Catley Lakeman Securities (CLS) has launched the first and only multilateral trading facility for structured products for UK investors.
Verto MTF is a fully regulated exchange and will allow for the necessary clarity under MiFiD II guidelines, which requires structured product investors to provide data reporting on execution as well as an independent audit trail in the trading and execution of the products.
Structured products have been in existence for decades and aim to provide pre-defined returns dependent on the performance of an underlying asset, such as a market index, over a set period.
Investors have the opportunity to receive a predefined capital gain at maturity or receive income payments over the life of the investment with initial capital repaid at maturity.
Research published by research service FVC in April suggested the products have outperformed funds, bonds and cash in recent years, but some warn that their strong returns and the element of protection must be weighted with their unique set of risks as well as their relative complexity.
CLS, which provides defined-return investments to asset managers, said Verto MTF differs from existing multilateral trading facilities in that it caters "for the idiosyncrasies of trading structured products".
It added that the current "Dark Pool" style of executing over the counter private placement structured products makes it hard for buy-side and sell-side participants to comply with MiFID II.
Verto MTF is designed to provide full transparency in the form of transaction reporting and full best execution reporting, while providing clarity to the costs and charges element of the MiFiD II regulation.
CEO of CLS Russell Catley said: "Verto MTF is a game-changer for the structured products sector.
"We have worked closely with the FCA over the last 24 months to ensure that we have designed a platform solution that meets its expectations. We are now regulated to operate an MTF and as a market data processor.
"Electronic, regulated trading is more efficient for bank issuers and hence should create price value. MTF provides a compliant platform and marketplace for banks and clients to grow the market for structure products, which is currently in decline."