Spate of products linked to Stoxx Europe 600 allow investors to take view on Brexit

By Angela McDaniels

Tacoma, Wash., June 14 – Structurers are showing an interest in the Stoxx Europe 600 index, an index seldom used as an underlier for structured products, ahead of the United Kingdom’s June 23 vote on whether to leave the European Union.

On May 18, GS Finance Corp. announced plans to price notes linked to the performance of the index relative to a basket of indexes measuring the performance of French, German and Swiss equities. That was followed in quick succession by announcements from Deutsche Bank AG, London Branch, Morgan Stanley Finance LLC, HSBC USA Inc. and Barclays Bank plc.

The tenors of the offerings range from one year to four years, and they offer different payouts on the upside, but the common theme among them is downside protection in the form of a barrier or buffer.

The first issue for which pricing details have emerged on the Securities and Exchange Commission is Deutsche Bank’s $1.17 million of 0% knock-out notes due Dec. 13, 2017, which priced June 10.

If the final index level is greater or equal to the initial index level, the payout at maturity will be par plus the index return, according to a 424B2 filing with the SEC.

If the final index level is less than the initial index level but greater than or equal to the knock-out level, 78.25% of the initial index level, the payout will be par.

If the final index level is less than the knock-out level, investors will lose 1% for every 1% that the index’s final level is less than its initial level.

JPMorgan Chase Bank, NA and J.P. Morgan Securities LLC are the agents for the deal and will be the agents for several of the upcoming offerings.

Stoxx Europe 600 index

The Stoxx Europe 600 index is derived from the Stoxx Europe Total Market index and is a subset of the Stoxx Global 1800 index. It represents large-, mid- and small-cap companies in the United Kingdom and 17 other countries of the European region.

The index’s more commonly used cousin, the Euro Stoxx 50 index, does not include stocks from the United Kingdom.

The broader index has fared somewhat better than the blue chip index. The Stoxx Europe 600 is down 10% since the beginning of the year and down 16% over the past 12 months, compared with a 12% year-to-date decline for the Euro Stoxx 50 and a 19% decline since June 2015.

According to data compiled by Prospect News, the last time a structured product used the Stoxx Europe 600 as an underlier was back in November 2015, when JPMorgan Chase & Co. priced $4 million of 10-year dual directional contingent buffered return enhanced notes linked to the index.

Through the end of May, issuers had priced $52.8 million of notes linked to the index since Prospect News began reporting on structured products in 2005.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.