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Important Legal Information

This website is operated by Causeway Securities Limited, which is authorised and regulated by the Financial Conduct Authority (FCA), Firm Reference Number: 749440.

By accessing or using this website, you agree to the following terms and conditions.

General Use and Audience

This website is intended to provide general information about Causeway Securities’ products and services. It may be accessed by:

Retail clients

Professional advisers

Institutional investors

However, the content is not tailored to any specific client type and must not be relied upon as financial advice. Users should consult a qualified financial adviser before making investment decisions.

No Advice or Offer

Nothing on this website constitutes:

Investment advice

A personal recommendation

A solicitation or offer to buy or sell any financial instrument

Content is provided for general information purposes only. Decisions made based on this information are solely the responsibility of the user.

Investment Risks

Investing involves risks, including but not limited to:

Loss of capital (you may not get back the amount originally invested)

Counterparty risk (especially for structured products)

Market risk

Liquidity constraints

Early redemption risk

You should read and understand all Key Risks and General Risk Factors related to our structured products before making an investment decision.

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By using this site, you confirm that you:

Accept the Terms of Use

Understand the risks involved in investment products

Will seek independent advice if uncertain about suitability

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Regulatory Status

Causeway Securities Ltd is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom (FRN 749440) and is an authorised financial services provider regulated by the Financial Sector Conduct Authority (FSCA) in South Africa (FSP No. 52397). Causeway Securities Ltd is incorporated in England and Wales (Company No. 0102661) with its registered office at 60 Cannon Street, London, England, EC4N 6NP.

Causeway Securities LLC is a wholly owned subsidiary of Causeway Securities Ltd. It is a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC).
You can review the background of Causeway Securities LLC on the FINRA BrokerCheck website at https://brokercheck.finra.org.

Causeway Securities LLC acts solely as a distributor/selling agent of structured note products. It is not the issuer, underwriter, or guarantor of any investment products and does not provide investment advice or personal recommendations.

Important Legal Information

This website is operated by Causeway Securities Limited (UK FCA-authorised, FRN749440). By accessing or using this website, you agree to the following terms.

General Use and Audience

This website is intended to provide general information about Causeway Securities’ products and services. It may be accessed by:

Retail clients

Professional advisers

Institutional investors

Content is not tailored to your specific circumstances and should not be relied upon as financial advice. You should consult a licensed financial professional before making investment decisions.

No Advice or Offer

Nothing on this website constitutes:

Investment advice

A personal recommendation

An offer or solicitation to buy or sell any security

All content is provided for informational purposes only. You alone are responsible for any investment decisions made based on this information.

Investment Risks

Investing in financial instruments, including structured products, involves risks such as:

Loss of some or all of your principal

Counterparty/credit risk

Market volatility

Liquidity constraints

Early redemption or call risk

Before investing, carefully review and understand all Key Risks and General Risk Factors [link] associated with our structured products.

Data Protection and Privacy

We respect your privacy. Causeway Securities Ltd complies with UK GDPR, the UK Data Protection Act 2018, and other applicable privacy laws. Causeway Securities LLC complies with relevant U.S. federal and state privacy laws, including Regulation S-P.
See our:

Cookie Policy

We do not sell your personal data to third parties. By using this site, you consent to the use of cookies as described in our Cookie Policy.

Terms of Access

By using this site, you confirm that you:

Accept the Terms of Use
Understand the risks involved in investment products
Will seek independent advice if uncertain about suitability

I agree Remember me

Important Legal Information

This website is operated by Causeway Securities Limited, which is authorised and regulated by the Financial Conduct Authority (FCA), Firm Reference Number: 749440.

By accessing or using this website, you agree to the following terms and conditions.

General Use and Audience

This website is intended to provide general information about Causeway Securities’ products and services. It may be accessed by:

Retail clients

Professional advisers

Institutional investors

No Advice or Offer

Nothing on this website constitutes:

Investment advice

A personal recommendation

A solicitation or offer to buy or sell any financial instrument

Content is provided for general information purposes only. Decisions made based on this information are solely the responsibility of the user.

Investment Risks

Investing involves risks, including but not limited to:

Loss of capital (you may not get back the amount originally invested)

Counterparty risk (especially for structured products)

Market risk

Liquidity constraints

Early redemption risk

You should read and understand all Key Risks and General Risk Factors related to our structured products before making an investment decision.

Data Protection and Privacy

We are committed to protecting your privacy and complying with the UK GDPR and Data Protection Act 2018. For more details, see our:

Cookie Policy

We do not sell your data to third parties. By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.

Terms of Access

By using this site, you confirm that you:

Accept the Terms of Use

Understand the risks involved in investment products

Will seek independent advice if uncertain about suitability

You must submit your agreement before access to the site can be granted

I agree Remember me

Cookie policy

The participation rates in structured products have experienced changes in recent months due to a combination of market conditions, interest rate fluctuations, and changes in investor sentiment. One of the key changes we have seen has been elevated market volatility due to economic uncertainties, geopolitical tensions, and fluctuating financial markets. This has led many to question how the participation rate is determined and what causes it to go up or down. In this article, we aim to explain the most common reasons for the participation rate to change.

What is a participation rate and how is it determined?

The participation rate in structured products refers to the percentage of the underlying asset’s performance that the investment will track.

The participation rate is determined by the Issuer of the structured product, usually a bank or financial institution, and is based on several factors, including the desired risk-return profile, the cost of the underlying assets or derivatives used to create the structured product.

The protected note can be decomposed into two key parts 1) a zero-coupon bond that provides the capital protection at maturity and 2) a participation in the growth of the underlying usually obtained by a call option.

The level of participation rate can be influenced by a range of factors including the level of prevailing interest rates, the creditworthiness of the Issuer, the volatility of the underlying assets, and the length of the investment term.

Interest rates

One of the main determining factors driving the protected note terms are interest rates. If interest rates move down, the Issuer must spend more on the capital protection as the zero-coupon bond becomes more expensive and have less money available to buy the participation in the growth of the underlying asset such as a fund or an index. Consequently, this means protected notes will have lower participation rates and the existing notes will become more expensive when interest rates drop (therefore an inverse relationship exists between the two).

Creditworthiness of the Issuer

The creditworthiness of the Issuer of structured products can also impact the participation rate levels. If the Issuer has a strong credit rating the zero-coupon bonds will be more expensive and again less will be available to buy participation in the growth of the underlying asset.

Volatility

Participation is usually obtained by a call option. The call options become more expensive when market volatility increases due to heightened uncertainty of future performance. Underlying assets with higher volatility can move further from their current levels, meaning the positive returns can be greater if the underlying asset’s volatility is high, while in the case of call options and 100% capital protected notes, the losses are limited to zero.

Investment term

In most cases, the longer the investment term the lower the cost of zero-coupon bonds and the higher the cost of call options. Although this relationship is not strictly linear, and the cost of call options tends to increase by less than what can be saved on the zero-coupon bond. This said it can still allow the Issuer to offer a higher participation rate because in relative terms, further away to maturity, the cost of the zero-coupon bonds decreases more compared to the increased cost of the call option, and the Issuer may be able to purchase more participation in the growth of the underlying asset.

What does this all mean in practise?

In the last few months, longer-term interest rates have started to come down as shown on the graph below. In most cases, the longer the investment term the lower the cost of zero-coupon bonds and the higher the cost of call options. Although this relationship is not strictly linear, and the cost of call options tends to increase by less than what can be saved on the zero-coupon bond. This said it can still allow the Issuer to offer a higher participation rate because in relative terms, further away to maturity, the cost of the zero-coupon bonds decreases more compared to the increased cost of the call option, and the Issuer may be able to purchase more participation in the growth of the underlying asset. In most cases, the longer the investment term the lower the cost of zero-coupon bonds and the higher the cost of call options. Although this relationship is not strictly linear, and the cost of call options tends to increase by less than what can be saved on the zero-coupon bond. This said it can still allow the Issuer to offer a higher participation rate because in relative terms, further away to maturity, the cost of the zero-coupon bonds decreases more compared to the increased cost of the call option, and the Issuer may be able to purchase more participation in the growth of the underlying asset.