Accounting changes mean structured product distributors now value after-sale liquidity over the price of the derivatives they buy. Under International Accounting Standard 39, distributors must mark their derivatives positions to market and they need counterparties to provide up-to-date price information in order to manage their accounts.
In a panel discussion distributors agreed the ability to unwind positions and the frequency of net-asset-value reports influences their choice of derivatives provider more than the price the investment bank offers. Philip Bastiman, head of structured products at Coutts in London, said changes to accounting standards were driving this move. "As IAS 39 begins to take effect, the quality, frequency and accuracy of valuations will begin to bite," he added.
