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Americas Equity Derivatives House of the Year: Credit Suisse

By GlobalCapital
15 Jul 2020

As a result of its robust approach to risk management and ability to deliver structured and flow solutions across its corporate, wealth management and institutional clients, Credit Suisse is our Equity Derivatives House of the Year.


History matters to many banks, but there is perhaps no better example today than Credit Suisse. The story of its past decade is of an institution that was compelled to reassess its identity and draw on its strong heritage to find new ways to grow. It’s an exercise that has served it particularly well in equity derivatives. 

The three-year restructuring that ran from 2015 to 2018 under former CEO Tidjane Thiam saw the bank’s global markets division play a central role in efforts to cut risk-weighted assets and balance sheet, which by extension impacted equity derivatives. It was also the point at which the bank put new focus on its wealth management businesses globally.

“It was going back to who we were as a firm,” says Elaine Sam, head of equity derivative sales at Credit Suisse in New York. “It’s our DNA: we are a global wealth manager with strong investment bank capabilities to support the private bank.”

Going through the rigors of the restructuring was key to the way the firm approaches the business today, she says. 

“Through the early years of balance sheet reductions we learnt how to run the business in a more focused, efficient and profitable manner with a strong focus on cost discipline and risk management. If you fast forward to 2020, equity derivatives has only emerged stronger.” 

Last year the firm reported its best full-year revenue performance in equity derivatives since 2015, amid a 7% rise in equities sales and trading revenues, while its peers saw revenues shrink 8%.

Equity derivatives sits between what Credit Suisse calls International Trading Solutions and its equities arm. The former provides solutions to wealth management and corporate clients globally, while the latter gives it access to the institutional market in the Americas. 

“Being able to straddle the high net worth and institutional pieces of the business is what differentiates us,” says Sam. “We see flows from both sides and each is really interested to see what the other is doing because these flows are really informative about what can potentially drive the market.”

Collaboration is also key to its risk management, another of the key differentiators that helped Credit Suisse stand out in 2019. Sales and trading work closely together, so that when salespeople originate ideas and put on trades they are included in the conversation with traders about how to manage, warehouse or offset the risk. 

The importance of maintaining this focus on risk management was brought home during the Covid‑19 crisis in early 2020, when correlations spiked and volatility increased, leading to challenges for many dealers across the industry involved in products such as auto-callables. “The fact that we were disciplined and very careful about how much risk we accumulated and how we worked to package risk in offsetting positions to different client segments really helped,” says Sam.

The firm has, like most of its competitors, been investing heavily in technology. While flow products have mostly already reached the click-and-trade stage, Sam says that the structured side of the business is catching up fast. “That’s not to say that salespeople will be obsolete; salespeople will just cover clients differently. It’s always in tandem with technology.”

It also means investing in content, where Credit Suisse has made big strides in quantitative investment strategies (QIS) for its institutional clients. 

“Our QIS business used to be focused on the high net worth and retail side but we have made a concerted effort to build out the institutional side for bespoke, custom trades,” she says. “There’s a significant amount of upfront work in modelling, in quants, in IT, to set up these types of products and it’s starting to bear fruit. But you have to be patient and we don’t think we are even close to reaching saturation point — there’s a lot more potential for us.”

By GlobalCapital
15 Jul 2020