A NEW BEGINING.
The exchange has undergone many incarnations but Christian Katz, CEO, SIX Swiss Exchange, explains why the group is now in a better position to compete in today’s challenging marketplace.
There have been a lot of changes over the past year so where do you see the SIX Swiss Exchange today?
Effective 1 January 2008, the SIX Swiss Exchange merged with SIS, the Swiss clearing and settlement house and Telekurs, the financial data and payment transaction company to form SIX Group. We also co-own the derivatives exchange Eurex, Scoach (Europe’s leading exchange for structured products) and STOXX together with Deutsche Börse. This makes our exchange part of a diversified, full service financial infrastructure company with a unique business model.
Our exchange offers the listing and trading of a wide range of securities including equities, fixed income, exchange traded funds and structured products (traded on Scoach). During 2009 we repatriated trading from London back to Zurich and introduced an innovative and technologically advanced new platform called ‘SWXess’ which is up to 100 times faster than our old platform. We are, moreover, about to introduce a new rulebook with lower capital requirements for market participants.
I think one of our biggest challenges is to solidify our new branding and make the market realize how much of a more versatile company we have become. It has been quite a step to move from a medium sized exchange to be at the core of a large group with over 3500 employees. We are currently integrating two companies in Luxemburg and Austria respectively, following their acquisition by SIX Group. Once finished SIX Group will have just under 4000 employees.
We believe that we are in the unique position of being based in the home of the world’s largest offshore money management centre. The composition of domestic and international end investors is absolutely unique. Switzerland is also an attractive location due to its low taxes, highly educated workforce and position within Europe, while having the benefit of not being part of the European Union.
What are your plans for the exchange?
We have strategies to expand and develop each of our business segments. On the trading side, we at SIX Swiss Exchange aim to reduce costs, improve latency and further enhance our technology. We just changed our fee structure for the blue chip segment as of December 1. The fixed fee is being reduced or abolished for those that have high transaction volumes. Fees for auctions will be harmonised. Alongside we introduced more detailed information and raised the depth of our order book from 10 bids and offers to 30.
On the listing side, we are looking to encourage more companies to list on the back of our client orientation, price, innovation and quality of service. At the same time, we are hoping to diversify our flow and attract a wider diversity of participants. There has been a great deal of press about our targeting high frequency traders and while we see them as an important segment, we are looking at the whole range of possible clients.
We also recently decided to switch ‘Swiss Block’ – the non-displayed liquidity service for Swiss blue-chip equities – to the SmartPool platform – set up by NYSE Euronext and leading investment banks – following the closure of the Nyfix Euro Millennium platform by its new owner, NYSE Technologies. We believe this adds another leg to our offering as a leading international trading venue.
What other new products have you launched?
This past September we launched a new service for collateralised structured products that aims to minimise issuer risk by means of collateral security. Many people who bought structured products on the derivatives exchanges lost money when Lehman Brothers collapsed. As a result we implemented a service for collateral-secured instruments or “COSI” products. In that they can now be listed on our exchange and traded on Scoach Switzerland (a joint venture between SIX Group and Deutsche Börse). Collateral for these instruments is placed with our sister company SIX x-clear, which means that investors are covered should an issuer become insolvent.
What about the deal with STOXX?
In November, we along with Deutsche Börse bought out the 33.3% stake of STOXX (a stock index business) from Dow Jones. The acquisition complements our SMI family of indices but overall we think there are great opportunities for developing this business. So far STOXX was focussed on European equities indexes but we plan to proceed with a geographical and product-driven expansion as well as strengthen our market position in the ETF and derivatives space.
We have also expanded the services of CONNEXOR our web-based reference data infrastructure. Our new platform allows issuers to compile their reference data centrally in a standardised form and then have it disseminated electronically to all stakeholder groups. It is not only more cost effective but investors and users have real-time access to a vast store of reference data, which makes it easier for them to compare the different financial products.
In terms of industry trends, what issues do you expect MiFID to be tackling?
We have a large national and international membership and as a result of that we have to be compliant with MiFID rules on trading even though we are based outside the European Union. In the field of issuer regulation we do have, however, the option to follow our own regulatory path. In general, I do not think MiFID has created a level playing field. For example, the dark pools and crossing networks of investment banks may be functioning like an exchange or MTF but they are not subject to the same rules on pricing and reporting of trades. Even when exchanges get a waiver to operate a dark pool, MiFID rules require them to report trades right after they are executed and set prices at the mid-point between bid and ask at that moment.
What do you think the future will hold for MTFs?
The market will evolve and some MTFs will survive in one form or the other. They are competitors that we have to deal with but whether they eventually become like stock exchanges, only time will tell. I do not think that the European trading structure though will develop in the same way as the US. I use the airline industry to illustrate that in the US there are many sustainable budget airlines, but that is not the case in Europe. The national carriers still dominate and there are only really one or two low cost carriers that have had success.[BIOGRAPHY] Christian Katz is chief executive officer of the cash markets division of SIX Group as well as SIX Swiss Exchange. He also on sits on the group executive board of SIX Group. Previously, Katz was responsible for the equities division of Goldman Sachs in Zurich and before then, he worked for eight years at J.P. Morgan Chase in London, first as country head, equities sales for Switzerland, and subsequently as head of research marketing for Europe. Katz also worked at the London Forfaiting Company and at SBC Warburg. Katz graduated in business studies and finance from the University of St. Gallen and went on to gain a doctorate in economics. ©BestExecution