Warrants heading west

Commerzbank Securities finds business for covered warrants in the UK. Yuri Bender reports.

A saturated mass market for covered warrants in Italy, Germany and Holland has led Commerzbank Securities to push this complex asset class through brokerages servicing high net worth clients in the UK. With clearance from regulators imminent, the German bank expects instruments to be traded on the new CWTS segment of the London Stock Exchange by mid-autumn. According to Henrik Takkenberg, head of public distribution at Commerzbank Securities, covered warrants – instruments issued by investment banks which give investors the right to buy or sell an underlying security – are an ideal instrument for current depressed markets. They are simpler than other competing derivatives and losses are limited to initial investments. Commerzbank services Sweden, Spain, Portugal, Holland, Belgium and the UK from its London office. German, French and Italian markets have their own hubs in Frankfurt, Paris and Milan. A hotline gives clients and intermediaries direct access to product issuers to answer queries. And local weekly seminars are arranged to give clients information on pricing and market trends. Mr Takkenberg was impressed by the UK’s “astonishing number of retail brokers”. Of the 170 contacted, 30 brokerages, including E*Trade, Charles Schwab and TD Waterhouse, expressed a strong interest in selling the products. He denied Commerzbank was merely concentrating temporarily on retail clients in order to make up for a lack of institutional investment banking business. “Commerzbank was always retail oriented. But like other banks, we moved into corporate and investment banking during the 90s and expanded into Holland, Belgium and Portugal. Covered warrants have a maturity of at least two years, so we are in this market for the long-term.”