Switzerland

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  • Date: 12/4/2013

“London’s financial marketplace is a major competitor” 

Interview with: Dr. Christian Katz, CEO SIX Swiss Exchange

Leading indicators for the Swiss economy have improved noticeably. What does that mean for the Swiss stock exchange?

Christian Katz: This situation is also reflected on the Swiss stock exchange. Since 16% of our listed companies are foreign firms, however, our main focus is on international developments. Besides, Switzerland’s largest corporations have become so global over the years that worldwide economic trends have become more important to them than the situation in Switzerland.

To what extent do current political and economic developments, like the tax dispute, affect your day-to-day work?

Christian Katz: Current political developments have a noticeable impact on the day-to-day work and results of listed companies. The Minder Initiative targets only listed companies and there are around 300 of those in Switzerland. Since it was adopted in March 2013, we have seen interest in IPOs decline significantly. Foreign companies, in particular, are rattled and holding back. The Swiss stock exchange most definitely feels the repercussions of economic and political developments of this nature.

What impact does increasing regulation in the various industries have on the Swiss stock exchange?

Christian Katz: The G20 states had originally decided to tighten financial market regulation in 2009. The general expectation was that this would improve the safety of doing business on the financial markets and prevent the kind of excesses that had been seen in the recent past. It was also assumed that stock exchanges around the world would benefit from this development – so far, though, this effect has been negligible and there are only a few stock exchanges that were able to derive an advantage from it at all. The reasons for that include increased regulation of stock exchange operators and related companies as well as more intense monitoring of clients, such as banks and securities dealers. The result is significantly higher costs for everybody. That, in turn, makes innovation more expensive and cumbersome. 

Which infrastructure and technology does a stock exchange have to offer in today’s world? And in which direction are these evolving?

Christian Katz: A stock exchange system primarily has to meet four main requirements: 1. high execution speed, 2. increasing capacity in terms of the number of transactions per second, 3. the desired functionality in terms of order types, market models, currencies and monitoring functions, and 4. the stability required of a trading platform. The Swiss stock exchange makes an ongoing effort to take the lead in all four areas. In this context, in April 2012 we worked together with our technology partner NasdaqOMX to install the world’s fastest stock exchange platform and double our capacity to more than 20,000 orders per second at the same time. We also followed up that improvement with the introduction of new risk management systems this year. Moreover, for nearly two decades or, in other words, since electronic trading was first introduced, we have had better stability than anywhere else in Europe. Since Switzerland manages such a large international securities market which is considered to be a source of capital for the open economy, the Swiss stock exchange owes this kind of first-class service to the players on that market. The Swiss stock exchange will focus on optimizing and expanding the system’s functions in the future while also maintaining its stability. 

How can the Swiss stock exchange set itself apart from its competitors abroad?

Christian Katz: We operate in a highly technological environment in which, logically, technical aspects can be a decisive factor. We believe, however, that the technology is only a sufficient condition. Our interaction with clients and our other stakeholder groups is where we make a difference, much in keeping with the motto “people make the difference”. And that’s where our strengths lie: We are close to clients and implement our innovations both for and in cooperation with them. When all is said and done, we define ourselves on the basis of how successful our clients are with us and not how successful we are with our clients.

How do you handle the various risks (e.g. a collapse of the IT system)? Is it possible to be sufficiently prepared for events like that?

Christian Katz: You can prepare sufficiently for potential events. Since risk management is our day-to-day business, we devote ourselves to it around the clock. It’s also part of the mandate we carry out on behalf of our clients. As a result, our efforts in this area have been extremely successful and so far we’ve never been surprised by an unsolvable situation.

What trends are you seeing in the proceedings the stock exchange have had to open, such as a result of insider trading or breaches of regulations governing ad hoc publicity? Has the number of proceedings increased?

Christian Katz: Proceedings such as these are always dealt with by SIX Exchange Regulation which is organizationally autonomous of the Swiss stock exchange. One crucial new trend is surely that the definition of insider trading as a criminal offense was changed following the amendment of the Stock Exchange Act in May 2013. We are just at the start of this new phase, however, and it remains to be seen how the situation and the number of proceedings will develop in the face of this new definition.

Where is Switzerland headed as a financial center and how is the Swiss stock exchange preparing?

Christian Katz: I’m hoping that the financial center has entered the final phase of dealing with issues from the past. The reorientation brings new questions that the Swiss stock exchange needs to prepare for. Such as whether offshore banking will be largely substituted by onshore banking. This would have a direct impact on the infrastructure we would have to provide along the entire SIX organization and also as an exchange. The capital requirements of the Swiss economy, for which tens of billions francs of capital are raised on the stock exchange every year, and of global players could turn out to be considerably higher depending on the new focus. Another central question is whether the initiative launched by the Federal Council, the Swiss Bankers Association and the Swiss Funds & Asset Management Association will succeed in establishing Switzerland as an asset management center. The Swiss stock exchange is trying to make a positive contribution to this discussion and help make the initiative a success.

What are the greatest challenges currently faced by the Swiss stock exchange?

Christian Katz: One is London as a financial center which is one of our major competitors. On the other hand, the EU’s weak, fragmented regulations brought a large number of market operators that are either poorly regulated or not regulated at all. As a result, there is a distinct lack of transparency on some of the platforms run by European banks. That is sure to continue posing a challenge for us in our capacity as a central, regulated market in a free society.
 

Dr. Christian Katz

Christian Katz

 

CEO SIX Swiss Exchange