Derivatives house of the year, Asia: UBS

Risk Asia Awards 2025

Thomas de Garidel, UBS

Retail investment in Taiwan is booming, with households turning away from traditional insurance products in search of better returns. But some demand was going unmet. Investors were looking for callable bonds on familiar names with monthly coupons. In Taiwan, there was a lack of highly rated corporate bonds matching investors’ needs. 

UBS stepped in, using securitisation techniques and a special-purpose vehicle to turn secondary market bonds from Taiwanese blue-chip TSMC into new callable securities, delivering both the higher returns and the monthly income many retail investors in Taiwan were seeking.  

Since the launch of those first TSMC products in March other names have followed, and volumes distributed through UBS’s local securities company clients have grown steadily each month.

The innovation highlights one part of UBS’s approach to growing its global markets business in Asia-Pacific following the recent merger with Credit Suisse. This year, the Swiss bank has been busy looking for ways to make use of its inheritance from its former rival to grow in markets and client segments where it was punching below its weight or lacked any presence at all.

The retail investment market in Taiwan is one example of this strategy in the past 12 months. But it is far from being the only highlight during this period.

In Japan, the bank has expanded Credit Suisse’s former fixed income business by targeting regional bank clients for JGB repack trades. With Hong Kong and Singapore insurers – another business that came from Credit Suisse – UBS launched fixed index annuity products linked to an S&P 500 volatility control index it developed with S&P Dow Jones and the Nobel Prize-winning professor Robert Engle. In equities, meanwhile, the bank was also able diversify its market and client footprint, through offering structured funds to new asset management clients in Thailand, that were linked to the dispersion of two tariff-themed equity stock baskets. 

“When we transitioned from 2024 into 2025, we truly turned a page,” says Thomas de Garidel, co-head of global markets, Asia-Pacific, at UBS in Hong Kong. “Our focus is now on monetising the investments we made through the [Credit Suisse] integration.”

Romain Barba, UBS

Clients have noticed a difference in UBS in the past year: “They have changed; they have been doing more new things; they have been doing more interesting things,” says a fixed-income structuring head at a securities house in Hong Kong.

UBS’s earnings in the first half of this year also hint at the strides the firm has been making in its global markets business following the integration of Credit Suisse. The first quarter saw record revenue growth in global markets, with revenues rising 32% to $2.5 billion, which the bank reported was driven mostly by higher activity in its derivatives and solutions business. 

“We have been shifting from a ‘win back strategy’ – which was winning back business and clients from Credit Suisse – into a growth phase,” says de Garidel.

The targeting of new markets and new client types as well as those where it has underperformed previously are two key pillars of UBS’s growth strategy for its derivatives business, says de Garidel. A third pillar, he adds, is protecting the bank’s position in markets where it already leads.

“When you’re leading, people try to copy what you do, so the challenge is to keep innovating,” he says. “We cannot rest on our laurels.”

Staying ahead

One market where UBS has long been ahead of its international peers is China’s over-the-counter equity derivatives market, which has bounced back to growth this year following last year’s bear market in China stocks. Here UBS remains the only foreign bank with a securities venture licensed by the Securities Association of China to trade in OTC equity options contracts.

“In China, we’ve been at the forefront of providing structured market access to global investors. Our strong local presence has been crucial in taking advantage of the renewed interest from international investors in China. This onshore presence gives us a competitive edge in understanding fund flows and market dynamics. As a result, we’ve achieved strong outperformance and market share gain. We expect this momentum to continue.”

De Garidel adds that the breadth of the hedging solutions UBS can offer for clients seeking to access China is one of the bank’s key strengths.

Gaurav Pugalia, UBS

“Our ability to offer a full range of hedging solutions and our innovative structuring capabilities have positioned it as the go-to partner for investors seeking to navigate the complexities of the Chinese market.”

The breadth of UBS’s institutional client base is another strength of the firm’s China derivatives solutions business, given the risk recycling opportunities that that affords.

“This creates a very effective ecosystem, allowing us to be able to offer highly competitive prices for both client segments,” says Romain Barba, head of structuring, Asia-Pacific, at UBS in Hong Kong.

In the past year, UBS became one of the first banks to offer payoffs linked to the CSI A500, a new index launched last September designed to cover a wider, more balanced range of sectors than the CSI 300. The bank’s Knowledge Network (K-Net) team, which provides in-depth research on China derivatives and volatility markets, was also quick to issue notes highlighting various new trading ideas around the index following its launch.

“With this index, we were one of the first to market it to clients,” says Lin Qian, head of equity derivatives and QIS structuring, Asia-Pacific. “It provides a balanced exposure compared to other benchmark indices like CSI 300 and CSI 500, as it is not overly weighted towards the financial or property sectors. This stems from our K-Net research, which has enabled us to have a more meaningful discussion with our clients [about the CSI A500], which they greatly appreciate.”

Out of every three suggestions, one results in a trade, which indicates the quality of our suggestions are highly appreciated by our clients, and they are acting on them

Gaurav Pugalia, UBS

FX focus

UBS has also bolstered its currency derivatives business in the past year. The integration of Credit Suisse has again provided a boost by further deepening the bank’s access to wealth management clients, thereby enhancing its ability to recycle risk and provide liquidity.

But the bank’s technology offering in FX has also shown its value for wealth management clients, particularly amid the US tariffs-related market volatility earlier this year. One example of how UBS is introducing technological innovations to the benefit of its wealth management clients is the proprietary restructuring suggestions tool, SPASA.

Through this tool UBS’s wealth management clients receive tailored assistance with the management of their FX positions, including automated reminders to roll over positions – on products such as Target Redemption Forwards (TARFS) and FX accumulators – and notifications of potential restructuring opportunities.

“No-one really trades TARFs and accumulators and holds them to maturity,” says Gaurav Pugalia, head of macro structuring for Asia-Pacific at UBS. “Unless [the market] moves decisively in one direction, there are always opportunities to take profit or restructure those positions. Given the volatility in the currency markets over last six or eight months, with the US dollar fluctuating significantly against other currencies, we found that this approach helps to keep things much more scalable.”

The tool boasts a near 30% success rate, adds Pugalia, and has proved especially valuable for clients throughout the extremely volatile FX market conditions seen earlier this year following president Trump’s April 2 Liberation Day announcement.

“Out of every three suggestions, one results in a trade, which indicates the quality of our suggestions are highly appreciated by our clients, and they are acting on them,” he says.

Pugalia adds that UBS is now planning for a broader rollout of the tool to regional bank clients in Asia in the near future.

“Our goal is to pilot this initiative in all regions, starting with Asia. Right now, we have one pilot client in Asia, and we intend to onboard another regional bank soon. The ultimate ambition is to roll this out to all our regional bank clients across the world.”

Legacy disposal

UBS’s transition into what de Garidel describes as a ‘growth mode’ has been helped by the speed with which it dealt with the disposal of the unwanted elements of the derivatives book it acquired from Credit Suisse.

Following the merger, roughly $230 billion notional of legacy derivatives positions from CS, including a significant portion of exotic equity payoffs, were pushed into a non-core and legacy (NCL) unit for disposal. Auctioning off these positions on such a scale manually would have been a very significant and time-consuming undertaking given the lack of standardisation for trade descriptions.

“Normally, it could take multiple years for banks to offload this due to it’s complexity of booking and trade complexity representations across different systems and regions,” says Alejandra Real-Mendez, operating officer – non-core legacy Asia-Pacific at UBS in Singapore.

“The pain points in the original portfolio stem from many years of internal development,” adds Real-Mendez. For certain complex instruments, “there is no one single standard for how the trades will be represented in a bank system.”

To address this, UBS developed a tool – which it dubbed the T-Rex – for the non-core equity trading unit to help create a common language for trade representations and automate the booking and confirmation process post-auction.

“The first feature of the T-Rex tool is that it creates a common language to represent complex financial instruments. This makes it much easier for our internal teams, such as trading and structuring, when they try to sell it. Additionally, the dummy price check feature allows the team to agree on prices with bidders and minimise basis risk, ensuring accurate pricing,” says Real-Mendez.

With the help of the T-Rex tool, the bank was able to successfully offload the majority of the non-core legacy portfolio by January this year.

The bank’s second-quarter earnings also highlight the continued progress made in the NCL wind-down, with risk-weighted assets down by $1.5 billion sequentially to $32.7 billion.

“Earlier this year in January, most of the equity derivatives legacy portfolio was offloaded for good, with the help of T-Rex, to auction more than 40 portfolios. The success lies in the fact that it was done at a very fast pace,” notes Real-Mendez.