Trade of the month: Secondary trading
The secondary trading of structured products in the UK is limited by low liquidity, which is partly due to bid-offer spreads that are wide enough to deter investors. While most providers of retail structured products in the UK publish prices throughout the product life at least once a month, few investors take them up on the offer, especially if those few are retail investors.
As so few investors are inclined to sell products back to investors this encourages a shortage of liquidity. And the meagre flows, combined with the expense of unwinding small amounts of product, tend to mean that providers are not very interested in developing secondary trading.
Some structured products are listed on the London Stock Exchange, but these are mostly institutional. And it is these investors who have the keenest interest in secondary market trading, partly because they have a
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