Bourse scraps blue-chip trading charges

Competition is heating up for the Swiss bourse Keystone

The Swiss stock exchange (SWX) has granted members a three-month holiday from trading fees on its London-based exchange and will cut tariffs next year.

This content was published on September 5, 2006 minutes

SWX described the move as a gesture of goodwill, but experts put it down to competition fears and the disappointing performance of the virt-x electronic trading platform, part of the SWX Group in London.

The Swiss bourse estimates members will benefit to the tune of SFr13 million ($10.5 million) when a freeze on fees relating to certain trades on virt-x comes into effect from October 1 until the end of the year.

Charges for all Swiss and pan-European blue-chip trading and exchange-traded funds (EFTs) will resume from January 1, 2007 but with a 15 per cent discount compared with current tariffs.

virt-x was created through the merger of the Swiss exchange's blue-chip members and the British electronic trading platform, Tradepoint, five years ago. The wholly owned SWX Group subsidiary is a cross-border platform for trading European blue chips, including Swiss multinationals, with more than 100 members.

SWX spokesman Werner Vogt told swissinfo the bourse is able to pass on a proportion of profits to members because it is mutually owned by Swiss banks rather than by shareholders.

"Given the excellent trading year in 2005 that will probably be even better in 2006, we decided that it was time to look at tariffs," he said.

"We are close to our market participants and it is good to share some of our profits with them. We are at liberty to optimise our service without shareholder pressure."

Werner denied the tariff cuts were the result of complaints from traders and added that they could be reversed if market conditions deteriorated.

New life

However, Manuel Ammann, director of the Swiss Institute of Banking and Finance at St Gallen University, believes the reduced charges may be a way of breathing new life into virt-x.

The electronic pan-European blue-chip trading platform was launched with great fanfare in 2001 but has so far failed to generate expected volumes. It was hoped that virt-x would capture ten per cent of European blue chip volume after a year of being launched, but so far has managed to corner seven per cent of the market.

"Virt-x has not worked in the way the Swiss bourse would have hoped for, but it has not been a total failure," Ammann told swissinfo.

"To make it work better, it needs to draw liquidity from established markets [for example London], but that is difficult unless there are extreme advantages."

Ammann thinks the tariff reduction will go some way to attracting greater volumes in the short term, but will not be enough to solve the longer-term dangers of increased competition if rival markets go ahead with proposed mergers.

"I don't think the 15 per cent reduction by itself will change the basic situation. Sooner or later there will have to be questions about cooperation or even mergers with other exchanges," he said.

swissinfo, Matthew Allen in Zurich

In brief

In 2004 the SWX rejected overtures to merge with the German stock exchange. However, this year the two bourses, which jointly own the Eurex electronic derivatives trading platform, created a new joint venture to trade securitised derivatives.

This year has witnessed frenetic jostling among the world's stock exchanges aiming to merge with or buy out rivals.

US stock market operator Nasdaq has been steadily buying shares at the London Stock Exchange (LSE) after being rebuffed in an earlier takeover bid. Australia's Macquarie Bank has also made an unsuccessful bid for the LSE.

The German Bourse revived merger talks with European stock market operator Euronext following a rival offer from the New York Stock Exchange.

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Key facts

At present, the average trading fee paid by banks on a SFr50,000 single trade on virt-x is SFr2.50. Next year that will be cut to SFr2.15.
This compares with SFr1.50 on Nasdaq, SFr2.30 on NYSE, SFr2.85 on LSE and SFr1.67 on Euronext.
Last year SWX and virt-x turned over SFr1,450 billion, an increase of 18.4% on 2004.
The exchange's market capitalisation stood at SFr1,175 billion, up nearly a third on 2004.

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