Title: Global Equity Finance Daiwa Capital Markets Europe Limited
1Global Equity Finance
Daiwa Capital Markets Europe Limited
2Daiwa as a Counterparty
3Daiwa Capital Markets Europe Limited
- Market cap.1 5.5 bln
- Group 16,217 Employees
- Network of 117 sales offices
- Total retail asset under management approx.
worth 524.4 bln
Long established European presence approx 1000
staff Backed by Japans 2nd largest banking
group One of two dominant retail distribution
networks in Japan
Global Equity Finance
Note 1. Market Cap. as of 03/03/11
4Who We Are
5Who We Are Daiwa Capital Markets Europe Limited
The Parent Company of Daiwa Capital Markets
Europe Ltd
The Daiwa Securities Group
- One of Japans largest financial groups
- Operating businesses in both domestic and all
other major financial markets around the world - Established in 1999 as the first holding company
structure created by a listed company in Japan - CDS spread tighter than the majority of Global
broker dealers - Tier 1 Common Ratio(2) of 28
- No exposure to US Subprime mortgages
- Benefits from having a strong securities house
(Daiwa) as parent company - Does not hold Big positions on Balance Sheet
-
- www.daiwa-grp.jp/ir/english
6Our Global Network
30 offices around the Globe
Key regional offices Daiwa Capital Markets offices
7TRS Portfolio Swap Synthetic PB
8Synthetic Prime Broker EPSILON
Flexible, Multi-Asset Global Swap Platform
Bespoke Investment Strategy Operational
Environment
- Long Short positions in same swap
- Electronic trade confirmation
- Choice of Preferred Benchmark for financing
- Flexible Close-out options (LIFO,FIFO,HICO, etc)
- Ability to finance as Total Return of Portfolio
swap style
- Financing Multiple assets within one swap (e.g.
Equities, CBs, ETFs, Sectors, Indices, Pfds,
Corp Bonds, Futures, Straight Bonds) - Execution across all markets that Daiwa have a
footprint in - Adjustment to long / short positions can be made
within the swap on a daily basis - Efficient Capital usage through cross margining
of all products within the swap - Full client service team of dedicated swap
specialists -
9Synthetic Prime Brokerage Asset Class Coverage
Asset Class Coverage
Global equities
Indices
Convertibles bonds
Sectors
ADRs / GDRs
Listed certificates
ETFs
Equity linked notes
Futures
Corporate Bonds
Pending Q4 2011 - Options
10Synthetic Prime Brokerage Market Coverage
Daiwa offers Synthetic Prime Brokerage in both
Non Emerging and Emerging Market countries.
Equity Swap/ P Notes in 41 Global Markets
EMEA
Asia
Americas
Other
- Australia
- China
- Hong Kong
- Japan
- New Zealand
- Singapore
- India
- Indonesia
- Korea
- Malaysia
- Phillipines
- Taiwan
- Thailand
- Vietnam
- Austria
- Belgium
- Denmark
- Finland
- France
- Germany
- Greece
- Ireland
- Israel
- Italy
- Poland
- Luxembourg
- Netherland
- Norway
- Portugal
- Spain
- Sweden
- Switzerland
- Turkey
- UK
- Hungary
- Russia (Micex)
- United States
- Canada
- Mexico
- Brazil (Pending)
11Swap Benefits
- Efficient access to emerging markets
- Negates the need for FII/QFI status
- Avoids costly/complicated local clearing networks
- Avoids local compliance and regulatory
requirements
Leverage
Leverage
Market Access
- Trading Taxes (e.g. UK Stamp tax)
- Withholding tax efficiencies
- Capital Gains Tax
Access
Fiscal
Operational
- Exposure without the operational burden of
multiple underlying positions - Easier Corporate Action process
12Transaction Flow
Order Capture
Execution
Confirmation
Reporting
FIX
Contract Note
Cash Execution
DMA
Client
Phone
Web Portal
TRS
Algo
FTP
Portfolio Swap
Care Orders
MBA/Traiana Traiana Harmony
External Broker
Give up brokers can be added if not already
signed
13Equity Finance Benefits Over Direct Access
-
- Access to restricted markets where direct access
is not available - Better liquidity than ADR/GDR market
- No repatriation restrictions no minimum
commitment - P-Notes are denominated in USD, thus making it
easier for valuation purposes - No arduous process of applying and setting up
local IDs before trading - Can deal instantly during Asia market hours
- If trading on P-Notes, only Daiwa cash account is
needed - No legal documentation is necessary when trading
P-Notes - Total transparency all of the P-Notes are listed
in Daiwas Bloomberg Page DGEF ltgogt with real
time prices - No annual fees
- If trading on P-notes, only a Daiwa Cash
account and a signed Purchase Letter is needed
14 Daiwas Asian Equity Finance Products
- Exclusive Inventory in
- Hong Kong, Taiwan, Korea, Singapore
- Malaysia, Indonesia, Australia
- Lending Desk for Asia Ex-Japan
- Stocks loaned synthetically through short equity
swaps - Competitive rates on GC and hard to locate names,
and can put-thru for clients - Single point of coverage for all Asia Ex-Japan
inventory -
Bloomberg page DGEFltGOgt
Issuance Entity
Daiwa Capital Markets Europe (Baa2/BBB)
Listing Exchange
Luxembourg Exchange
Dividend Treatment
All dividends are passed to the P-Note holders
net of withholding taxes
Currency
All P-Notes are denominated in USD
Tenor
5 years, upon expiry it can be rolled into a new
note free of charge
Settlement
Euroclear settlement for all P-Note trades
Valuation
Unique ISIN number is assigned to all P-Notes and
can be checked on Bloomberg
15Daiwa Asian Market Access
Delta-One Products
- INDIA
- Investment in local shares via our tax efficient
Market Access products - No FII needed no Mauritius entity needed
- Non-transferrable P-Notes
- Daiwa Listed Certificates/P-Notes (fully funded
and listed n Luxembourg Exchange) - Long or Short Equity Swaps (OTC)
- Synthetic Prime Brokerage
- TAIWAN
- Not all funds or portfolios under management have
QFII/FINI - Some Funds can not purchase Taiwan OTC stocks
- Daiwas JV with Cathay for exclusive supply axe
- KOREA
- Not all funds or portfolios under management have
local IDs or are restricted on buying stocks
listed on KOSDAQ or at their foreign ownership
limit. - Access to exclusive local lenders via Daiwas
domestic relationship
- CHINA
- Investment in the Chinese market can only be done
by registered Qualified Foreign Institution
Investors (QFIIs) - QFII status has been granted to a number of
investors
- VIETNAM
- Difficult registration and custody set up
- Settlement risks with Vietnamese brokers
- Currency control
16Indicative Asia Execution Commission Table
17Securities Lending
18Short Coverage
- Our trading desks are situated in London, Tokyo,
Hong Kong New York - Our traders are at hand to approve locates and
offer market colour - Daiwa is an independent entity and as such we are
not tied to a single source of supply
Breadth Stability of Supply
Daiwa Securities
Retail Network
Exchange Supply
In-House Supply
Exclusives
Principal Lenders
Agent Lenders
Global Custodians
Brokers
Market Specific Liquidity
19Equity Finance Global Inventory
Seamless Global Coverage Model
- Access to 3 trillion of Global Securities
Lending Inventory - Securities Lending capabilities in 38 Global
Markets
London
Tokyo
New York
Hong Kong
20Asian Inventory
Korea
Japan
- Direct Lending relationship with 5 onshore
Lenders - Access to Daiwas Exclusive Korean Inventory
- Access to 50 Bln in sec lending supply with
10 Bln of exclusives - Access to Daiwas retail Box
Taiwan
- JV with Cathay Financial
- Direct Lending relationships with
- 9 onshore Lenders, other pending
Hong Kong
- Strategic lender relationships to gain access to
special allocations. - Access to Daiwas Exclusive HK Long Inventory
Singapore
- 6 Domestic lenders signed with 3 more in the
pipeline
Australia
- Build strategic lender relationships to gain
access to special allocations.
NB Short Selling not allowed in China and India
21Margin
22Syncova Optima Dynamic Margin Calculation
Solution
Overview of Risk Margin/Haircut Setting Process
Credit Risk Department
Front Office Risk Management
Risk Limits (PCE CCE)
Static Margin Grid
Single Name
Internal Credit Rating
Margin Rules
Tiering
DynamicMargin
Portfolio
Single name margin is set on a series of grids
defined by client rating and asset.
Single Name Margin
- Daiwa uses Optima Syncova for portfolio margin
and offers - Fully optimised cross asset margin (All positions
assigned to best hedge strategy for optimal
margin requirement) - Easy to maintain rules with overrides for
specific transactions - Flexible account hierarchy, legal entity, trading
account, consolidated account - System margin reconciliation with clients using
Optima Hedge
Portfolio Margin
23Convertible Bonds
24Convertible Bonds Definition
A convertible bond is a blend of straight equity
and debt characteristics
- Convertible Bonds are fixed income securities
that may be exchanged for a fixed number of
shares at the option of the Bondholder - The embedded option allows conversion at a price
that is fixed on the date of issue - Typically the underlying shares of the of the
Issuer are listed on a recognized stock exchange - An exchangeable bond is similar to a convertible
with the difference that the bond can be
exchanged into shares other than the issuers
Debt
Equity Option
- Fixed conversion price, at premium to initial
share price - Fixed number of shares
- Conversion into shares during life(American)
- Embedded equity option subsidises coupon/yield
- Principle repayment in future
- Periodic coupon payments
- Priced as percentage of par
- Can be callable/puttable
25Daiwa Capital Markets Global Convertible Bonds
Leading global specialist in convertible bonds
Team
- 28 dedicated front office professionals
consisting of 12 traders, 12 sales persons and 4
analysts - Based in Hong Kong, London and New York
- Highly rated experienced team with 17
un-interrupted years in business - Specialist Data, Systems, Back Office and other
support personnel
Client Offering
- Leading global convertible bond specialist in
convertible bonds with unique approach to product
- One of the largest dedicated convertible sales
force with most extensive distribution channels - One of the largest market makers covering over
800 convertibles globally - Insight - The industries leading specialist CB
trading, risk, analysis and data system, with 6
dedicated developers.
Part of Daiwa Capital Markets
- Complimentary product skill set supports
significant expansion of Daiwa Capital Markets
global investment banking in Asia - Objective to become a top rated CB new issue
franchise in region - Research coverage of 390 Japanese and 458 Asia
ex-Japan Equities - Synthetic Prime Brokerage and Stock lending
facilities
Daiwa acquired the Global Convertible Bond
activities of KBC in 2010
26Daiwa Capital Markets Global Convertible Bonds
Leading global specialist in convertible bonds
One of the largest convertible sales force in the
market
- 17 years experience
- Dedicated product approach
- Sales to European, US and Asian investors
- Over 350 clients in 27 countries
- Leading global specialist in convertible bonds
- Unique investor coverage
- Extensive distribution channels
- Track record of successful fund raisings
Global turnover (USD Bln)
One of the largest global market makers
- Leading secondary market share
- Extensive coverage after-market support
- Market intelligence supports accurate pricing
- Av. global turnover USD 86bln p.a.
- Make prices in over 800 convertibles
- Comprehensive data analytical platform
- Act as principal with idea driven strategy
towards clients
27Execution Capabilities
28Daiwa Group - Global Execution Research
Direct Exchange Membership
Execution
Global Sales Network
- Agency
- Risk
- Block
- Direct Market Access (DMA)
- FIX
- Algorithmic
- Portfolio Trading OMS, EMS, Network Partners
- Smart Order Routing
- Dark Pools
- Representations in 30 offices globally
- Covering all major financial locations
- 300 stocks (expanding)
- Multiple industry awards
- 9 Exchange Memberships across Asia
- UK
- US (NYSE, NASDAQ, and Regional)
Global Trading Services
- All major financial locations
- 40 Countries
- America (4)
- Europe (22)
- Asia (14)
- Japan
- Major clearing systems
Korea
China
Japan
Hong Kong
Taiwan
India
Philippines
Global Research Product
Trade Analytics
Singapore
- Over 200 people
- Covering 15 Countries
- 300 stocks (expanding)
- Multiple industry awards
- Quant Research Team
- Pre-trade Post-trade
- Client Reporting
Australia
29Global Program Trading
Daiwa Global Programs Trading Raise your
standard on the next program trade
- Daiwas global portfolio trading platform offers
comprehensive Agency and Principal executions in
global markets. Regional specialists deliver high
touch global trading services with access to a
vast liquidity pool - Global Depth
- Combining global trading desk expertise with
technology to achieve clients execution
objectives - Exchange memberships globally in most all major
markets across Asia, Europe and the Americas - Aggressive Pricing Capital Commitment
- Competitive pricing on Agency portfolio trades by
leveraging our own broker network - Willing to commit Capital to facilitate customer
transactions - Technology Dedication
- Comprehensive and Customized Pre-trade and
Post-trade Analytics - Connectivity to all major OMS, EMS and network
vendors - Dedicated global 24/7 sales trading, operations
and IT support - Enhanced Liquidity
- Daiwa Securities Electronic Trading (DSET) DMA
Algorithmic Trading and Smart Order Routing - Consistent top 2 market share in Japan
- DRECT (Daiwa Routing and Execution Crossing
Technology)
30DSET Daiwa Securities Electronic Trading
DSET Empowering you Empowering you to capture
trading alpha in todays ever changing market
place. Delivering optimal trading performance in
global markets from a robust, purpose-built
platform
- Leveraging Daiwas global network to get access
to local expertise and highly experienced sales
and trading teams - Pan-Asian market access too all
electronic-trading enabled markets from New
Zealand to India - Full compatibility and integration with various
versions of FIX and vendor/proprietary EMS/OMS
platforms - High availability and robust failover systems
ensure reliable operation
DSET innovative product offering
- DRECT Daiwa Routing Execution and Crossing
Technology providing access to unique liquidity
and access to all possible execution venues - FMA Daiwa Fast Market Access providing
extremely low-latency co-location setup for
high-frequency strategies - DART Daiwa AlgoRithmic Trading providing
comprehensive suite of advanced trading
strategies designed specifically for Asian markets
31DSET unique offering
DART Daiwa AlgoRithmic Trading
DRECT Daiwa Routing Execution Crossing
Technology
- Provides unique crossing opportunity to reduce
market impact opportunity cost - Aggregated liquidity from institutional and
retail business - New order types such as Pegged, FoK, IOC,
Resident orders etc - Intra-day continuous, pre-open and after-close
crossing - Advanced SOR strategies such as Static Sweep,
Dynamic Sweep, Dynamic Split etc - Access to multiple execution venue through one
source
- VWAP
- POV
- TWAP
- PEGGING
- ACTIVE
- FLEX VOL PARTICIPATION (AEJ)
- OPPORTUNISTIC (AEJ)
- SNIPER (Japan)
- ICEBERG (Japan)
- AGGRESSIVE SHORTSELL (Japan)
32DSET Current Product Offerings in Asia
33Sign-on Process
34Sign On Process
1
Business discussion, general agreement of
financial terms
2
Daiwa credit due diligence visit
3
Margin terms agreed
4
Legal documentation negotiation (client product
elections)
5
Introduction to Daiwa coverage (front to back)
6
Transition, connectivity testing
7
Go live
35Disclaimer
This presentation has been issued or approved by
Daiwa Capital Markets Europe Limited ("DCME") in
order to promote its investment services. DCME is
registered in England (registered number
01487359). The registered office is at 5 King
William Street, London EC4N 7AX. DCME is
authorised and regulated by The Financial
Services Authority and is a member of the London
Stock Exchange, Chi-X, NYSE Liffe and Eurex. This
publication is intended for investors who are not
Retail Clients in the United Kingdom within the
meaning of the Rules of the FSA and should not
therefore be distributed to such Retail Clients
in the United Kingdom. The information contained
in this document does not constitute the
provision of investment advice and it is not to
be construed as an offer to buy or sell or a
solicitation of an offer to buy or sell any
financial instruments or to participate in any
particular trading strategy in any jurisdiction
or as an advertisement of any financial
instruments. The information herein is believed
by DCME to be reliable and has been obtained from
public sources believed to be reliable. With the
exception of information about DCME, DCME makes
no representation as to the accuracy or
completeness of such information. DCME and/or
connected persons may, as principal or as agent,
from time to time make purchases, sales and/or
offers to purchase and/or sell, in the open
market or otherwise, the investments mentioned
herein or related investments and/or may have a
position or holding in such investments as a
result of engaging in such transactions. Any
information to which no source has been
attributed should be taken as an estimate by
DCME.