Under Pressure: The Future of Switzerland as a Trading Center


Under Pressure: The Future of Switzerland as a Trading Center

Technological progress has allowed for global trade to accelerate immensely since the 1950s and came to an abrupt stop in 2008. Two new trends emerged: The global economic focal point moved toward the East and the importance of industry sectors changed. Technology companies dictate nowadays how the world operates. Read the article by SIX CFO Daniel Schmucki on how Switzerland and SIX react to these developments.

In times of repeated disputes between the world’s largest economies USA and China, a seemingly ever-lasting Brexit as well as lingering tensions in Iran, world trade has been facing increasing uncertainty. Yet, such events tend to have temporarily limited impacts on trade activities. In comparison, processes such as globalization, technological progress and digitalization have much longer lasting effects on global trade. Naturally, these trends also exert pressure on traditional trading centers all around the world. This bears the question as to what effects they will have on Switzerland, which has profited immensely from rapidly growing world trade in the past. And furthermore, what are our measures at SIX to help ensure the country’s competitiveness?

A Geographical Shift and the Rise of a New Asset
Technological progress has allowed for global trade to accelerate immensely since the 1950s. Similarly, liberalization and new ways of financing enabled an exponential increase in global investments and money lending. Both examples go hand in hand with decreasing transaction costs – a development that has also been facilitated by the technological advances made by stock exchanges such as SIX. However, the fairytale of global trade and ever-increasing international capital flows came to an abrupt stop in 2008. During the recovery in the past decade, two new trends emerged: Firstly, global share of market capitalization in Asia has been increasing consistently in the last two decades, shifting the global economic focal point toward the East. Secondly, we have seen a significant change in the importance of industry sectors. Looking at the market capitalization share, the previously dominating energy sector has been marginalized in recent years. Nowadays, technology companies such as Microsoft, Apple, Amazon and Alphabet are dominating the market and dictate how the world operates. At the core of their businesses lies a relatively new asset: data. Today, it can easily be argued that data has successfully replaced oil as the most valuable resource. As such, both of the mentioned trends bear new challenges for established trading places like Switzerland.

Switzerland in a Unique Position as Trusted Partner
At first glance, it might seem questionable whether tradition-based Switzerland is ready or even capable of meeting these challenges. However, traditional and stable must not be confused with slow and rigid. Instead, I would argue that the country is in perfect position to address the upcoming challenges in a digitalized world. The reason for this is its unique reputation as trusted partner. This is an asset that will likely prove to remain as invaluable in the future as it has been in the past. With Switzerland’s famed history in banking and with it consistently ranking as the global leader in stability, trust and even innovation, it is easy to see why the country would be uniquely positioned to be a central trading place in a digitalized future.

Our Contribution as SIX
Finally, this leads us to the question of how SIX can seize the resulting opportunities and help Switzerland ensure its long-lasting competitiveness and retain its global importance as a trading center. To explore this, we wrote two whitepapers in which we discuss potential future scenarios for two of the mentioned key factors: “Data, the Future of Financial Information” (to be released in February 2020) and “The Future of Money”. In line with the latter, we are currently exploring new ways to think payments, such as with new debit cards, more capable ATMs and the mobile payment app TWINT. Our greatest project, however, is another endeavor: the SIX Digital Exchange, the first end-to-end platform for digital assets. SDX is our response to the aspiration of ever-decreasing transaction costs, to the relentless march towards modernization and digitalization, and to the increasing importance of stability and trust. In short, we are seizing the initiative. We are actively pursuing what we see as our contribution to the financial market of the future.