As an essential asset to Natixis’s Equity Finance business line, the forward trading team consists of 14 traders in Europe. This includes a dedicated desk for single stocks, managed by Alexandre Vial, and a dedicated desk for indices, managed by Guillaume Charras.
The team provides solutions ranging from plain vanilla forward products to more complex and structured financing and investment solutions. Currently, we are focusing our efforts on delta-one exposure solutions over a large universe of assets. These can range from the conventional universe of international equities to a larger scope of indices and ETFs, bonds and mutual funds depending on the exposure the client is requesting.
The choice of the wrapper for the exposure depends on the clients preferences. In most cases, clients prefer the note route as it is quicker and easier to implement, involving neither an ISDA agreement nor a CSA. Meanwhile swaps are adapted for clients who are able to trade under an ISDA agreement, including daily margin calls.
Currently, most of our flows are delivered through a portfolio swap-based synthetic services platform NSS (Natixis Synthetic Services) – while we deployed these services to our first client on 2008, the platform itself was established only in 2011.
NSS includes a secure and dedicated website that enables clients to manage both their long and short positions. It equips clients with information regarding maximum exposure on both sides, alongside a rich array of additional reporting information including position monitoring, dividends, funding fees and the current repo levels associated with short positions.
Furthermore, we are extending the platform to provide the same level of monitoring and reporting for notes, replicating what is already available on the portfolio swap side.
Of course, execution is an important part of our service. In this area, our offering is distinctive because it employs a full open-architecture facility. Clients are free to use our own execution services or those of external brokers – assuming that they are vetted and accepted by Natixis. With NSS, the client benefits from the platform flexibility and at the same time keeping control of his environment.
Finally, it is important to highlight the efforts we are making to develop a service around collateralised notes, which pays tribute to Natixis’s strong focus on innovation and its dedication to meet client needs. We are able to provide both unsecured notes facing Natixis rating and collateralised notes secured by assets.
Guillaume Charras, head of index forward trading, Europe
We have a European team, four traders in Paris and one in Frankfurt. Our focus is to provide clients with exposure to indices. These vary from world indices, to regional or country specific ones. The main providers of indices are FTSE, STOXX or MSCI, with the last experiencing a large increase in demand over the past three years. Indeed, MSCI World is a route for investors to get easy access to global markets.
At Natixis, we are able to offer the total range of index performance type – price return, gross or net total return. Gross or net total return indices mean that dividends are fully reinvested in the index or following a given withholding taxes table defined by the index sponsor. Hence the investors can choose not only the index, but also the way they would like dividends to be treated.
In regards to execution, we need to adapt our expertise to accommodate the indices that are popular. We have a global platform which allows us to trade in different geographical zones – US, Asia and Europe. We provide our clients with a choice of execution options, such as executing at the close or on the view. Indeed, we use a range of algorithms to ensure execution is tailor-made to what the client needs to achieve.
Of course, in each case, our back offices need to be tooled up to receive these shares and ensure that all corporate actions are completed effectively for the instruments that we hold. This functionality is vital in successfully replicating the index rules of each sponsor so that there are no remaining tracking error.
Last, but certainly not least, we are currently developing systematic indices. Indeed, these will be tailor-made to accommodate the needs of each client and will be built in accommodate the needs of each client and will be built in collaboration with our financial engineering team – who will improve either the risk or reward performance of a given index by lowering variance or improving performance.
The indices can either have specific purposes, such as building a high-yield index in our current low-yield environment, or can be based on a typical index strategy, such as reweighting or tracking dividend swaps performances.
Alexandre Vial, head of the single stocks forward trading, Europe
I manage the single stock forward trading team, composed of four people in Paris and one in Frankfurt. My team provides prices across the classic range of forward products, including futures, equity swaps and dividend swaps.
In regards to investment certificates, we offer clients two types – static, where the underlying portfolio does not move during the life of the product, or dynamic certificates, where there is flexibility to shuffle the portfolio during the life of the note. Generally speaking, dynamic certificates are popular among private bankers because they are a simpler way to implement bespoke allocation strategies that can occur within the note, rather like a prime brokerage solution.
Of course, it is also important to remember that compared with a swap, dynamic certificates are more straightforward to implement. Consequently, we have a strong client demand for these types of notes structured around actively managed certificates.
Both types of note use the same kind of function as the portfolio swap, and in both cases we can offer the same level of flexibility when it comes to execution, with the client choosing the preferred broker. Indeed, all that differs is the wrapper.
As Hugues explains, we can propose a range of underlying assets to clients, including equities, trackers or bonds – either from a basket of single stocks or from an index. On equities, all corporate actions are systematically adjusted in the swap or note performance.
On voluntary corporate actions, our expertise enable us to propose the monetisation of the implied option. We are currently in the process of obtaining regulatory validation to be able to include derivatives to our solutions. Once this has been achieved, it will help us address the demand for more actively managed structures, as well as enabling us to enlarge the universe of assets that we can support.
What is more, we are working towards developing notes that combine both long and short positions which also include a degree of leverage, rather than just the long positions that we provide today.