (VaR) implemented in July 2009

10-day time horizon, 99-percent confidence interval

Daily calculation of VaR for all 30’000 listed products in Switzerland (calculated by independent third party providers)

Monte Carlo / Historic simulation, time window of 250 days

Six different risk categories


Risk Rating

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Risk Rating

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• Available on SSPA website and over 10 issuers in Switzerland

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Jun-09 Jul-09 Aug-09 Sep-09 Oct-09


Mini-Future on Nestlé, ISIN: CH0025899151, Symbol: NESMB


Risk Rating

21

456 3

Value at Risk(right scale)

Mini-Future on Nestlé(adjusted)

Nestlé(adjusted)

% %

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Bonus-Certificate on SMI, ISIN: GB00B0XP4V03, Symbol: SMIXL


Risk Rating

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4 2 13

Value at Risk (right scale)

Bonus-Certificate on SMI Index

SMI Index

% %


Benefits for market participants

Comprehensible, easy to understand risk information

Change in risk can be tracked and monitored

VaR is calculated by an independent institution (assocation or third parties) no legal risks for issuers

Informed customers are better customers

Risk transparency helps to regain trust and credibility


Risk Rating

23

Questions & Answers


Thank you for your attention!

24

Eric Wasescha

+41 79 209 36 90

[email protected]

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