Nominees For DW's Best Derivatives Houses Of 2003

Credit

Credit derivatives have been the cash cow of investment banking in recent years and, although the growth might be starting to tail off, derivatives houses are quickly coming up with innovative new structures to keep up the momentum.

Deutsche Bank's name was mentioned time and time again for its product coverage and knowledge. The firm was one of the first to start offering single tranche deals and continuously innovates in CDO structures.

 

 

 

JPMorgan's Web site alone was enough for several end users to nominate the bulge bracket credit derivatives house. The site gives live indicative pricing on credit-default swaps and the TRAC-X family of indices.

 

 

UBS was nominated for its full service coverage. It provides excellent research and execution, according to investors. This year several major credit houses have tried to replicate its principal finance operation, showing it is a true market leader.

 

BNP Paribas received praise for its early adoption and market making commitment to index credit-default swaps in Europe and Japan.

 

 

Morgan Stanley has broken new ground in the synthetic CDO arena several times with its Spices program, according to investors. It is also the co-creator of the TRAC-X index family.

 

 

 

Equity

The European structured equity market is where most of the innovation has happened, which goes some way to explaining the dominance of the European houses in this category.

Deutsche Bank's excellent research and strategy, including the U.S. and European number one ranked Institutional Investor analysts for equity derivatives, has placed it firmly in the nominations.

 

 

 

 

Merrill Lynch excelled equally among U.S. and European investors in structured equity derivatives. It has long-term relationships with several of the major equity derivatives end users who still point to the firm as innovative and competitive on price.

 

 

 

 

Several investors said Credit Suisse First Boston's ability to market and present products clearly put it at the top of the table. The firm has also been at the forefront of structured products on hedge funds.

 

Barclays Capital's Simple Product was singled out as being one of the most innovative developments in the equity derivatives market. BarCap was also praised for its price and risk awareness in structured notes on single hedge funds. The firm sold its cash equities business in 1997, but still seems to be making an impact in the derivatives market.

 

BNP Paribas' strength is on the exotic options side of the business. Investors and hedge fund managers said this derivatives house was often the only firm in town when it came to the most exotic deals.

 

 

 

Fixed Income

This area has gone through some huge changes recently, sparked by new and proposed accounting rules, pension fund and insurance companies' solvency concerns and the largest ever remortgaging by U.S. homeowners.

Deutsche Bank's trade support separated it from the rest of the pack. Corporate treasurers said they can rely on the firm sending confirmations on time for every trade. It was also praised for its after trade service.

 

 

 

 

Goldman Sachs was considered to be among the most innovative firms for structuring FAS 133 compliant trades. The massive profits its proprietary trade group generate, as evidenced in last year's results, also prove the firm knows how to forecast the market.

JPMorgan won acclaim for its continued market making and risk taking during the recent jump in U.S. interest rate spreads. One treasurer said, "When things get crazy, not every bank can follow through, but JPMorgan is always there through thick and thin."

 

 

 

Morgan Stanley was noted for having structurers and modelers who responded to client needs. "The modelers and structurers consistently come up with interesting payouts," noted one investor.

 

 

 

 

 

Investors were impressed by the standard of UBS' research and strategy ideas. The firm also got kudos for its good balance of structuring and trading.

Foreign Exchange

In a market where execution is king, derivatives houses had to offer something special to get noticed.

UBS made the cut through making life easy for its clients. Hedge fund managers praised its online options trading site. The Swiss giant's pricing is always consistent, according to foreign exchange professionals.

 

 

 

 

 

Citigroup's sheer size in the foreign exchange market means it is a firm that several players turn to by default. It not only has a grip on the liquid major's but due to its huge branch network, is many end user's first call for emerging market options. Because of the flow it sees it is also able to offer exotics at tight spreads, according to end users.

 

Goldman Sachs is known for its creativity in foreign exchange options, incorporating improvisation into the firm's strong analytical capability and intellectual capital.

 

 

 

Credit Suisse First Boston's knowledge of the exotic options market singled it out for many investors. This is not only in terms of trading, but also in structuring and strategy.

 

Deutsche Bank was praised for having efficient execution and strong research, promoting good strategy plays. The strategies also stretch into correlated and multi-asset class ideas.