Johannesburg — Richard Swain is modest. "I'm no financial whiz," he says, having just explained derivatives, warrants and complicated instruments better than any financial dictionary I've ever consulted. Swain is only 33. It hurts a little that he is younger than me. Most of the people I interview take longer to achieve recognition in their fields. But Swain was snapped up by Investec a year ago. He is responsible for the bank's equity derivatives division and, with strong marketing and sales, Investec's offerings in the market have a higher profile than those of any other bank.

We meet at Allora in Sandton. It is nestled just behind the JSE. The day is sweltering -- my car's thermometer says it is 37°C. Part of me wishes we had conducted our interview in the Melrose Arch pool -- the one where you sit at a table with your feet dangling in the water.

But Allora is stylish. Among the crowd, I spot an advocate, people from the JSE, Datatec CE Jens Montanana and others. Allora is evidently going places. Just a few weeks back the mayor of Ekurhuleni, Duma Nkosi, met me at Allora's sister restaurant in Bedford Centre. The menu is extensive, with a Mediterranean influence dominating.

Swain is drinking red Grapetiser and he orders a rare tuna steak with soy sauce on the side. I opt for the chicken with prosciutto and sage.

A University of Cape Town graduate, Swain cut his teeth on derivatives at Merrill Lynch's London office. His knowledge of the market is broad. At first we chat about weather derivatives.

For those who experience a chill when they come across heavy financial lingo, a derivative is merely a financial instrument, such as a future or an option, based on underlying cash assets. And a future is an undertaking to buy or sell a standard quantity of a certain asset at a future date and a fixed price.

So you can literally bet (this is a word traders hate, but betting is the reality of markets) on anything that may happen in the future, such as the weather.

Weather is not traded in SA although some items, like the price of maize futures, are heavily dependent on whether or not it rains at the right time for the maize crop.

Swain explains that in the US or the UK, restaurants with outdoor seating can buy options on how much it may or may not rain in summer. If the restaurant thought it was going to be a wet summer it would buy options to hedge against its expected fall-off in turnover, and vice-versa. Forecast correctly, the restaurant could break even or even make a profit on its outside tables. Futures are like insurance.

Swain used to be at Absa. His byline would appear in Business Day when he wrote updates on the warrants market, but he says Investec has given him more leeway to launch products. He is having fun -- with the equity derivatives team he has been able to bring a number of products that have done well offshore.

Some people in the financial industry use their knowledge as a weapon -- not so with Swain. He has always come across as a genuinely nice guy. His wife and daughter and his folks are always part of his conversation. Having been brought up in Cape Town and being a fan of outdoor sports, he reckons Johannesburg will not suit him forever.

With his background, he could look for a job in asset management or hedge funds if he had to return to the mountain.

But until then he is likely to be introducing all manner of new financial products to the local market. The cool thing about the instruments Swain has listed is that they are not only the preserve of large institutions. Regular individuals can take them up.

Of course, he says, listing products on the JSE is "notoriously expensive" and the bond exchange would be cheaper, but instruments need to go where the market is.

He is also not sold on the JSE's social responsibility index, which seeks to rank companies in terms of environmental and social, as well as financial, performance. His clinical view of the market is a good reminder of the way the financial world works -- it is all about product and price.

For institutions and individuals, Swain's team offers equity derivatives based on listed property stocks as well as "enhanced dividend securities" (EDS) and more. Investec launched its first EDS instrument a couple of years ago but trade has more than quadrupled in the past year or so.

How do they work? Swain thrusts a bunch of brochures across the table towards me. Company A, which is listed, has a share price of R100. Investec buys shares at R100 a share in the open market. Investec then creates and lists a derivative product in these shares offering traders the right to buy company A's shares through Investec at R55 a share -- R50 for the share and R5 for the use of Investec funding. If company A's share rises by R1 overnight to R101, the enhanced dividend securities' value rises from R55 to R56. In other words, every move that the share makes, up or down, is almost twice as big for the investor. So, if the underlying share rises R1 to R101, or 1%, the derived security also rises R1 to R56 -- almost a 2% gain. This gain is known as leverage, or gearing.

Another benefit of enhanced dividend securities is that if company A issues a dividend of R10, the dividend goes tax-free to the individual investor, which means the derivative that originally cost R55 would now cost R45.

The food arrives. Swain's tuna is suitably raw, although the waitress forgets his soy sauce. My chicken seems a bit bland so I ask for chilli to spice it up.

As we eat, the sun seems to beat down even harder. We talk of cold beers and air conditioning. Unfortunately, with work awaiting us both, it remains just talk.

With the recent success of EDS -- trade quadrupled between 2005 and 2006 -- Investec has introduced two new products based on the same idea. One, known as "Hot EDS", offers the investor even more gearing. Again, it relies on the market rising. If the market were to fall, it offers more downside risk than the first EDS product. In a rising market, the downside risk is not too much of a worry, but Swain says he is nervous about the market.

"It has risen too much too fast," he says about the gains made in October -- the JSE's all share index rose more than 4% in just one month.

But Swain's reverse EDS product has just the remedy. In SA, investors are not allowed to short the market -- to bet on a fall in prices -- unless they are hedge funds. A hedge fund would typically borrow shares from a treasury such as Eskom's and sell them in the market because the fund thought the share was overvalued and the price would fall.

So, say the hedge fund borrows and then sells 100 shares in MTN at R60 a share. The hedge fund would make R6000. If the hedge fund was correct about MTN's share and it soon fell to R50, it could buy back the 100 shares at R50 for a total of R5000. The R1000 difference, less any costs, would be the hedge fund's profit.

The hedge fund would also still have an obligation to return the same number of shares to Eskom.

While the reverse EDS instrument does not short the market in this way, it takes the view that the market is going to fall and allows an investor to trade on the all share index, losing rather than gaining value.

Swain says this instrument was launched before October -- the month in which markets always fall, due perhaps to some sort of hangover from the crashes of 1929 and 1987. If this were a typical October, these securities could have gained value, but -- unfortunately for some -- October this year has been an extraordinarily positive month. Swain is not the only financial guru to have expressed concern at this sudden fillip.

But for investors nervous about the markets right now, the reverse offering is a new way of hedging their other plays that have been forced into a one-way bet upwards.

After the meal, neither of us opts for coffee, as it is just too hot. Lunch is quick because Swain needs to get back to his office to monitor the news from Finance Minister Trevor Manuel's mini- budget.

He watches for which stocks react to the news. He says any big announcements on infrastructure spending would make construction stocks the ones to watch. With Manuel saying the treasury is planning to spend a total of R15,1bn on preparations for 2010, the construction sector does indeed make gains.

When I ask Swain what else Investec may be about to launch, he doesn't reveal anything.

It is evident, however, that there are more tricks up his sleeve; more instruments he would like to hone for the local market.