Editor's letter

Considering its proximity both to the creator and the buyer of structured products, the distributor is ideally placed to play the paramedic. Distributors hold more power than even they might imagine, although their position in the structured products food chain is precarious. They are the necessary fee collectors from product producers and retail investors alike.

But there has been a change in the dynamic of the market leading up to, and as a result of, the credit crisis that will make the distributor - true to its schizophrenic existence as intelligent assistant and middle man - invaluable as well as dispensable.

In Europe's more developed markets, it has been possible for some time to build a structured product easily. Once equipped with electronic access to various, specifically tailored bank platforms, investors can select from a list of parameters. What tenor they would like, what coupon, and even the underlying can be selected from a drop-down menu. The order is whisked off to the product repository - in this case a trading room that deals with a new issue and a separate team that perfects the hedging arrangements.

This is all relatively new, and could even encroach on the mass market, eventually. It will be a long time before wealthy clients in Europe could use it, but the product technology is there to trickle down. And in this case, distributors will be the losers, as they have been during the recent crisis, with clients claiming they were mis-sold and misled.

But it is not all doom and gloom. The crisis might have helped distributors establish an unassailable role in the pecking order now they are stepping up - at least in Asia - to make good some of the losses from products issued by the defunct Lehman Brothers. In some cases they might only be helping investors over 62 with just a primary school education behind them, but this still places them firmly in the mix as the benevolent hosts at the last-chance saloon.

Considering its proximity both to the creator and the buyer of structured products, the distributor is ideally placed to play the paramedic. If, by some influence or courtroom force, distributors in the US take on this role for investors stranded in Lehman products, then perhaps the real money debate enshrined in this new role can begin.

Richard Jory

[e-mail]

[phone].