Exotic Markets

The way private banks have traditionally distributed structured products leaves much to be improved upon. Customers are typically a payoff and they are offered a subscription period during which they can sign up and pay. Behind the scenes, the bank sales person and the private bank will take commissions and so will the structurer. The customer's yield will be eroded and the level of transparency will be minimal. And customers can only enter as buyers of the notes. To make matters worse, once a customer has subscribed to a structured product, he can only resell it back to the bank. With only one counterpart to trade with, banks are in a position where they can impose wide spreads on any buybacks. The playing field favors the private banks and the system is opaque.