Big is Good, Growth is Better

Big is Good, Growth is Better

In our function as a financial market infrastructure provider, size is a crucial factor in order to have a say in industry developments or to lower transaction costs. Constant growth, however, is even more important in order to maintain our ability to act and to invest, for instance, in new technologies.

In many situations in life, less is more, or size doesn’t matter. But in basketball, bridge building, and bison breeding, big is normally better, and I contend that big is also better in many areas of the financial business.

Size is a crucial factor for SIX, at least in our function as a financial market infrastructure provider. Size gives us weight when it comes to having a say in shaping the rules of our business. But size is also a prerequisite for operating successfully in the traditional platform business. As the size of a platform increases, economies of scale reduce its costs. The Swiss Stock Exchange, the securities exchanges in Spain, and the Swiss payment transactions system constitute such platforms and our financial information business is scalable, too. We create networks that our clients access to connect with each other. These networks have to grow. It takes rising volumes to enable us to stay competitive, to lower transaction costs within our networks, and to create recurring added value for our clients.

So, on closer examination, it isn’t sheer size, but rather growth that’s crucial. And we at SIX want to grow to be able to shape the financial markets of tomorrow. It takes a sound foundation for growth to work, and we have one: our business model is broader-based than those of our competitors. We have two strong domestic markets in Switzerland and Spain. We can count on support from our shareholders and possess ample funds.

The expenditures invested to lay this foundation caused us to grow less robustly than the rest of the market in recent years. But those expenditures were necessary and have ultimately put us in a position to participate in the upward trend: the market for capital market infrastructure has expanded by 3% since 2012 and has even grown by 5% worldwide. The overall market for financial market infrastructure, including payment transaction infrastructure, has paid off for shareholders, delivering an average annual return of 20% since 2012.

Stay Capable of Taking Strategic Action

In such a burgeoning market, it’s important to stay capable of taking strategic action, which brings me to another key motivation for growth. Growing enables us to earn money for future investments. For example, our takeover of BME and the securities exchanges in Spain brings greater volume to our platforms, making us the third-largest provider of financial market infrastructure in Europe. We can invest the added revenue in future projects like the SDX digital exchange. Growing means pushing ahead with innovations, especially in a market that is in a constant state of technological change. Whoever merely wants to manage a business in the status quo doesn’t need any growth.

Our focus is on organic growth, which keeps us in the driver’s seat at all times. Huge potential, of course, lies in combining our trading and post-trading operations in Switzerland and Spain. The digitalization of payment transactions in Switzerland likewise opens up a lot of opportunities that needn’t end at the country’s borders. And then there’s our financial information business, an area where we have what it takes to go up against the towering players in the market. I’ll gladly eat crow if small can’t triumph over big here for once. After all, 5-foot-3-inch point guard Muggsy Bogues successfully played professional basketball in the USA’s National Basketball Association league for 14 seasons. I’m less familiar with the statics of bridges and the market value of bison bulls.

Apropos sports, listen in to the new podcast from SIX. In the maiden episode, I describe how my fellow countryman, soccer legend Johan Cruyff, inspired me and explain what it takes for a company to score in a growing market.