Swiss Structured Product Trades Drop to 6 Month Low in November

Trading of structured products on Switzerland’s Scoach exchange dropped to a six-month low in November as investors shunned risk and volatility on the country’s main stock index fell to the lowest since 2006.

The volume of traded certificates and warrants declined to 2.29 billion Swiss francs ($2.36 billion), down 5 percent from the previous month and the smallest total since 2.26 billion francs in May, according to the exchange, which is run by Six Group and Deutsche Boerse AG. (DB1)

Swiss investors are responding to Europe’s debt crisis by steering clear of equities and structured products based on them, according to Andre Buck, Scoach’s Zurich-based head of sales and marketing. Stock-linked products account for as much as 80 percent of the securities traded on Scoach.

“Investors have tired of the euro crisis and the U.S. fiscal cliff, while low volatility has harmed trading,” Buck said.

Trading in stocks and equity-based exchange-traded funds on the Six Swiss Exchange, Scoach’s parent, was 2.7 percent lower in November compared with the previous month, according to the exchange.

Meanwhile, three-month implied volatility for at-the-money options on Switzerland’s benchmark Swiss Market Index (SMI) declined to 10.25 on Nov. 30, the lowest point since Feb. 23, 2006, according to data compiled by Bloomberg. The gauge tracks prices for options, which are embedded in structured notes.

Structured product issuers that have sold securities such as leveraged call warrants will typically buy shares in the underlying stock to hedge their exposure, Buck said. When volatility is lower, issuers will be less active stock buyers, he said.

Trading in leveraged products, which account for 52 percent of the 30.05 billion Swiss franc market this year, slowed to 1.09 billion Swiss francs in November, the least since at least January 2006, when the Swiss Structured Products Association began publishing data on the market.

To contact the reporter on this story: Alastair Marsh in London at amarsh25@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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