Capital Markets: 6 Trends that Shaped the Last Year and Will Keep Us Busy in 2022

Capital Markets: 6 Trends that Shaped the Last Year and Will Keep Us Busy in 2022

The year 2021 was marked by GameStop and ESG, tokens and cryptocurrencies, SPACs and Brexit. How did they make their presence felt on the capital market in Switzerland and Spain? Read on to find out what particularly struck our attention last year.

The world economy recovered in 2021. The growth in global gross domestic product left it in better shape than even before the pandemic, but new waves of COVID-19, inflation concerns, and supply bottlenecks caused uncertainty to resurge toward the end of the year.

From the perspective of the Swiss and Spanish stock exchanges, both of which are operated by SIX since its takeover of BME, the recovery was reflected in the performance of their two benchmark blue-chip indices: the SMI gained 20.3% in 2021 and the IBEX 35 advanced 7.9%. The year was shaped by the integration of products and services from the now third-largest operator of capital market infrastructure in Europe and the fourth-largest player in securities trading and post-trading operations. The securities exchanges operated by SIX hosted a combined total of 25 IPOs last year. But looking back on 2021, six additional things caught our attention on the Swiss and Spanish capital market:

1. Growth in Cryptoassets Explodes

Trading volume of products with cryptocurrencies as their underlying skyrocketed on SIX Swiss Exchange by more than 637% year-on-year in 2021 as the number of individual trades mushroomed by more than 634%. The trading volume of 1.2 billion Swiss francs registered in February 2021 alone exceeded the full-year figure for 2020. Interestingly, demand came mainly from institutional investors.

Supply also expanded tremendously as SIX Swiss Exchange added seven new cryptocurrencies last year. The world’s first exchange-traded products (ETPs) on Polkadot, Stellar, Cardano, Solana, Polygon, Avalanche, and Algorand now give investors a total of 15 currencies from which to choose. ETPs on Bitcoin and Ether accounted for the largest trading volumes in 2021.

2. Sustainable Bonds Boom

Sustainability set the agenda on the Spanish fixed-income market in 2021 as 27 new ESG bonds came onto the market, including the first 5 billion euro green sovereign issue.

The market for fixed-income securities continues to expand in general anyway. The MARF alternative fixed-income market operated by BME, which is geared toward SMEs, welcomed its 100th corporate issuer in spring 2021 in the eighth year of its existence.

3. Small Investors Crowd Into the Stock Market

In the year of the GameStop stock hype, small investors discovered stock exchanges, nudged and supported by a climate of ultra-low interest rates. This phenomenon manifested itself on SIX Swiss Exchange through an increase in the number of transactions amounting to under 10,000 Swiss francs particularly for trades involving exchange-traded funds (ETFs). The number of trades increased overproportionately compared to aggregate trading volume.

The growing number of investors also stimulated issuance activity. SIX Swiss Exchange gained twelve new issuers of ETFs, mutual funds, ETPs, and structured products in 2021 and even reached a new all-time high in December with 45,000 tradable structured products listed.

4. Alternative Avenues to Capital Open Up

BME Growth, the SME segment of the Spanish market, has successfully paved the way for more small and midsize companies to go public. Fifteen companies in 2021 alone chose this avenue to growth capital. This pathway is now also available on SIX Swiss Exchange through Sparks, the SME segment launched in autumn 2021.

In addition, the first SPAC went public on SIX Swiss Exchange in December. A SPAC (special purpose acquisition company) is a company without active business operations. This “corporate shell” uses the capital it raises to afterwards acquire a privately held company, the identity of which is unknown at the time of the SPAC’s IPO.

5. Regulatory Divergences Can Affect Investors

Brexit became a reality in 2021, giving rise to regulatory divergences between the European Union, the United Kingdom, and Switzerland on stock exchanges.

One-third of traders on SIX Swiss Exchange suspect that this will cause confusion and costs for investors, according to a survey conducted by SIX. Two out of five respondents stated that this poses a challenge, but one that can be surmounted. Only 8% think that the regulatory divergences will not have any consequences.

6. Tokenization Becomes Real

In September 2021, FINMA authorized the licenses that SIX needed to start operating SIX Digital Exchange (SDX). They marked the first permits ever issued in the Swiss financial sector for infrastructures that enable trading and integrated settlement of tokenized digital assets.

In November, SDX commenced operations with a tokenized bond, the world’s first bond with a purely digital tranche ever issued in a fully regulated environment. The bond offering was several times oversubscribed and attracted keen interest from a broad institutional investor base in Switzerland.

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