Cross-products find their feet

The concept has also entered into a new phase, he said. Traditionally defined as a product with more than one underlying risk type, more recently cross-product trading is about repackaging traditional FX products to new audiences, he said.

One recent hybrid solution Deutsche Bank offered was for a UK corporate with a US subsidiary. The parent wanted to reduce earnings volatility, but under accounting regulations could not use earnings to hedge its long dollars position. The solution, said Desselberger, was to get the US subsidiary to enter into a strip of forward contracts to purchase sterling denominated bonds for a fixed US dollar price. "It’s a special accounting treatment that means it doesn’t have to be marked to market," explained Desselberger.

Investors have different problems. One pension fund client liked the risk-return profile of an FX transaction, but under its mandate could not enter into an over-the-counter transaction. Deutsche Bank repackaged that FX view into note form, enabling the fund manager to buy it.