Japan’s Bank of Tokyo-Mitsubishi (BTM) is in the process of transferring its derivatives operations to its newly formed securities house subsidiary, Mitsubishi Securities, in an attempt to provide a wider array of structured products to investors.The move, which commenced in early September with the transfer of 10 senior bankers from BTM to Mitsubishi Securities, is due to be completed next April with the relocation of the bank’s derivatives trading teams.
The strategic shift is aimed at increasing the scale and variety of structured products the derivatives team can offer to investors. Under current Japanese regulations, there are strict divisions between commercial banks and securities houses, with commercial banks, for example, unable to engage in equity derivatives business or arrange structured notes for institutional and high-net-worth investors. A securities house, however, offer a wide range of structured notes, as well as equity-linked products such as warrants and equity options.
“The bank’s strength is the coverage of corporates and the liability side, while the securities house’s strength is the investor business,” says Hiroshi Yoshimine, senior executive officer and head of derivative and structured products group at Mitsubishi Securities in Tokyo. “Investor products are more of a strategic direction for the group going forward.”
The derivatives team will still service BTM’s corporate customers, and a derivatives marketing team will remain within the bank. However, the parent holding company, Mitsubishi Tokyo Financial Group (MTFG), opted to house a single derivatives product group within the Mitsubishi Securities to enable the group to access the optimum structuring opportunities, says Yoshimine.
“We now have both direct access to investors through the securities network and access to liability clients through the banking network,” he says. “This single derivatives product group framework helps prevent the two entities – the bank and the securities house – from duplication and cannibalising each others’ customers.”
Mitsubishi Securities was formed in September following the merger of Kokusai Securities, Tokyo-Mitsubishi Securities, Tokyo-Mitsubishi Personal Securities and Issei Securities.
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