TD Securities is taking its first step back into global structured equity derivatives since withdrawing two years ago. The firm, once a global derivatives player with a reputation for structuring innovative investment products from hubs in New York, London and Hong Kong, withdrew from exotic credit and equity derivatives outside of Canada in 2005, citing compliance and regulatory costs (DW, 4/29/05). But while the firm has made a commitment to the U.S. by registering equity-linked investments with the Securities and Exchange Commission, this is not necessarily part of a strategy for TD to return to its previous global structured derivatives businesses.
TD equity sales and trading officials said the firm is initially looking to see how much interest it gets from U.S. distributor TD Ameritrade for a one-year reverse convertible provisionally linked to E*Trade stock. Although the type of product has been decided, the reference stock could change. TD officials declined to say how much investment interest the firm is looking for, or when the first product might launch. Sales officials at TD Ameritrade--which currently offers investments structured by five or six different dealers--referred calls to TD Securities in Toronto.
New York-based rivals said TD's decision to return now is curious, as the U.S. investment products market is crowded with issuers. But they noted the Canadian firm's name is well-known and it has a good Main Street presence. A Toronto-based senior TD official added the firm believes its AAA credit rating will also support it, declining comment on how the firm will differentiate itself. Plans for the U.S. issue were in place before April's Ameritrade acquisition of TD U.S. broker arm TD Waterhouse.
The firm will also look to issue follow-up deals. The senior official said it will be gauging investor appetite through its U.S. brokers. "It's a testing of the waters," he said. The investments will be structured both from New York and Toronto.
