Top three structured product underlyings globally

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Top three structured product underlyings globally

The three largest geographical regions in the structured products market are North America, Asia Pacific and Europe. In total these account for over 98% of all product issuance. This can be seen in Figure 1 below.

There is quite a wide variety between the regions as can be seen from the table. The main feature being the large number of product issuance in Europe (dominated by the German and Swiss markets) and the high volume of actual product sales in Asia where structured products remain extremely popular.

Figure 1: Product issuance and sales per region 2019, source

Region Product Issuance Sales Volume (USDm)
North America 23,829 (1.3%) 68,465 (11.7%)
Asia Pacific 84,526 (4.5%) 424,385 (72.7%)
Europe 1,734,836 (93.0%) 90,502 (15.5%)

Figure 2 below shows which underlying is the most popular in each of these three regions

Figure 2: Top underlying per region

  Underlying (% share of total)
Region Europe Asia Pacific North America
By sales volume (USDm) Eurostoxx 50 (13.11%) USD 3M Libor (22.9%) S&P 500 (24.2%)
By product issuance DAX (24.4%) Hang Seng Index (15.7%) S&P 500 (12.7%)

In the North American region the top underlying by both number of product issuance and sales volume was the S&P 500. This index dominates the structured product market in the US and has done over the past three years either as a single underlying or in combination with the Russell 2000 index.

In Europe the most popular underlying by product issuance is the DAX. There were 423,881 products issued linked to this index in 2019. This is up on both 2018 and 2017 when it was also the top underlying in the region by product issuance.

The top underlying in Europe by product sales volume in 2019 is the Eurostoxx 50, up on 2018 and 2017 when it was also the highest ranking underlying by sales. The average sales per product linked to the Eurostoxx 50 index in Europe was $365,000 in 2019 versus products linked to the DAX it was considerably lower at $4200 reflecting the nature of the German market

The most common payoff in Europe for products linked to the DAX in 2019 as categorised by SRP is the “Leverage with Stop Loss”. Over 50% of the products linked to the DAX fall into this payoff type which typically has a very short maturity. Almost 75% of products issued in 2019 and linked to the DAX have a maturity of less than 1 year. This helps to explain the difference in average sales volume, such instruments are available on exchanges and cannot be considered as significant size retail structured products.

As for Europe, the Asia Pacific region has different top underlyings depending on whether we classify by sales or by number of products. The Hang Seng Index was the largest index by product issuance in the region accounting for over 15% of the market share. However by sales volumes the USD 3M Libor was the most popular underlying accounting for 22.9% of all sales in the region in 2019. This underlying has been the most popular underlying by sales volumes for the past three years. In 2017 and 2018 it was also the top underlying by product issuance. Although still the biggest selling underlying, the market share has dropped significantly from 2018 where this underlying accounted for 49% of all sales (236,564 USDm) in the Asia Pacific region. This due to a combination of economic factors but is undoubtedly affected by the impending LIBOR transition.

Tags: Special Reports Investment Structured Edge

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