Concerns over conflict of interest in large structured product hedges
Taking an average reading from several strike dates could help avoid a potential conflict of interest where UK traders put on multi-million-pound hedges that can move the level of a structured product's underlying before it strikes, says industry source
Bank traders hedging their structured product exposure have the capability to move the level of the underlying stocks or index by placing hundreds of millions of pounds worth of options trades just before a structured product strikes.
It is a conflict of interest that has not necessarily been addressed by the UK's financial regulator, the Financial Conduct Authority (FCA), says Andrew Brogden, co-founder of financial services and product provider Econumy in London. "I'm not sure this is
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