JP Morgan launches LSE-listed certificates
JP Morgan has launched the first listed certificates registered on the London Stock Exchange (LSE), targeted at retail investors. The move follows the launch in November of covered warrants in the UK.
JP Morgan’s bull certificates are designed to let investors bet that a particular index or basket of shares or indexes will rise by tracking the value of the underlying. Leverage bull and leverage bear certificates come with a knock-out barrier: the value of leverage bulls goes up at a relatively fast rate – compared with a direct position in the underlying – as the underlying increases in price. But it also has a knock-out on the downside, so the certificate becomes worthless if a certain price barrier is broken. The converse is true for a leverage bear certificate.
Discount certificates let investors replicate exactly the performance of a stock, an index or a basket, but they are sold at a markdown because the upside is capped – the investor sells a call option with the option premium knocked off the cost of the certificate.
Toby Peters, an associate in JP Morgan’s London equity derivatives marketing department and head of UK warrants, said he believes discount certificates will be popular because many investors have a moderate bull view of equity prices. "I think they [investors] are not particularly concerned about giving up upside beyond a certain level,” Peters said.
JP Morgan listed the certificate on Monday. Peters said none have been sold yet, but the US bank's marketing drive only began today.
David Lake, director of UK warrants at French investment bank SG in London, said he is waiting to see how JP Morgan’s certificates perform before deciding whether to issue rival products. He is sceptical of the need for the discount and bull certificates. “Our feeling at the moment is that these kinds of products are actually quite similar to contracts for difference or spread bets, because there is no gearing element,” said Lake.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Markets
Buy side would welcome more guidance on managing margin calls
FSB report calls for regulators to review existing standards for non-bank liquidity management
Citi halves swaptions book with US retail funds
Counterparty Radar: Mutual funds and ETFs cut exposures by 22% in Q4
Who’s winning the €STR futures race? Depends how you measure
CME, Eurex and Ice all claim to be leading, but experts say it’s too early to pick a winner
CDS review seeks to tackle conflicts ‘elephant’
Isda AGM: Linklaters proposes overhaul for determinations committee - including independent members
Saudi Arabia poised to become clean netting jurisdiction
Isda AGM: Netting regulation awaiting final approvals from regulators
Buy side looks to fill talent gap in yen rates trading
Isda AGM: Japan rate rises spark demand for traders; dealers say inexperience could trigger volatility
JP Morgan’s new way to trade FX overlays
Hybrid execution method allows clients to put dealers in competition via a single trading agreement
Pension funds eye 30-year Bunds as swap spread tightens
Long-dated bonds continue to cheapen versus euro swaps, and some think they might fall further
Most read
- Top 10 operational risks for 2024
- Top 10 op risks: third parties stoke cyber risk
- Japanese megabanks shun internal models as FRTB bites