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Structured products post strong finish to 2009


The global market for structured products survived a very difficult period over the course of the global credit crisis and posted a strong finish to 2009, according to a survey by Greenwich Associates.

According to private banks, regional dealers, insurance companies and other distributors of these products in markets around the world, the market is poised to return to previous levels of issuance and even growth in the near future.
The market emerged from the crisis much changed, however, after investors learned a series of hard lessons about the counterparty risk inherent in these products.

In the emerging post-crisis environment, investors and third-party distributors alike are much more cognizant about sell-side firms’ creditworthiness.

In every market, counterparty risk emerged as a key criterion as distributors of retail structured products chose providers.
Although retail and institutional investors are focusing on counterparty risk to a never-before-seen extent, creditworthiness represents only one hurdle that must be cleared by sell-side firms in the equally competitive marketplaces of the US, Europe and Asia.

Third-party distributors in all regions are seeking out firms that excel across the entire lifecycle of retail structured products, which stretches from all aspects of origination — including product design, innovation and pricing — to sales coverage, marketing support, execution and post-trade servicing, the last of which in turn encompasses a range of functions including product valuations, monthly reporting and secondary market support, defined as the ability and willingness to provide dealable quotes and consistent liquidity.
Globally, Barclays Capital and J.P. Morgan lead in market penetration, having secured relationships with 45 per cent of distributors across Asia, Europe and the US. BNP Paribas, Deutsche Bank and Credit Suisse round out the top five firms in terms of market penetration. Barclays Capital also stood out for consistently strong performance in each region.

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