Vontobel intensifies network race with new clients

Vontobel has signed up four buyside clients to its Asia-based Deritrade multi-issuer platform (MIP), the Swiss private bank announced yesterday.

The move has highlighted the race between competing regional structured product networks to sign up clients since the launch of a new network, Contineo, in January.

Anup Gupta, Deritrade MIP’s Asia head, confirmed that KGI Asia’s Hong Kong arm, Maybank’s Singapore private bank and the Singapore entities of Swiss private banks LGT and Union Bancaire Privée have signed up to the Deritrade platform. These are the first buyside additions to the Asia platform since it was launched in January 2015.

In Asia, structured products issued by only one firm – Vontobel itself – are currently available on Deritrade. In contrast, Contineo launched with six issuers on its network, but it is only set to go live in July.

Gupta said Deritrade is “in advanced discussions” with a number of issuers, some of whom have signed a memorandum of understanding.

Vontobel has six issuers who currently offer structured products on Deritrade in Europe: namely Deutsche Bank, Morgan Stanley, Société Générale, UBS, Vontobel and Zürcher Kantonalbank. Gupta declined to say which of these issuers are in the process of signing up to the platform in Asia.

Société Générale is also one of the six issuers – along with Barclays, BNP Paribas, Goldman Sachs, HSBC and JP Morgan – who own Contineo. On March 5, Contineo announced that it has signed up its first private bank client to the network, namely Julius Baer.

Those six issuers have started testing the Contineo network and will do so until April. Then buyside clients – such as Julius Baer along with the issuers’ private banking arms – will begin testing from May and the network is set to go live in July.

Differences between Contineo and Deritrade include the fact that Contineo offers an “all you can eat model”, as managing director Mark Munoz puts it. The network charges an annual licence fee. In contrast, Deritrade charges a fee per trade which may be more suitable to smaller private banks who do not conduct enough business to justify paying the annual licence fee charged by Contineo.

Both networks promise lower minimum ticket sizes for structured product trades. Gupta observed that a few years ago the minimum size per trade was $750,000 to $1 million. Now that figure is $200,000-$250,000. Gupta added that, in Switzerland, Deritrade offers a minimum of 20,000 Swiss francs ($20,000) per trade. “It is going that way in Asia,” he said.

Client demands for lower minimum trade sizes is one factor driving the adoption of automated systems. By offering prices from six issuers on one platform, Contineo will make it easier for relationship managers at private banks to efficiently offer their clients a range of prices. Deeper integration offered by Deritrade – which integrates pre- and post-trade in one system – may facilitate more rapid implementation of trades.

For this reason, Gupta said that he doesn’t see Contineo as a competitor. “The way we look at Contineo is as a kind of utility” which just offers at-trade pricing and execution, he said. In contrast, Deritrade offers “front-to-back service, linking up pre-, at- and post-trade.”

The two firms offer similar products – including equity-linked notes, knock-out equity-linked notes, fixed coupon notes and daily range-accrual notes. Contineo will also offer OTC options, accumulators and decumulators from launch - Deritrade will release these in due course, said Gupta.

Deritrade’s heritage in Europe suggests a wider range of European underlyings. “That’s their strong suite,” said Munoz. Contineo will focus on offering access to more than 4,000 Hong Kong, Japan, Singapore and US-listed securities underlying the different product formats offered. Deritrade claims more than 1,000 underlyings.