FOR A NEW SECURITIES INVESTMENT CULTURE Annual Report 2017 EDITORIAL Thank you … … for the many good wishes that we have Our training and ongoing education initiatives recently received from the financial policy also provide significant added value. spokespersons of the various parliamentary factions, from the chairpersons and presidents However, the central focus of the activities of other associations, as well as from company of our association is and will remain political directors on our ten-year anniversary [see also communications. In this context, we support pages 26 and 27]. We were delighted to receive the numerous regulatory projects of legisla- them, and we are also rather proud of what tive bodies and supervisory authorities at the we, as a young association, have been able national as well as European level. We write to achieve for our members and sponsoring position papers, draw up discussion papers, members, as well as for the many structured state our opinion via the INFORUM informa- Dr Hartmut Knüppel products investors, in the past decade. As tion service and, together with our experts, CEO and Member of the Board of Directors early as 2008, the year of our establishment, engage in technical dialogue with political deci- we launched an extensive transparency initia- sion-makers. As a political interest group, we tive with our members. We were, and still are, are committed to ensuring clear and fair condi- convinced that effective investor protection tions for structured securities for the benefit of hinges on the comprehensibility and transpar- investors. And there is a lot of work still to be ency of the products. done in the coming few years as well. With the introduction of the Derivatives League as a form of product classification, standard- “Transparency is the guiding principle ised terminology, and risk ratings for structured behind all the activities carried out by products, a large number of highly-respected our association.” sector standards have been established. A fur- ther milestone was the introduction of a Fair- ness Code, adopted at the end of 2013, which We are delighted with the interest taken by the has now been further updated. With this code, media, policymakers and many retail investors DDV members have set new standards in terms in the issues that concern us. The year 2017 of product and cost transparency. No other was another eventful one for the association sector is so open in dealings with its clients. and, thanks to the great support of our mem- bers and sponsors, a successful one as well. On Transparency is also the principle on which behalf of the Board of Directors, I would like to our public relations activities are based. This take this opportunity to express my gratitude. applies to our events and the information we provide in equal measure. Thus, the German Berlin and Frankfurt am Main, Germany, Derivatives Day, the DDV Business Journalism March 2018 Award and the Structured Products Breakfast for the staff of political decision-makers in Ber- lin all continue to be extremely popular. The range of information we provide has become more diverse and colourful, both on the website Dr Hartmut Knüppel and in the form of brochures and books. CEO and Member of the Board of Directors Annual Report 2017 | Deutscher Derivate Verband 3 SHAPING OPINIONS The ball is in the politicians’ court: for a new securities investment culture Page 6 Promoting a securities investment culture is an important issue for the future and should be a part of the political agenda AT THE HEART OF THE ACTION 10 years of the DDV: many achievements and much to do Page 22 The DDV reviews a decade of successful activities WORKING TOGETHER German Derivatives Day: with a focus on the Bundestag elections Page 30 The meeting place for issuers, politicians, journalists and academics 4 Annual Report 2017 | Deutscher Derivate Verband Table of contents SHAPING OPINIONS The ball is in the politicians’ court: for a new securities investment culture 6 INFORUM: the key issues in 2017 8 Academic study I: the benefits of Discount Certificates 9 Academic study II: total costs of structured products investment 10 Paradigm shift for investor protection: Are product bans really necessary? 12 MiFID II: 20,000 pages of transparency and investor protection 14 PRIIPs: from theory to practice 15 New prospectus law: a lot of work without much impact 16 Taxation: a glimmer of hope 17 The voice of the structured products sector in Europe: EUSIPA − the European umbrella association 18 European regulation: New standards for securities supervision? 21 AT THE HEART OF THE ACTION 10 years of the DDV 22 WORKING TOGETHER The German Derivatives Day 2017 30 Off the record: sustainability is en vogue 32 The DDV Business Journalism Award: complex topics presented simply 33 WORKING TOGETHER MEDIA Association communications: no securities investment culture without lobbying 34 German Derivatives Day: DDV projects: knowledge sharing as a priority 36 with a focus on the Bundestag elections MARKET Page 30 The structured products market in 2017: facts and figures 38 MANAGEMENT The DDV at work: organisation, committees, executives and staff 44 Members 50 Sponsoring members 51 Publishing information 51 Annual Report 2017 | Deutscher Derivate Verband 5 SHAPING OPINIONS AT THE HEART OF THE ACTION WORKING TOGETHER MEDIA The ball is in the politicians’ court: for a new securities investment culture The Germans play a leading role in a number of sectors. Does this also apply to financial investments? Far from it! Most Germans love their piggy banks and stashing their money away under their mattresses or in current accounts and instant access savings accounts – and this at a time when interest rates are virtually zero, inflation is increasing and pension outlooks are not exactly rosy. Promoting a securities investment culture in Germany is thus an important issue for the future that politicians must address at long last. You have to give it to the Germans, they are undoubtedly − in addition to politicians − companies, associations and world champion savers. While they put aside an impressive the media can also play an important part in improving the 200 billion euros from their regular income in 2016, a total of financial education of the German public. only 250 billion euros were saved in the rest of the eurozone put together. In 2017, private monetary assets in Germany Political action needed continued to rise – by 5.2 percent, to a record level of 6.1 In the context of the securities investment culture, what trillion euros. A very good result, at least at first glance. But areas now need to see political action? Firstly, all the meas- if one takes a closer look, the picture is no longer so clear. ures that have been taken in the name of investor protec- tion should be put to the test. The following questions are amongst those that have to be answered: Will investors not Piggy bank vs securities only be protected from potentially dubious investments but What do Germans do with their savings? This is where the also be deterred from making sensible ones? What type of bad news starts. They hoard approximately a quarter of the individual is the state intervention based on: The investor monetary assets in cash, or in current accounts and instant who is capable of making an informed investment decision access savings accounts for which they get only an extremely or homo demens? And finally, where is state intervention small amount of interest or no interest at all. Just 14 percent needed to protect particular groups, and where does the of Germans invest their money in equities, equity funds and state limit the scope of individual decision-making and free- structured products, enabling them to generate two-digit dom of choice unduly, even becoming intrusive? returns in some cases last year. In contrast, savers who did not have any securities in their portfolio lost 38 billion euros Minimising information asymmetries in order that investors in real terms. As such, Germans do not get their money to and providers of financial products are on an equal foot- work for them; instead they work for their money and just ing is undoubtedly the right approach. Furthermore, it is look on as the value of their savings falls day after day. not only expedient to apply quality standards to financial products but also to information about these products. To The unwillingness to invest in securities also widens the dis- achieve this, formal reporting requirements are needed. But parity between the wealth of different groups within society. is this really necessary to this extent in securities advisory This is because it hardly affects the people at the top end of services, and can there really be no exceptions for self-di- the salary range at all. It applies to a much greater extent to rected investors? Investors and, in particular, self-directed those who do not have any money to give away - not now, investors who are willing to take greater risks for the chance and definitely not when they are old. And once again, the to receive higher returns are often not treated with appro- mattress and the piggy bank are not the solution but the priate respect. problem itself. A part of the solution is education and more education, which should be provided at an early age. This is However, political action is also needed with respect to the one of the reasons why we have been calling for Economics tax conditions. These must be made more investor-friendly. as a subject in schools for a number of years. Furthermore Within certain limits, support for asset accumulation may be 6 Annual Report 2017 | Deutscher Derivate Verband MARKET MANAGEMENT “ The piggy bank has had its day.