When it comes to issuing complex investment products like exchange-traded notes (ETNs), it's better to be safe than sorry, says Euronext CEO Stephen Boujnah.
Speaking to CNBC Monday, the chief executive of the near $3.6 trillion pan-European exchange discussed the controversial ETNs that have taken a major hit from market volatility recently, and explained why his exchange planned to be cautious in that area. ETNs are unsecured and low-ranking debt securities issued by an underwriting bank, with no principal protections.
"We are very, very cautious on this front," Boujnah said. "We will probably miss more opportunities than others, but we will make much fewer mistakes," he added.
"That is why when it comes to these particular products, we tend to be extremely cautious and we have a very intense dialogue with regulators to make sure that, at no point of time, our liability can be captured by investors who are finding themselves not properly aware of the products and the risks attached to products."
The CEO was speaking in reference to the high-risk, short-volatility ETNs that saw immense popularity over the last year, as extremely low-volatility market conditions became highly lucrative for those betting on calm market conditions. But while the banks issuing the ETNs outlined that these products were meant for short-term holding by sophisticated investors, the funds and their investors suffered devastating losseswhen market volatility returned with a vengeance during early February's abrupt market sell-off.