In October 2020 FVC added FX capability to its Stress testing and PRIIPs services. This is the latest asset class to be covered, in addition to Equity and Fixed Income. FX Structured Products are an important part of the retail and private banking market and so the same level of product testing is critical when new offerings are brought to market. This testing is needed to satisfy FCA governance rules, the mandatory PRIIPs KID document and MIFID II requirements.
Growing usage of FX in structured products
FVC has set up the FX asset class within its Stress testing and PRIIPs portal and API service with the same intuitive framework that has been central to the success of the system. This means that existing and new clients will be able to conduct testing quickly and easily for FX products.
Initially over 20 important and heavily traded currencies (from G10 and emerging markets) are supported along with a variety of popular product types, including the Dual Currency Deposit, Participation Note and Warrant. Care has been taken to observe the various conventions around defining currency pairs in order to make the system consistent with standard market practice.
Adding the FX engine
The flexibility of the FVC analytical engine means that the FX asset class can be tested for the different requirements of both Stress testing and PRIIPs. Generating PRIIPs KIDs can now be done in scale for FX structured products as part of the Ascend partnership that FVC has with the Opal platform created by Vox FP, its expert documentation partner. Demand for FX structured products and therefore stress testing and PRIIPs continues to grow, and the current market environment of low interest rates and uncertain equity markets are likely to support this further.
Developing key methodologies to help the market
As a key part of its business services, FVC remains committed to providing insight and methodologies for the benefit of its clients and the wider market. As part of the development of the FX module the important “Value-for-money” concept created by the UK Structured Products Association was extended to cover FX structured products.
No formal guidelines have yet been published by UKSPA or any other entity, so FVC’s analysts in consultation with longstanding clients were pleased to provide the lead on this. As a company FVC has always believed that advancing methodologies is an important part of any service extension and the benefits of which go hand in hand with a strong analytical engine and sound technology solution.
As interest in FX structured products increases, the FVC stress testing and Ascend PRIIPs platform will strive to stay at the forefront of the market.
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