In One Click to the Optimal Individualized Structured Product

Over the last couple of years innovation in the structured products markets has predominantly evolved around the issuer side concentrating on new digital tools and platforms which automate and streamline back-office processes. Such tools/platforms allow optimized pricing for structured products, increased automation, reduced costs and ultimately enable lower ticket sizes for customized structured products. This evolution opens up the opportunity for wealth managers to serve a larger client segment by offering a tailored solution for each and every client. The missing piece which our experts added to the digitized value chain is a formalized design process for structured products as based on client specific data. This scalable and intelligent technology is vital for unlocking the next level of growth in the structured products market.

For the past three years our technology specialists and quants, building on our successful track record in derivatives technology for global banks, exchanges and clearing houses, have constantly expanded their derivatives expertise to develop this missing link in the value chain. After seeing consistently stable and optimal results in a preliminary client-specific test phase, swissQuant Group is now prepared to launch a new and innovative product- the DeriRobo. This product includes a newly designed algorithm which can optimize non-linear products in the primary market. DeriRobo designs for each individual wealth management client the optimal structured product, while at the same time meeting internal investor specific criteria (risk profile, portfolio allocations, investment views and preferences). A previously fragmented process becomes unified using the technological bridge provided by the DeriRobo – connecting the issuer side with the wealth management and client side. A strong business case can be made for wealth managers to make comprehensive use of structured products due to the newly created impact of improved scalability.

As an added feature, we have integrated an alpha version of the DeriRobo into our wealth management software ImpaQt, allowing relationship managers or investment centers to observe the functionalities and impact of the newly developed optimization process.

Currently around 30 banks benefit from the implementation of our wealth management software ImpaQt. The advantage of combining ImpaQt and DeriRobo to the wealth manager is to more comprehensively serve the client’s wishes, combining optimization algorithms and risk calculations in a technologically scalable manner. The DeriRobo embedded in ImpaQt enables the user (i.e. relationship manager) to carry out the design process for an optimal structured product on the spot using the software together with the client to immediately illustrate the impact of a proposal on the client’s portfolio. This makes customizing client proposals much easier, quicker and improves the quality of advice provided to the end client.

DeriRobo capabilities

The power of this new technology lies in its ability to create a structured product proposal based entirely on the existing client portfolio, client preferences and restrictions, the risk profile of the end investor and of course on the current pricing conditions within the structured product markets. DeriRobo provides the RM in one click the optimal individualized structured product for any one client. The engine does not push structures back and forth but, by incorporating the client data, proposes the best customer specific structure. This is done in a formalized way so that RMs can access their client portfolios on a monthly/weekly or even daily basis, adjusting the portfolios in sync with the optimization algorithm in order to reflect the specific needs of the end investor. The technology also takes into account market conditions, adjusting on an on-going basis structured product selection to reflect the actual market environment. This holistic approach allows the client to take advantage of pricing opportunities as opposed to a rigid classification of investment instruments.

During the onboarding process the client or RM completes a questionnaire providing the basis for his or her investment profile. The DeriRobo then provides a personalized portfolio recommendation tailor-made for that particular client, using their desired investment and risk profile, investment view, and any specified preferences.

Not only does the DeriRobo provide on the spot flexibility and optimization to the end client and RM, but allows the investment center to determine by client segment the appropriate configuration of underlying structure, risk and portfolio allocation reflecting the current investment view of the wealth manager. DeriRobo calculates on this basis all optimal proposals which then can either be directly placed with the execution desk or pushed as proposal to the RMs for them to be taken up with the clients.

The best results for end clients are achieved when DeriRobo is free to tailor the structured products to the individual investors, but it can also handle shelf or campaign products. The base algorithm can even be used to create the shelf products that are best for clients and maximize volume per structure.

Target market

DeriRobo is aimed at the primary market and has been geared to provide support for primary issuance. We as a firm are constantly in touch with market players and know what the requirements are and how best to meet those needs.

While the DeriRobo is targeted for private banks and wealth managers initially, the technology greatly enhances efficiency, productivity and costs if it is connected with the sell-side. Deployment is however effective for both clients who have sell- and buy-side capabilities, as well as those who will deploy the technology on the one side.

The advantage of the DeriRobo is that it can be customized to fit the specific needs of any particular provider. We foresee a multitude of uses as we continue to work closely with providers to meet their individual needs as the product matures.

Is the market ready to adopt this kind of technology?

For some time, the sell-side has been ahead of the automation game compared to the buy-side. However, as buy-side firms start to see the potential to shift the balance towards a more efficient distribution model, we have noticed an increasing number of buy-side firms moving towards automation. Developing intelligent technology based on client specific data has proven powerful and capable of propelling innovation for the benefit of the client, the market and the end investor.

In Switzerland, the DeriRobo is in high demand in a well-functioning and mature market which is a strong indication for its future role in a broader market. We expect widespread deployment of this intelligent technology in other European and APAC markets where structured products play a significant role in investors’ portfolios and automation is at an advanced level. It is only a matter of time until the DeriRobo becomes an integral part of European and other mature markets ready for this next digitized step.

Other tools/functionalities

We believe that for tier one banks such a technology can be combined with their existing automated research capabilities on derivatives related underlying assets. Not only would this provide a smarter approach to delivering research on underlying assets, but it could also provide an added advisory value to end investors and trade decisions.

From a portfolio construction perspective, DeriRobo can also be used for trade explanation as every provided recommendation takes into consideration the expected return of the underlying, implied volatility, the structured product type and diversification. Therefore, DeriRobo can be used for diversification purposes as well. The expected return, which is also a key variable, will feed directly into the risk profile of the investor.

Furthermore, the tool can be used to measure the overall impact of adding a particular structured product to a portfolio and whether or not the risk bandwidths have been breached. The algorithm never recommends a product that falls outside the predefined risk bandwidths. Therefore, from a suitability and target market perspective, the DeriRobo is MiFID II relevant.

Post-trade tools

We have the capability to develop and integrate the DeriRobo into a life-cycle management technology. On the risk side, we already have modules available and deployed at clients. While for listed products it is relatively easy to obtain risk data that has been calculated by exchanges, it can be difficult to get similar data for non-listed products or in general for very complex products. We have developed modules that are able to calculate the risk of products for the investment provider as well as for individual clients.

Helping the market to become a more transparent space

swissQuant Group believes that the DeriRobo technology has the potential to disrupt the structured products markets, unlocking for participants a new level of growth. In the past banks have struggled to develop technology-based solutions because their set-up is often not flexible enough to be at the forefront of technology developments. Specialization in this field, however, can make a difference in terms of time to market. swissQuant Group has been working for some time on this and other technologies and has been able to fine tune particulars along the way in order to improve upon the value added to market players. As a consequence of concentrating exclusively on such intelligent technologies, we have developed a leading role and advantage in providing the market with superior and time sensitive products.

swissQuant is well positioned to experience how technological tools such as the DeriRobo have already helped to move the market forward and to ensure quality and regulatory standards. These tools reduce costs, add transparency and give advisors and investors a better awareness as to how structured products can be used to add value to investment portfolios. We believe this kind of tool will take a leading role in the comprehensive offering for the structured product markets. swissQuant Group works continually to develop technological solutions for the marketplace which undoubtedly spur further growth. It is our commitment to remain in the lead of technological development in the market and lead our clients down the technologically intelligent path to their sustained growth in the future.


Structured products remain a very interesting and valid instrument with which to invest in the financial markets as well as implement investment views. We believe structured products will in the near future become mainstream. We are doing our part by developing the technology which will help to disrupt the current set up and move the market in a new direction.

Legacy systems are slowing down adoption and the technology footprint of the different players is uneven; however, we have a lot of experience with complex integration projects at banks and are confident we can master this challenge together with our clients. We see more and more players making the right decisions around technology and moving to digitize their processes.

Authors: Besnik Jashari (SQG), Philip Johnson (SQG), Nancy Schumann (SQG), Pablo Conde (SRP)

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