Volatility Triggers Surge in European Structured Product Trading
Nov. 10 (Bloomberg) — Market swings in October triggered a surge in trading of structured products on European exchanges, with volumes reaching the highest in as much as 17 months.
Trading in leveraged certificates, which amplify gains or losses in underlying securities, climbed to 1.3 billion Swiss francs ($1.35 billion) in October, the most active month since May 2013, on the SIX Structured Products Exchange in Zurich. Exchanges in Germany, Italy, Norway, Finland and Sweden also reported jumps in volumes as measures of volatility reached the highest in more than two years.
Markets were whiplashed as concerns that global growth is slowing, declines in oil prices and the surprise departure of Bill Gross from Pacific Investment Management Co. spurred a sell-off in the first half of the month. That was followed by a rebound after the Bank of Japan expanded stimulus and investors sought to profit from price swings after years of calm.
“There was more dynamism in the markets,” said Dominique Boehler, head of public distribution and exchange-traded funds for Switzerland at Commerzbank AG in Zurich. “As soon as there’s a sudden move in the markets and volatility goes up, it gives investors new opportunities, whatever direction they’re betting on.”
Certificates tied to Transocean Ltd., the largest owner of deep-water drilling rigs, and UBS AG were among the most traded at Commerzbank in October, Boehler said. Contracts linked to Chicago Board Options Exchange SPX Volatility Index, or VIX, futures were also popular, he said.
The VIX and the Euro Stoxx 50 Volatility Index reached 28- month highs in October, as average levels remain below long-term averages this year. The Standard & Poor’s 500 Index fell to a six-month low in the first half of October, before erasing the losses and climbing to a record this month.
To contact the reporter on this story: Yakob Peterseil in London at ypeterseil@bloomberg.net To contact the editors responsible for this story: Shelley Smith at ssmith118@bloomberg.net Abigail Moses, Michael Shanahan
