SIX Swiss Exchange has extended a new service that is designed to protect investors from the risks associated with structured products to cover British collateral providers.
The bourse’s collateral secured instruments (COSI) service allows investors to minimise the issuer risk of structured products and was only previously available for Swiss firms.
The service, which was introduced by SIX following the bankruptcy of Lehman Brothers in 2008, requires banks to post collateral with a selected provider via post-trade services provider SIX Securities Services when listing a structured product.
In the event the bank issuing the structured products defaults, the COSI scheme allows the exchange to redistribute the collateral to members based on their investment in the structured product.
The expansion now allows British issuers of structured products to offer protection against the instruments they list on Scoach Zurich and Frankfurt.
SIX Swiss Exchange said legal adjustments were required before enabling British firms to launch COSI products to ensure investor protection and guarantee that the protection offered remained valid in an international context.
The first UK COSI products will be rolled out in the coming months, with a further expansion to new jurisdictions anticipated soon after.
"We have carefully been working on the proper approach to make COSI accessible to international collateral providers,” said SIX Swiss Exchange CEO Christian Katz. “The quality of COSI is one of a kind anywhere in the world and has attracted a correspondingly high degree of interest. However, we had to ensure that the COSI collateral mechanism will also work properly at an international level. UK issuers can now list COSI products at SIX Swiss Exchange more easily, as they can use a UK collateral provider to deposit the necessary collateral with SIX Securities Services in Switzerland. This stimulates and expands the market. Investors are offered additional opportunities to invest with the best possible protection from issuer risk."