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Best Wholesale bank for technology innovation: BNP Paribas |
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Also shortlisted: Deutsche Bank and Société Générale CIB |
The structured products market was hit hard in the crisis. Burnt by losses, clients began to prioritize transparency and search for simpler investments. But technology has enabled some banks to overcome problems and redefine the client experience with structured products. BNP Paribas’ Smart Derivatives is just such a platform, and the bank wins Euromoney’s inaugural award for best wholesale bank for technology innovation.
Smart Derivatives was launched in June 2012 and now has 180 clients with more than 70,000 quotes a month taking place through the web-based platform. The platform enables clients to price and trade their own structured products with full transparency throughout a product’s life.
Unlike many web-based platforms that list all products, Smart Derivatives suggests products and solutions targeted to users’ needs. “Usually websites are very passive with no interaction. But Smart Derivatives is a communications channel between sales and the client, rather than just a static product list,” says Geoffrey Rodrigue, global head of stocks and index solutions at BNP Paribas. “Solutions specific to each client are posted with marketing documents and corresponding sample pricing panels – rather than the usual way of exchanging emails between the client and the sales, and then between sales and quotation team, adding many layers between the client and the price.”
The platform also provides clients with information that would help them make investment decisions by providing tools such as actively priced underlyings and analytics, global markets’ outlooks and analysts’ white papers.
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| Geoffrey Rodrigue, global head of stocks and index solutions at BNP Paribas |
One of the most singular aspects of the platform is that it enables the client to build a custom product or get access to innovative products. “What used to happen was that the client would call the sales team and say, for example, that she/he would like a reverse convertible on Apple. Then the sales team would transfer the request to the quotation team that prices the product, who would send the conditions back to the sales and eventually back to the client,” says Cyrille Peponnet, head of structured equity ebusiness at BNP Paribas. “If the conditions were not suitable, then the client would say: ‘OK, not Apple. What about a different stock? And so on it would go.’ The Smart Derivatives platform, however, enables the client to design an existing product – or ask BNP Paribas to access any innovative product that the client might have in mind – and see immediately if the conditions are right, and to keep altering the product until satisfied. The platform has more than 3,000 underlyings in equities, commodities and BNP Paribas’ proprietary indices. “There is more autonomy and freedom than there has ever been,” says Rodrigue.
When the client has traded the product, Smart Derivatives gives immediate information to the client on the pricing in the secondary market. “This is very novel,” says Rodrigue. “The client can ask for a firm price and trade via the platform to sell back or increase its position, and he can also know when the maturity is getting close, or if the product valuations have fluctuated, or how the underlying’s moves have impacted the product valuation.”
And finally, when the client has sold the product, he has access on the platform to all of the documentation and post-trade information such as the past valuation, legal documents and coupons paid. “The platform provides complete transparency and flexibility in every part of the cycle: pre-trade, trade, and post-trade,” says Rodrigue.
He adds: “It was clear that a large range of structured products had become commoditized, and clients wanted to have better tools to look at pricing. At the same time, regulation was calling for more information to be available to clients: documents, information on market parameters, post-trade transparency.”
The products, services and documents can all be white-labelled. Private banks are the natural audience, but Peponnet points out that the tailor-made aspect means the products can be provided to any client of BNP Paribas. “Institutional investors need to hedge market exposure from time to time and Smart Derivatives also enables them to be able to price and trade such risk,” he says. “It is a real revolution in the way structured products are offered. Most of the time, similar platforms have the same underlyings, the same level of service, the same traditional communication channels between sales and clients, but the innovation here is in the interaction between the client and the sales through the platform in creating together exactly what they need.”
Rodrigue says Smart Derivatives will be the trend for the structured products industry. “The crisis of 2008 really provided some challenges to the market and underlined the importance of transparency and liquidity. We needed to reassure the investors that structured products have a value, but also to provide them with a tool to make sure they are comfortable investing again. This is part of the answer, and if the industry aligns to this new benchmark I am confident that the structured products market will evolve positively.”
