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Swiss Exchange Closing Down London Platform
November 12, 2008
SIX Swiss Exchange said Nov. 11 that it is repatriating the 32 Swiss blue-chip stocks listed on its London-based platform to cut operating costs in an increasingly competitive environment for execution venues.
“By consolidating our trading operations in Zurich, we’ll reduce our cost base and improve our commercial positioning,” said Lee Hodgkinson, chief executive of SWX Europe, a SIX Group subsidiary that will close by mid-2009. As a result of the restructuring, 40 positions--SWX’s London staff--will be eliminated. Hodgkinson said he will stay on to ensure an orderly transition and is in discussions with the Swiss exchange operator about his future with the company.
According to Hodgkinson, SWX Europe has led other venues in reducing costs--slicing trading fees by 30 percent so far this year--and anticipates that trading costs will continue to fall next year. Consolidating listings on the SIX Swiss Exchange, he said, will allow the company to maximize operational performance and improve cost management. “Although London is a critical commercial center where trading takes place, more important is cost and quality of service we provide to our customers,” he added.
Despite a challenging environment, the exchange company is pursuing the “reunification from a position of strength,” noted Hodgkinson. In October, SWX Europe saw its fourth-best month ever in terms of volume, executing 4 million trades worth 150 billion Swiss francs; September was its second-best month.
The Swiss exchange shifted its blue-chip stocks, including Credit Suisse, Nestlé, UBS, Zurich Financial and healthcare giant Roche, to London in 2001 to recapture execution volume from the London Stock Exchange. The Swiss exchange’s market share in those securities had fallen to 70 percent as executions migrated to London due to taxes imposed by the Swiss government on brokerages domiciled outside the country. Those “stamp duty rules” have since been all but eliminated, Hodgkinson said, and SWX Europe has regained the 90 percent share its sister exchange previously held.
SIX Group estimates that it will save 15 million Swiss francs per year by consolidating technology and operations in Zurich, said Hodgkinson. In addition, the company will gain efficiency by no longer having to comply with regulatory regimes in both the U.K. and Switzerland. “Issuers whose securities are admitted to trading in the EU-regulated segment of SWX Europe will no longer have to take into account the rules and regulations of Great Britain and the EU as well as those stipulated under Swiss law,” said the SIX Swiss Exchange in a statement.
According to SIX Group, the move will not affect trading systems, “and no participant-side changes or adjustments are necessary.” The SIX Swiss Exchange, which will maintain a small representative office in London, currently has 150 banks and securities dealers trading on its system, including important players in Germany, France and the U.K. The exchange company has publicly stated its desire to expand its customer base further and secure its role as an international exchange, a goal furthered by the efficiencies and cost savings attained by consolidation.
SWX Europe’s agreement--reached late last year--with Nyfix’s London-based multilateral trading facility, Euro Millennium, to offer anonymous block trading in blue-chip securities, will be unaffected by the change. Live since August, the SWX Swiss Block service is powered by Nyfix technology, while SWX Europe provides the liquidity. Following the transition, that liquidity will be provided by SIX Swiss Exchange; Euro Millennium will operate the matching service under the auspices of the exchange’s regulations. Investors will be able to post block orders for the Swiss stocks on Euro Millennium, where they can reside in the dark while awaiting anonymous matches or pass through in search of matches on the way to another venue.
