Commerzbank Securities is restructuring its equity derivatives group from a region-specific focus to a sector-specific focus to manage risk in the same way as its brokerage, research and credit areas. Eduardo Bastida, global head of equity derivatives trading in London, said the move is spurred by a shift in market perception that has affected single-stock correlation with sector movement in the equity market. Bastida said it is too early to comment on how reporting lines would change because of the shift.
Investors are spending more time studying the entire capital structure of companies--including both credit and equity, Bastida explained. Movement in credit spreads has traditionally been driven by sector-specific influences and now that same phenomenon is happening in the equity market, he noted. Although the correlation between equities and credit is typically a bear market phenomenon, Bastida said the link between equity and credit will not disappear if the economy improves.
This restructuring is the second stage of a reorganization of the equity derivatives group, according to Bastida. Recently the firm split the division into three areas: exotic products, which includes guaranteed products on alternative investments; vanilla products, which includes single stocks and indices; and flow products, which includes exchange-traded derivatives such as warrants.