The Swiss financial marketplace is particularly strongly affected by the globalisation of the securities business. Since this business has always had an international client structure, about a third of all the money that is not managed in the home country of its owner is in Swiss bank accounts. In terms of internationality, the only European stock exchange comparable to the Swiss financial marketplace is that of London. A further consideration is that Switzerland neither belongs to the EU nor has adopted the euro.
The SWX Swiss Exchange regards itself not only as a stock exchange, but also as a provider of exchange services in the wider sense. Since the merger of the stock exchanges in Basle, Zurich and Geneva and its establishment in 1993, the SWX Swiss Exchange has legally been an association, although its organisational structure is comparable to that of a joint-stock company. There are, however, plans to change the legal structure in 2002; in future, since the SWX Swiss Exchange manages various shareholdings in addition to its operative side, the operative side and the shareholdings are to be managed by a joint-stock company.
In the past few years the SWX Swiss Exchange has undergone a startling development. It has become a company that not only ensures effective securities trading in the interests of the Swiss financial marketplace, but also participates in the operation of two international exchanges, Eurex and virt-x, whose strengths lie in their technological competence and international orientation.
The actual stock exchange
The SWX Swiss Exchange operates the Swiss stock exchange. It has over a hundred participants, a third of whom are so-called 'remote participants' who are based abroad. At the end of 2001, over 5,000 securities had been admitted to trading on the SWX Swiss Exchange: about 470 shares, 2,600 bonds, close to 4,000 options (warrants) and about 25 investment funds. Some of the issuers of these products are domiciled in Switzerland, but most of them are domiciled abroad. In 2001, the SWX Swiss Exchange achieved a turnover of CHF793bn (all products, not including virt-x). If the turnover generated by virt-x is added, the turnover was CHF1,255bn.
In terms of the market value of the listed domestic shares, the SWX Swiss Exchange holds eighth place among the world's stock exchanges. In terms of turnover, it holds about twenty-fifth place -- not counting the blue chips traded on virt-x; if the Swiss blue chips traded on virt-x are added, it holds about twelfth place.
The shareholdings
The SWX Swiss Exchange has a number of shareholdings in companies both in Switzerland and abroad who also provide exchange services, namely Eurex (50%), virt-x (about 39%), STOXX (25%) and EXFEED (100%). The SWX Swiss Exchange provides various services for these companies. For example, it operates the virt-x trading system in London, calculates and maintains the STOXX indices, operates various websites as a provider and carries out operative and other tasks in marketing and in various other areas. Among other things, the SWX Swiss Exchange developed today's Eurex Repo platform. Now, in 2002, only about 10% of the income of the SWX Swiss Exchange is generated directly in the form of turnover fees (in 2000, the figure was still at about 50%). The other income is derived from various services, regulatory activities, the sale of data and distributions from the investment companies. In 2001, the SWX Swiss Exchange achieved an income of close to CHF100m from these additional activities.
Regulatory activities
An important part of the business of the SWX Swiss Exchange is its activities in connection with regulating the stock exchange. The SWX Swiss Exchange issues stock exchange rules and regulations and continuously adapts them to the changing requirements of the market. These rules and regulations are subject to the approval of the supervisory authority, the Swiss Federal Banking Commission. The SWX Swiss Exchange also regulates the admission of traders (examination) and issuers, monitors all market activities, carries out investigations, checks compliance with the duty to provide information and imposes sanctions.
New trading segments
In 1998, the SWX Swiss Exchange added eurobonds (SWX Eurobonds) to its trading system. The decision to do so was based on the positive experiences it had with its business in listed bonds, especially in connection with executing small orders. The goal in creating the segment was to make the efficient SWX Swiss Exchange trading platform available to the thousands of eurobond issues. One absolutely necessary measure in connection with the regulatory conditions was to exempt eurobond trading from stamp duty. Another requirement for this market segment was to admit so-called 'remote members' (in particular, remote members based in London). At the same time, a representative office of the SWX Swiss Exchange was established in London, the centre of the eurobond business.
In 1999, the SWX New Market was created. Various European stock exchanges had already developed such market segments. The German, Paris, Amsterdam and Brussels stock exchanges had even created an association called Euro-NM to co-ordinate regulating and marketing measures. In order to allow young companies to have early IPOs, certain barriers to listing were lowered. The requirements regarding the duty to provide information, on the other hand, were increased.
The SWX Swiss Exchange also introduced a repo segment in 1999. It was developed in close co-operation with the Swiss National Bank when the repo market gave indications of becoming the most efficient market for controlling the money supply. Again, an absolute requirement was exemption from stamp duty. The Swiss repo market proved too small. In 2000, therefore, the segment was transferred to Eurex, the goal being to promote the development of an international repo market.
In the 1990s, investment companies experienced a boom, so the SWX Swiss Exchange created new segments for investment companies (1999) and real estate companies (2000). In 2001, the secondary exchange was turned into the SWX Local Caps segment, which has more demanding listing requirements.
From alliances to virt-x
In view of the introduction of the euro, the consolidation of Europe's capital markets, and hence also of its stock exchanges, became a dominating topic in the EU. A similar discussion had already taken place ten years before in Switzerland. After examining the various possibilities -- such as alliances, mergers and remaining completely independent -- the SWX Swiss Exchange decided that its best option was to establish a co-operation with Tradepoint, the British stock exchange, and the consortium of leading investment banks that stands behind it. As a result, virt-x was developed, and it began operations in June 2001. By transferring all trading in blue chips to virt-x, the SWX Swiss Exchange became appreciably smaller as a Swiss stock exchange -- at least measured against the local trading volume; overall, however, in terms of the corporate turnover, the SWX Swiss Exchange achieved considerable growth. This growth was brought about by adopting sweeping measures and achieving an outstanding performance in terms of technology, organisational structure and regulatory policy.
Market capitalisation of domestic shares: 2001
Main and parallel markets [*]
| Exchange | Value (USD) | |
|---|---|---|
| 1. | NYSE | 132.7tr |
| 2. | Nasdaq | 34.7tr |
| 3. | Tokyo | 33.3tr |
| 4. | London | 26.9tr |
| 5. | Euronext | 23.0tr |
| 6. | Deutsche Börse | 13.4tr |
| 7. | Toronto | 7.8tr |
| 8. | Switzerland | 7.5tr |
| 9. | Italy | 7.2tr |
| 10. | Hong Kong | 6.5tr |
| 11. | Madrid | 5.7tr |
| 12. | Australian | 4.3tr |
[*] Excluding investment funds
Source: World Federation of Exchanges (former FIBV) -- monthly statistic 12-01
SWX Swiss Exchange turnover: 2001
| Total (CHF) | % | |
|---|---|---|
| Total | 1,254.9bn | 100 |
| Shares1 (incl. funds) | 995.8bn | 79.4 |
| Bonds (incl. eurobonds) | 217.8bn | 17.4 |
| Derivatives | 38.3bn | 3.1 |
| ETFs | 2.9bn | 0.2 |
SWX Swiss Exchange listed products: 2001
| Total | Swiss | Foreign | |
|---|---|---|---|
| Shares [*] | 459 | 30 | 154 |
| Funds | * 26 | 26 | 0 |
| ETFs | 10 | 1 | 9 |
| Bonds | 1,620 | 887 | 733 |
| Derivatives | 4,070 | 1,839 | 2,231 |
| Total of all products [*] | 6,185 | 3,058 | 3,127 |
| Listed companies [*] | 412 | 263 | 149 |
[*] including SMI equities
Source: SWX Swiss Exchange -- monthly report 12-01
