Editor's letter

Editorial

As Structured Products went to press, the trading frenzy of late February that followed a 9% fall in the Chinese stock market continued to hit the headlines. Markets were down, worries about the unwinding of carry trades were increasing and volatility was forcing investors to reassess their positions. Next month we will report on how some new short-selling index strategies may appeal to investors as a result of market jitters.

This month, however, our cover story examines how a legal wrangle between Commerzbank and index provider Deutsche Borse could shape the future of the entire index business. There are certainly some valid points made by both sides. Commerzbank argues that because index levels are reported daily in newspapers there should be no need to pay a licence fee to the index providers to base structured products on an index. Deutsche Borse counters that it is in fact providing a service to Commerzbank, so charging a licence fee is only to be expected.

Most observers do not expect the case to be resolved until 2009, so whether other banks decide to take the same line as Commerzbank remains to be seen. But the case will probably force all index providers to rethink their business models.

To my mind, though, what the legal tussle really demonstrates is just how far the structured products markets have come in the past few years. Market conventions are now being questioned, and that's evidence of a dynamic industry.

In next month's issue, we will report on just how dynamic the Americas markets have become. Long regarded as the great underachiever of the structured products world, the US market - and indeed the Latin American and Canadian markets - are bursting with examples of innovation. Our Americas Awards are designed to celebrate that excellence, and although the results have not yet been decided, I have been extremely impressed by industry developments there.