When plans were drawn up in the 1980s to launch a Swiss derivatives exchange (SOFFEX), stocks were still being traded in a very traditional manner in individual auctions, i.e. every share was only traded for just a few minutes a day. This meant that it was not possible to permanently calculate indices. The then existing indices on Swiss stocks belonged to individual banks and were only calculated once a day.
With derivatives trading, a rethink was required, as this was innately continuous trading. And of course, for derivatives to be permanently traded, the underlying assets also had to be permanently tradable. This prompted the Swiss stock exchanges to introduce continuous trading for the largest Swiss stocks in the 1980s.
With the introduction of permanent trading, there was also a need for a permanently calculated index. This was supposed to be particularly suitable for derivatives trading and of course required a neutral publisher. And so it was that in 1988, the Association of Swiss Securities Exchanges developed the SMI out of this market requirement.
Find out with our infographic how stock indices and their function have performed over the past century.