Editor's letter



The German structured products market appears to be over-saturated, but that's not necessarily a bad thing. Increased competition means distributors are now being forced to come up with more attractive payoffs and, as a result, they are likely to develop specialisms. One institution may decide that products tied to commodities warrant their attention, whereas others may choose to spend more time developing investments tied to foreign exchange. Ultimately, investors will know where to shop for their specific needs.

Increased competition in the market is also forcing distributors to come up with increasingly innovative marketing strategies. Before Christmas, for example, Deutsche Bank employed a 'scratch and sniff' card to promote its latest offerings in the German market. Rather seasonably, it smelt like Christmas cookies.

But elsewhere, things are less fragrant. Indeed, the fierce competitive streak is rearing its head at associations in the country. Derivate Forum (established September 2004) and the Deutsche Derivate Institute (founded December 2003) are currently engaged in a war of words, according to one outsider unaffiliated with either association.

The bodies have different objectives - DDI is generally seen as being more concerned with promoting legal best practice while Derivate Forum is regarded as a data-producing entity. But some members of the trade associations feel there is only room for one 'voice'. This may be ruffling a few feathers, but at least the German market has some semblance of market voice, as noted by a few of our British and French contacts.

Trade bodies can be pivotal in building market maturity - just look at the influence the International Swaps and Derivatives Association had on the development of the global derivatives market. And so it seems only natural that Europe's divergent set of structured products trade associations will endeavour to set market agendas in the future. But surely a European body, along the lines of the New York-based Structured Products Association (embracing US and Canadian interests), makes more sense?

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