BROKERS: The introduction of structured products, a success

Since the introduction of structured products on the BSE, in July 2010, the volume of this type of traded products increased from 1.2 million, that year, to 12.1 million, last year, and 15.87 million in the first quarter of 2012.

Equity market specialists consider that the rise in the total number of trades with structured products is owed to the increase in the appetite of investors when it comes to the trading of these instruments, as well as due to the appearance of an increasingly large number of instruments of that nature.

• Mihai Chişu, "IFB Finwest": Structured products have almost exhausted their potential for growth on the Romanian stock market

Mihai Chişu, broker at "IFB Finwest", considers that the introduction of the structured products was a success, when one considers their turnover compared to the total volume traded daily on the BSE.

He said: "Since their introduction, these financial products have known a constant growth of their volumes and have attracted all types of investors, due to their diversity in terms of their associated risk, as well as due to their underlying financial assets. As for their evolution, I estimate that at the moment, they have almost exhausted their potential on the Romanian market, as they are limited by the small size of the domestic market".

The broker also emphasized that an increase in the number of investors on the Romanian stock market, would certainly lead to an increase in the volume traded for these products.

• Marcel Murgoci, "Estinvest": Since liquidity is lacking on the stock market, the market for structured products will do increasingly better

"Ever since the launch of the first structured products on the market managed by the BSE began (the year 2010), the number of trades and the total volume have increased vertiginously, and at this moment we have seen a 15% increase of the number of trades and with 50% of the total volume traded, compared to 2011", said Marcel Murgoci, Director of Operations at "Estinvest".

According to him, this is due to the increase in investor appetite towards the trading of these instruments, as well as to the appearance of an increasingly large number of instruments of this kind. Furthermore, Marcel Murgoci said that because these products benefit from a liquidity provider, trading is much more liquid.

The Director of Operations of "Estinvest" also said: "The significant growth of these products had led to the appearance, this year, of another liquidity provider for a new structured product, based on the DOW index. The success of the development of the structured products consists in the appearance of more structured products, as more liquidity providers appear. Investors will appreciate them even more and will direct part of their funds to the trading of such instruments".

Considering the evolution so far, he thinks that 2012 will certainly be better than 2011.

Marcel Murgoci also explained that, absent liquidity on the stock market, investors will try to increase their profits by trading derivatives. Under these circumstances, the market for structured products will have an increasingly better evolution and will bring a consistent profit to the market managed by the BSE, he said.

• Darie Moldovan, "SSIF Broker": The use of the structured products for the purpose of hedging or for the diversification of portfolios, are ways of providing sustainable growth for this market

Darie Moldovan, New products & Market Making Specialist at "SSIF Broker", also considers that the market for structured products has seen a sustained growth, as the daily value of trades nearly doubled.

He explained that this evolution was influenced predominantly by two factors: the fact that investors have become better informed and have assimilated the specific mechanisms for the trading of Turbo structured products (which basically account for the largest chunk of trading volumes) and the fact that the liquidity ensured by the liquidity providers makes investments in structured products more attractive, minimizing the liquidity risk, which is more pronounced in the case of most of the stocks listed on the BSE.

The representative of "SSIF Broker" said: "The market for structured products has major potential for growth, as other intermediaries will popularize the products among their clients. At this moment, there are a rather limited number of brokerages which account for the largest part of the turnover on this market, but the fact that the traded volumes have been rising, makes more and more investors interested in the operation and trading of structured products".

The ongoing education of investors and the use of structured products for the purpose of hedging and for diversification of portfolios of customers with a lower risk profile, are ways of providing sustainable growth for this market in the long run, said Darie Moldovan.

In the 146 trading sessions which took place so far this year, 115,328 trades with structured products were made, 15,806 more than in the 255 sessions of 2011.

At the end of Monday's trading session, the total volume of structured products reached 18.39 million, up almost 52% compared to the total volume traded in 2011.

Also, the average daily amount traded in 2012 increased 72.28% compared to 2011, reaching 2.96 million lei (0.67 million Euros).

In the first semester, the total traded value was 379.93 million lei (86.55 million Euros), three times greater YOY.

In June alone, 14,739 trades were made, with a volume of 2,054,710 structured products, worth 58.41 million lei (13.10 million Euros).

The value traded in June represented 13.55% of the total value traded this year.

This year, traded values reached all-time highs, since the launch of the structured products, in the trading sessions of May 2nd, when the total traded value was over 12.06 million lei (2.73 million Euros), and May 3rd, when the total traded value was over 13.14 million lei (2.98 million Euros).

At the moment, on the market for Structured Products are traded certificates issued by "Erste Group Bank AG", "Raiffeisen Centrobank AG" and "S.S.I.F. Broker S.A".