Frankfurt keen on closer ties with Swiss bourse

An unidentified trader works the phones at the German stock exchange in Frankfurt (AP) Keystone

The boss of Germany’s main stock exchange, the Deutsche Börse, says he wants to press ahead quickly to forge closer ties with the Swiss stock exchange.

In a newspaper interview, Werner Seifert, a Swiss who has been with the German group since 1993, said he would like to start talks as soon as possible.

Seifert stopped short of mentioning the words “merger” or “takeover”, but said that “maintaining the status quo” was not an option.

“The SWX is not under immediate time pressure,” Seifert told Zurich’s “NZZ am Sonntag”. “[But] a company must maintain and improve its strategic value.”

“This is also the case for SWX,” Seifert added, saying the Swiss exchange would be looking for ways to improve its profile.

“That is the basis for my optimism that we can deepen our cooperation,” he explained.

Seifert last attempt at expansion involved an unsuccessful takeover bid for the London Stock Exchange in 2000.

Invitation

His comments follow Deutsche Börse’s invitation last month to the SWX Swiss exchange to begin talks on “intensifying cooperation”.

The Swiss have so far been non-committal, saying only that they are considering their options.

Analysts say closer ties, or an outright merger, would make a lot of sense.

“One reason is that Europe is being increasingly traded on a sort of pan-European, one market basis,” Hilary Cook, director of investment strategy at Barclays Stockbrokers in London, told swissinfo.

“The logistics and the reasons for having separate exchanges for each country are increasingly disappearing,” she said.

“It’s expected there will be fewer exchanges in ten years’ time and I think exchanges need to make sure they are in the lead of consolidating and of leading the merger,” she added.

Pressure

Cook said she did not agree with Seifert’s suggestion that SWX was not under time pressure.

“I think we are seeing a trend towards closer links across Europe so in a sense if you don’t go with one partner, you may find that they’ve gone with somebody else, so yes, there is some sort of a hurry,” Cook said.

Any further cooperation between the two bourses would build on the existing successful partnership they have as joint owners of the Eurex futures and derivatives exchange.

“There are an awful lot of possibilities for closer cooperation, “Cook noted. “There’s already quite a lot of shared business across the exchanges and of course a common language helps as well.”

She pointed out that both groups operate on different trading platforms.

“It will be an interesting challenge as to which way they decide to go because without operating on a common platform, it’s difficult to see the full benefits of any sort of merger,” she said.

Costs

But advantages of a merger would include lower costs and more influence.

“What everyone really wants when they deal on the stock market is a well-regulated, liquid, low-cost market and the real advantage of being big is that regulation costs are relatively cheaper across a bigger company,” Cook argued.

“[A merger] would create the third-largest stock exchange in Europe after London and Euronext and that would put it in a much stronger position,” she added.

In a statement in mid-July, the SWX Exchange confirmed receiving Deutsche Börse’s overture, saying it was studying the proposals.

SWX commented that possible new cooperation agreements, alliances or other kinds of financial integration would be considered if they contributed toward strengthening Switzerland as a financial centre with gains in cost and efficiency.

It said that because of its position as a non-listed company and its healthy finances, SWX aimed to “actively cooperate” in the consolidation process amongst European exchanges.

swissinfo, Robert Brookes

Key facts

Deutsche Börse and the SWX are joint owners of the Eurex futures and derivatives exchange.
A merger with SWX would create the third largest bourse in Europe (after London and Euronext).
The SWX already has a presence in London with its virt-x subsidiary – a pan-European blue chip exchange.

In brief

Deutsche Börse first made overtures to the Swiss exchange in July.

So far, the Swiss have been non-committal about closer ties.

Analysts say closer cooperation or even a merger would make “a lot of sense” since Europe’s bourses are expected to consolidate over the next ten years.