Top global indices for structured products in 2018

The Eurostoxx 50, Kospi 200 and the S&P 500 indices were the three most popular indices used as underlying assets for structured products worldwide as measured by sales volumes of 2018, according to data. These three maintained their position as the top three indices from the previous year in 2017.

The Eurostoxx marches on

The Eurostoxx 50 was the top underlying of the three and accounted for over 6% of all structured product sales by notional amount globally. Although the overall sales volume was slightly up on 2017 the number of products issued fell by 35% to 36,000 individual products. Therefore the average sales volume per product has increased significantly to fully compensate for the decrease in number of issues.

MifID II and PRIIPs effects

From this we can deduce that the overall demand for EuroStoxx 50 linked products is stable but that the first year of MIfID II and PRIIPs appears to have had a profound effect on the number of products issued. Costs of producing and monitoring PRIIPs KIDs, evidencing best execution and assessing target market is simply not economic for such a volume of products issued. No doubt issuers also realised that there was too much overlap of products that they or their competitors were offering. Over 30,000 products issued in one year linked to a single index could hardly be called leaving the market underserved.

For the other two indices an increase in sales volume has also been observed from 2017 to 2018 and the average sales volume per product has also increased somewhat. The European centric reasons would play a lesser role in changes for these other two indices but the overall regulatory burden would tend to support the same effect over time.

South Korea - the active market dominated by a local index

The Kospi 200 had the lowest number of products issued of the three but still provided high volume. To contrast with the S&P-500, the number of products linked to the Kospi 200 was only 1/25th of the number of products linked to the S&P 500 yet the combined sales volume of Kospi products was in excess of half the volume of the S&P-500. This means that the average volume per product was very significant. This is to be expected in a more simplified retail market rather than the competing open architecture platforms operating in the US.

Unsurprisingly these indices are the most popular within their home regions. The Eurostoxx 50 and S&P 500 are also frequently used throughout the world because they are well known benchmarks representing large capitalised markets. However virtually all Kospi 200 index linked products were sold in South Korea, although the index does sometimes feature in products sold in other markets in combination with other indices for use in a multi underlying product such as a basket or worst of.

The top three product types linked to the Kospi 200 index in 2018 were Digital, Shark Fin and Knockout. Most products are capital protected with less than a quarter of products issued putting capital at risk. This reflects a more risk-averse investor base and is in contrast to most other markets.

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