Profiles: The rewards of representation

Special report: Focus on Switzerland

In our survey of European distributors (Structured Products, October 2006) we found that 84% of those surveyed believe it is either 'very important' or 'quite important' to be represented by an association. Amazingly, however, only 14% of respondents were in fact members of an association, which indicates that opportunities may exist for the wider development of associations throughout Europe. So the market in Switzerland was ahead of the game when five Swiss-based banks launched the Swiss Structured Products Association (Schweizerischer Verband fur Strukturierte Produkte, or SVSP) in April.

Roger Studer, head of financial markets at Bank Vontobel, is the SVSP chairman, while Luigi Vignola, head of trading, equity products at Zurcher Kantonalbank, serves as deputy chairman. The SVSP now has 10 members, including ABN Amro, Credit Suisse, UBS, Vontobel and Zurcher Kantonalbank, so it has certainly captured the cream of the Swiss market. Between them, the members have a Swiss market share of 90%, says Eric Wasescha, president of the SVSP in Zurich.

"It is important that we have such large market share because, while I believe it is essential to have industry association representation, it is equally important that only one body exists," Wasescha says. Splintered representation - as is the case in Germany - can lead to confusion on the part of the regulator over which industry association to listen to when discussing policy, he explains.

At this stage, the SVSP is focused on three key areas. The association's public relations arm promotes structured products by educating the media, financial advisers and investors; its legal and regulatory function lobbies the Swiss regulator on behalf of structured products to ensure they receive fair treatment; and it is developing its operations and standards function to work with issuers on improving the market's efficiency.

An example of the latter function in action is the establishment of the Swiss Listed Derivatives Map 2006. Devised by the SVSP in conjunction with the Swiss Stock Exchange and Zurich-based market data company Derivative Partners, the map classifies all structured products released to market by product type. The products are then listed on the SVSP website, allowing investors to easily compare similar products by different providers. The SVSP also provides risk evaluation tools on all products listed on the website.

Banks in Switzerland have certainly welcomed the initiative. Roland Baumann, director of structured derivatives advisory at Credit Suisse Private Bank in Zurich, for example, says: "The association and its website that lists all products in the market has been an important innovation that improves the transparency, efficiency and promotion of the market."

The SVSP is promising a more aggressive approach to regulatory issues in 2007. "We are examining the regulatory environment very closely and expect to make further progress on this front in 2007," Wasescha says. A dialogue already exists between the regulator and the association. Many market participants say the regulatory environment in Switzerland is the friendliest in Europe for structured products providers and distributors, and the SVSP aims to keep it that way, Wasescha says.

As a result of the association's public relations work, the Swiss structured products market is already reaping tangible rewards in the quality of media coverage. "Arising from the association's initiatives, the financial press, and indeed the mainstream media, is now covering structured products on a regular basis," Wasescha says. "Switzerland is the world's biggest market for structured products - with EUR200 billion of products under management each year - so it's logical that the most advanced association in Europe has begun in Switzerland." The SVSP expects other European countries to follow its model as the market becomes more competitive.

The SVSP is still expanding its membership base and will accept new members who are issuers of structured products and have substantial commercial and personnel resources in Switzerland, Wasescha says.

The association has certainly received a warm welcome from the structured products market in Switzerland. In the end, though, its success will be judged on whether its involvement results in lasting market growth. The SVSP's first year, at least, looks to have got off to a positive start, as the market is up by around Sfr6,000 million so far in 2006. Market participants in Switzerland and the rest of Europe will be watching with interest to see if the association - and others like it - can have a long-term, positive contribution to the market.