Switzerland: Country and Foreign Investment
The SWX Swiss Exchange
The Swiss stock exchange (SWX) was formed in 1995 by a merger between the country's three existing exchanges in Geneva, Basle and Zurich.
SWX is the world's sixth largest securities exchange, and the third largest in Europe.
The Exchange is governed by the Swiss Stock Exchange and Securities Trading Act of 1995, which includes listing requirements and continuing obligations for listed companies.
SWX has a highly-integrated electronic trading platform. It has also been innovative in product terms, launching the electronic SWX repo market in 1999, and a high-growth market called SWX New Market in the same year which has already seen a number of successful high-tech listings. Eurex, the first transnational derivatives exchange, is a joint venture between SWX and Deutsche Borse AG. SWX and the German Borse have also combined their trades in structured products under a joint subsidiary which launched on January 1, 2007. SWX is also a partner in STOXX.
Stocks, bonds and warrants are traded on the SWX Swiss Exchange. Since July 1998, SWX has also provided facilities for electronic trading in Eurobonds. Latterly, it has introduced Exchange Traded Funds (ETFs). One of the best-known SWX products is the SwissIndex family of securities market indicators. It comprises the Swiss Market Index (SMI), which is made up of the most important Swiss stocks and represents 80% of total market capitalization in Switzerland; the broader-based Swiss Performance Index (SPI), which covers all Swiss stocks (including those of Liechtenstein); and the Swiss Bond Index (SBI), which measures the performance of CHF bonds with a minimum life of one year. A separate index is published for investment companies.
After years of planning, SWX finally committed itself to a virtual future in June 2001 when its alliance with Tradepoint, a consortium of leading international investment banks, culminated in the launching of the virt-x pan-European electronic stock market on June 25th. Virt-x has subsequently become a wholly-owned subsidiary of the SWX.
Virt-x lists the top stocks from most of Europe’s largest bourses on a single screen, operates with a central counterparty facility with a choice of clearing organizations (LCH.Clearnet Limited, SIS x-clear AG) and settlement (CrestCo Limited, Euroclear Bank, SIS SegaInterSettle AG). It has a single rulebook for all stocks regardless of listing location. The exchange operates under UK regulatory standards.
Virt-x offers full dealing services in all the main index stocks in France, German and Italy as well as the FTSE Eurotop 300, Stoxx and MCI indices which cover smaller European markets as well.
In October, 2004, SWX approved changes to its reporting regulations which reduced the potential for insider trading, and brough Switzerland into line with the rest of Europe in this regard. Under the new rules, which came into force in July, 2005, listed companies are obliged to report to the SWX transactions undertaken by a single member of their management team in the company's shares totalling more than CHF100,000 (USD79,000) in any one month. Such reports must be made within two days of the transaction having taken place.
This in fact represents a 'watered down' version of the original draft proposals put forward by the SWX Admissions Board, although representatives of the Swiss banking and business communities had pushed unsuccessfully for a higher threshold and extended reporting deadline.
Both the SWX and virt-x recorded all-time highs in turnover and trading volume in 2006. At 8785.7 points, the blue chip SMI index fell just shy of closing the year at an all-time high. The described the performance of the SMIM which finished the year up 47%, as "particularly remarkable".
On January 1, 2007, the SWX adopted new Rules of Procedure which, according to the exchange, have brought considerable changes and benefits for issuers, participants and traders. These changes include an improved system of checks and balances, greater legal certainty, standard rules of procedure governing investigative and sanction proceedings and the faster completion of these proceedings.
Under the reforms, the bourse's Admission Board retains its legislative authority as before, but ceded its judicial powers to an independent Sanction Commission (which replaced the current Disciplinary Commission), in a bid to improve the separation of powers.
The SWX also standardised procedural rules that are applicable across all areas of supervision.
The exchange believes that this reorganisation of judicial powers, in addition to other "select changes", have meant that proceedings are concluded more rapidly for participants, traders and issuers.
In addition, a new statute of limitations provision will help to speed up the conclusion of proceedings, the Exchange said. This means that no proceedings will be instituted if a possible breach of the SWX rules and regulations happened more than two years ago. Similarly, a decision may no longer be taken if more than two years have passed since proceedings began.
In a joint effort, SWX and IAZI (Information and Education Centre for Real Estate AG) are marketing Swiss indices on single-family homes, freehold flats and multifamily housing. The indices have been developed by IAZI and will be calculated on a continual basis. As a result, indices compiled by a fully independent firm and based on actual real estate transactions is available in Europe for the first time. The SWX said that moreover, these unbiased indices provide a credible foundation for derivative financial instruments.
IAZI bears responsibility for compilation of the indices, while their publication and distribution is in the hands of SWX, with marketing conducted on a co-branding basis. Publication of the indices commenced on 18 April 2007 and encompasses the following five indicators:
- SWX IAZI Private Real Estate Price Index
- SWX IAZI Private House Price Index
- SWX IAZI Condominium Price Index
- SWX IAZI Investment Real Estate Price Index
- SWX IAZI Investment Real Estate Performance Index
The SWX Swiss Exchange, virt-x and Scoach Switzerland Ltd recorded all-time highs in turnover and total number of transactions in 2007. Annual turnover rose by 27.7% versus the previous year to reach an impressive CHF2,527 billion. Particularly noteworthy was the explosion in trading activity in structured products and warrants, which grew by 56.7%.
Turnover in Exchange Traded Funds (ETFs) also registered a marked increase of 51.7% to CHF28,796 million. For ETFs, the number of listed products rose from 61 (end of 2006) to 125 (end of 2007), by the end of 2008 this stood at 150 and rose to 269 by the end of 2009. By the end of 2010 this figure had risen to 604 and 645 by the end of 2011. Turnover in Exchange Traded and Investment Funds was CHF79,569 million with the number of trades at 1,143,437 for 2011.
The number of listed structured products and warrants were recorded at 21,873 by the end of 2008, 23,645 by end of 2009, 30,604 by the end of 2010 and 34,796 by end of 2011. The number of transactions in equities (including funds and Exchange Traded Structured Funds) recorded a of around 33.5% in 2008 but by the end of 2009 a decline of around 23% was recorded. The figure for the end of 2010 was virtually unchanged from the previous year.
On the last trading day of 2007, the blue chip SMI index stood at 8,484.5 points down 3.43% versus the end of 2006, in 2008 it dropped to 5,534.5, recovering in 2009 to 6545.9. A slight drop in 2010 saw it ending the year at 6436.0 with a further decline in 2011 when it finished at 5936.2.
In 2008 the newly introduced SLI Swiss Leader Index PR stood at 1,299.5 points, down 1.06%, by the end of 2008 it stood at 789.6, down by 39.2% it had recovered to 1003.3 points by the end of 2009, an increase of 27%. For 2010, a modest rise of 1.39% was recorded with a final figure of 1017.26, the final figure for 2011 was 1107.96. The broadly based SPI stood at 6,942.24 points, up 0.19% at the end of 2007, by the end of 2008 it had dropped 34% to 4567.6, it regained a fair share of its losses by the end of 2009, finishing up 23.2% at 5626.4, 2010 saw a modest rise of 2.9% to 5790.6, while by the end of 2011 this had dropped to 5343.5.
The SWX announced that virt-x, the London-based securities exchange and subsidiary of SWX Group, had changed its name following the merger of SWX Group, SIS Group and Telekurs Group in 2008. Effective March 3, 2008, virt-x Exchange Limited changed its legal name to SWX Europe Limited.
Lee Hodgkinson, CEO of virt-x, commented: “We are committed to providing the most liquid venue for Swiss blue-chip trading from our base in London. The new SWX Europe brand clarifies our identity and underpins our competitive positioning, as we continue to deliver our strategy to revitalise trading services in a MiFID environment.”
Swiss multinational companies account for 14% of blue chip market capitalisation of the STOXX 50 index. Also, SWX Europe is the home for the SMI (Swiss Market Index) and the SLI (SLI Swiss Leader Index), amongst which are five of the world’s top 100 companies.
“Our new name not only reflects the essence of our core business in Swiss blue-chip equities but also the revitalisation of our trading offering," commented Hodgkinson.
"The launch of a non-displayed liquidity service and additional headline tariff cuts will consolidate our position as the home market for Swiss equities trading as the exchange landscape undergoes significant change. We remain committed to embracing the needs of our users across Europe and the US from our base in London," he added.
The Swiss financial centre’s three infrastructure companies, which merged as of January 1, 2008, to create Swiss Financial Market Services Ltd, recorded robust financial results for 2007, the last year in which the three companies prepared individual accounts as separate entities.
The SWX Group, SIS Group and Telekurs Group each generated record earnings in 2007. Higher volumes in all business fields contributed significantly to these results.
For the SWX Group, 2007 was the most successful year in its history. Securities turnover on the SWX Swiss Exchange, SWX Europe (formerly, virt-x) and Scoach Switzerland Ltd. increased by 27.8% to CHF2.528tn (EUR1.562tn).
Turnover in structured products and warrants rose a marked 57.7% and in ETFs by 51.8%.
The Group’s net profit for 2007 surged an annualised 49% to CHF244.3mn, representing the sixth consecutive year of record earnings. Increased demand for trading capacity contributed significantly to that result. Operating income in 2007 grew by 26% to CHF533.8mn.
Ten initial public offerings were launched on the SWX Swiss Exchange in 2007. The newly listed companies had a collective market capitalisation of approximately CHF5.0bn, CHF1.5bn of which was placed in the public capital market. With the IPOs of Cosmo Pharmaceuticals and Addex Pharmaceuticals, the SWX Swiss Exchange was able to expand further its position as Europe’s leading life-sciences exchange.
Dramatic growth was also recorded in the number of new issues of structured products and warrants. At the end of 2007, the number of outstanding products totalled 19,062, with 25,742 having been admitted to trading during the year. 64 new ETFs were listed on the SWX Swiss Exchange in 2007, bringing the year-end total to 125 products. A further 25 had been added by the end of 2008, while 2009 saw an increase of 119, bringing the year-end total to 269 products.
Also, the SWX Swiss Exchange and SWX Europe pressed ahead with their “Trading for the Future" initiative, which is aimed at expanding the exchanges’ trading infrastructure.
The SIS Group, which provides clearing and settlement services, also achieved solid results, and the 2007 financial year represented the company’s fourth consecutive year of record earnings. Operating income rose by 78.1% to CHF108.8mn, while net profit grew from CHF34.6mn in 2006 to CHF70.3mn in the past year.
At the Telekurs Group, the payment services and financial information company, operating income increased by CHF136.3mn, or 19.5%, to CHF834.1mn; earnings before interest and tax rose by 23.5% to CHF79.3mn. These key readings are all the more impressive when one considers that Telekurs acquired the French financial information company Fininfo in 2007.
"Given those results, Swiss Financial Market Services Ltd is starting out on an extremely solid base," the SWX stated.
In November 2007, the SIX Swiss Exchange announced its decision to relocate all of its share trading to Zurich to achieve a harmonised regulatory environment for all Swiss stocks.
Part of the Swiss stock exchange operated as SWX Europe in London and managed the trading of 32 blue chip stocks. These stocks were repatriated to Zurich to take advantage of one set of rules and regulations and simplify trading. The move consequently allowed Swiss stocks to be subject to internal Swiss regulation and monitoring from mid-2009.
In order to continue to satisfy the demands of its trading participants in London, the SIX Swiss Exchange opened up a representative office in London to handle local administrative and technical participant support.
According to the SWX, the transfer would not affect the trading systems and no participant-side changes or adjustments would be necessary. The ongoing project aimed at modernising the entire trading system will proceed according to plan, it announced.
"With this strategic reorientation, SIX Swiss Exchange is on one hand taking into account the changed competitive environment and, on the other, streamlining its operations and lowering costs substantially, thereby enhancing its competitiveness, reinforcing its role as an international securities exchange, and strengthening the Swiss financial centre," the exchange stated.
In 2008, the SIX Swiss Exchange, SWX Europe and Scoach Switzerland Ltd. recorded annual turnover of CHF1.93bn representing a 23.5% decline compared to the extremely heavy trading witnessed in 2007. In contrast, the total of transactions rose to an all-time-high of 45,212,001 – a 27.9% increase versus the previous year, these declined by 23% in 2009 to 34.8 million. Bond turnover increased by 24.4% on an annual basis, with ETFs registering a full 36.8% gain.
The total number of trades in equities (plus ETSFs) was up 31.1% in 2008 compared to 2007. Meanwhile, the total number of bond trades and ETF trades grew by 34.7% and 64.3% respectively in 2008 compared to the previous year. The total number of trades in international bonds and structured products and warrants declined by 17.1% and 12.9% respectively in 2008 compared to 2007.
On December 30, 2008 the blue chip SMI index was down 34.46% for the year, the SLI Swiss Leader Index PR was down 39.04%, and the broadly-based SPI was down 33.82%. By the end of the following year, the SMI index had risen by 18.3%, the SLI and SPI also recorded gains of 23.2% and 27% respectively. At the end of 2010, the SMI index was down -1.7% on 2009, 2011 saw a further decrease of 7.7%, while the SLI and SPI had lost 11.3% and 7.72% respectively compared to 2010.