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Swiss Stock Exchange: Back to Normality with Innovation and Variety

Background 11 Oct 2021

Swiss Stock Exchange: Back to Normality with Innovation and Variety

André Buck, Global Head Sales & Relationship Management SIX Swiss Exchange, talks in an interview about the latest innovations on the Swiss stock exchange, about the ever-growing variety of crypto investment opportunities – and about the increasing influence of retail investors.

The year 2020 was an exceptional trading year in many respects. Has boredom set in on the Swiss stock exchange since then?

In a positive sense, “boring” is at most the stability of our infrastructure, where we gladly do without excitement – otherwise not. But we have definitely seen a return to normality in 2021. On the one hand, because trading volumes and volatility have stabilized at lower levels after the records of the previous year, on the other hand, because since February we have again been competing with UK-based multilateral trading facilities for market share in Swiss equity trading. We have been preparing for this moment since the EU denied us stock exchange equivalence as of mid-2019, as we welcome healthy competition and open markets.

Have these political squabbles affected the growth dynamic in the product segments of the Swiss stock exchange?

Fortunately not, because here too our competitive approach remained unchanged. We want to make our trading venue more attractive for product issuers and trading participants with innovations and improvements that are geared to market needs – from which end investors also benefit, in the form of more diversification options in terms of the choice of product providers and investment themes, and also better liquidity. This sounds simple and logical in theory, but in practice it is not a foregone conclusion. Our expertise and close cooperation with the industry are the key to success here. That is why the recognition of the Swiss stock exchange through recent awards, for example from SRP Europe in the area of structured products and from XENIX in the area of Exchange Traded Funds, clearly also belongs to our clients.

Our close collaboration with the industry is key to our success.

Can you give specific examples of the innovations you mentioned?

In the area of Exchange Traded Funds, we launched Quote on Demand. It combines the classic quote-driven trading in the public order book and a request-for-quote service in an additional order book – and this includes settlement via central counterparty, which minimizes counterparty risks. Trading participants can place limited orders in the existing order book as before and additionally settle their desired volume without pre-trade transparency via the new Quote on Demand service, thus reducing the market impact of the order. In doing so, the best price from the service is compared with the prices provided in the order book. Only a few months after the introduction of this new service, it resulted in measurable price improvements. Quote on Demand is a very innovative service and is still taking some getting used to for many market participants. We expect significant growth in the second half of 2021, which will further improve the quality of trades for participants.

How has this affected demand for exchange services?

The demand for investment opportunities and the trend toward passive investment products is reflected in the expansion of financial products by issuers. We have already welcomed ten new issuers to the Swiss stock exchange this year in the segments for Exchange Traded Funds, Exchange Traded Products and structured products. The number and variety of products has also increased accordingly – because, as mentioned at the beginning, competition spurs innovation. This is particularly evident in the area of investment products on cryptocurrencies, where the growth trend from last year has intensified and we have expanded our role as a globally leading regulated trading venue. This year, the world’s first physically secured Exchange Traded Products on Cardano, Polkadot, Solana and Stellar added to our unique selection. And in the month of February 2021 alone, the total trading turnover of 2020 was surpassed at 1.2 billion Swiss francs. For those interested in the latest figures, I recommend a free subscription to our monthly Crypto Report. 

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We are well aware that, as the Swiss stock exchange, we must not lose touch to private investors.

So the variety of investment products on cryptocurrencies on the Swiss stock exchange is meeting with high demand?

That is correct, and the demand is coming from the institutional side in particular – there would be no other way to record these record volumes. In this context, we are taking on a role as a growth accelerator with the stock exchange. We created a clear framework early on to meet the needs of issuers and investors. Rules and standards provide certainty and enable scaling – that is one of our core tasks. For example, the admission criteria for crypto underlyings, which date back to 2018, are subject to constant change and require updating. Here, we work together with market participants to develop future-oriented admission criteria that take into account investor protection but also the demand for cryptocurrencies.

In the past year, many private investors also seem to have discovered trading on the stock exchange. How do you assess this?

We can confirm this trend, as the trade sizes show. Here we define certain brackets and have observed that, for example, in the area of Exchange Traded Funds, the number of small tickets up to 10,000 Swiss francs has increased significantly – a sign of increasing investment activity by private investors. Globally, the number and weight of retail investors has also increased, and the GameStop story has created plenty of buzz as a showdown between hedge funds and retail investors. Even if the US and Swiss markets are not comparable: We are well aware that, with the Swiss stock exchange, we must not lose touch to private investors. Anyone who wants to trade via smartphone has many options today, and we cannot tacitly assume that everyone is aware of the advantages of trading on a regulated exchange with transparency, liquidity, investor protection and equal treatment. We will therefore think about how we can offer private investors something more, both in terms of the information we provide and in terms of specific services – so that competition in turn triggers innovation.

 

The interview with André Buck has originally been published in the ETP & Indexing Guide 2021/2022.

André Buck

As Global Head Sales & Relationship Management, André Buck is responsible for the distribution of various services and products within the Swiss Stock Exchange, which is part of the Markets division. In addition, he is responsible for the relationship management and acquisition of exchange participants. Furthermore, André Buck manages the distribution and development of the CONNEXOR reference data as well as the data business of the exchange. In mid-2009, he joined the exchange for structured products (formerly Scoach) as Head Sales & Marketing. Since 2016, he is Chairman of the Structured Products Commission and since 2017 jury member of the Swiss Derivatives Awards. His experience has also brought him to Hong Kong, where he has been a member of the board of directors of an international structured products company since 2018.

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