Banks may roll out more European-style structured products to U.S. retail investors if the newly nominated Securities and Exchange Commission chairmanChristopher Cox takes a more relaxed approach to regulation than his predecessor William Donaldson.
Michael Benhamou, a managing partner with broker-dealer Louis Capital Markets in New York, said the structured products market needs less aggressive regulation in order to evolve. "The Street expects Cox will have a more hands-free approach," he said. But other sellside officials said the U.S. structured products market lags behind Europe for reasons other than just regulation. European investors have always been focused on capital preservation so they came up with interesting ways of protecting principal, such as CPPI strategies, explained one official, adding, "U.S. investors, meanwhile, rode the dot com wave." Now the stock market is moving sideways and interest rates are going up, investor appetite has changed and firms will begin offering more products with twists, he said.
"If retail investors can get comfortable with the complexities of these instruments and understand the risk and rewards, they can be compelling," added Keith Styrcula, chairman of theStructured Products Association in New York.