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The Trade Lifecycle: Behind the Scenes of the Trading Process by Robert Baker

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17
New Products
Trading is continually evolving in the financial industry. An organisation must be able to keep up and in order to do so must have procedures for transacting new products. By new products we mean new trading types or new asset classes; not transacting more of existing trade types.

17.1 ORIGIN OF NEW PRODUCTS

The desire to transact new products might come about for a variety of reasons.
Opportunities: traders and structurers are always seeking ways of making money. Sometimes they or someone else in a financial entity may spot a new opportunity. This could be through a modification to an existing trade or a completely new type of trade.
As the world of commerce evolves, so does the financial industry serving it. For example the new breed of weather derivatives has arisen recently to fulfil a need to insure against adverse weather.
As trading matures in any existing area, the market becomes well understood and well populated leading to a reduction in profit making opportunities. This sometimes has the effect of pushing businesses to look for greener pastures.
People joining the organisation: it may seem a cliché but the biggest asset of a financial entity is its staff. Being a service industry with very little physical infrastructure such as plants and machinery, a finance house distinguishes itself from its peers by the skills and application of its employees.
To grow a new business area staff with specialist skills are often deliberately targeted from outside. ...

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