When Structured Products was lining up features for its first issue back in October 2004, we wanted to make sure that we spoke to the key figures of the industry. Accordingly, we profiled Richard Mikaliunas, senior vice-president, capital markets, at the American Stock Exchange (Amex). Mikaliunas is an industry veteran who has not only seen the structured products industry grow at impressive rates since he first became involved in the area at Amex in 1996, but has also undoubtedly assisted in the market's development.
For more than a decade, Amex has been a proven innovator in product design. And Amex's ability to gain required Securities and Exchange Commission (SEC) approvals makes it the exchange of choice for some of the biggest issuers in the market. "Our mission is quite simply really," Mikaliunas says, "and that's to assist issuers in bringing product concepts to reality in the listed environment."
In 2006, Amex listed 114 new structured products with a face value of $4.7 billion - up 14% on 2005 figures - accounting for 85% of the exchange-traded note market (issued by financial institutions). The issues covered index-linked notes, equity-linked notes, fixed income, warrants, currency notes and commodity-linked notes. The dominant issuers on Amex continue to be structured products heavyweights Morgan Stanley, Citigroup and Merrill Lynch, but Bank of America and Wachovia are also increasing their listings on the exchange.
Although it would be easy to continue listing the more common equity-linked products, Amex has refused to rest on its laurels and constantly explores new opportunities. "Last year, new territory was entered when the SEC approved Amex's filing to issue a security based on a basket of commodities and an equity index," Mikaliunas says. "Known as the Metals-China Basket, the performance of the basket is based on the price movements of copper, lead, nickel, zinc and the FTSE/Xinhua China 25 index." Wachovia Securities underwrote the project.
Amex has also developed and received SEC approval to issue a structured product on the Baby Boomer Consumption Index. The index is primarily based on the common stocks of companies that participate in various healthcare and healthcare-related businesses that may benefit from the continued ageing of the generation of consumers commonly referred to as 'baby boomers'. The underwriter of this product was Merrill Lynch.
The exchange has also brought to market three issues that dealt with Asian currencies. Two were warrants - one based on the Yen and the other on a basket of the yuan, yen, Taiwanese dollar and Singapore dollar. The other issue was a note linked to the currencies of Japan, China, Singapore, Indonesia, the Philippines and India. "Another issuer looked to the currencies of emerging markets - Brazil, Russia, India and China," Mikaliunas says. "It's all about giving access to a wide range of underlyings."
Perhaps the best sign of Amex's achievment is the repeat business that major firms have brought to the exchange. "Citigroup (Salomon Brothers) listed its first product in 1990. This was followed by Merrill Lynch in 1991 and Morgan Stanley in 1993, and today these institutions continue to list on the exchange," Mikaliunas says.
"We work closely with our issuers to navigate the complex process of designing, registering and listing products," says Cliff Weber, Amex executive vice-president, development and strategy. "We even calculate and disseminate custom indexes, either our own or created by our issuers, to serve as underlying benchmarks for products. The market is continually evolving and Amex will continue to support issuers bringing new and innovative structured products to market."
WHY AMEX WON
Quite simply, Amex is the exchange of choice for products issuers in the US. Its ability to ensure approval from the SEC, and its commitment to product innovation can only be applauded.
The week on Risk.net, December 2–8, 2017Receive this by email