Switzerland bids goodbye to blue chips

virt-x will trade Swiss and British blue chip stocks swissinfo.ch

The Swiss stock exchange, the SWX, has experienced its biggest ever shake up with the launch of the virt-x pan European trading platform. The London-based platform makes Switzerland the first country to shift trading in its blue chips to another country.

Spokesman Leo Hug said the launch on Monday morning had proceeded smoothly and without problems.

Created last year by the merger of the Tradepoint electronic exchange and the blue chip segment of the SWX, virt-x will from Monday offer trading in British and Swiss blue chips. The following week will see trading begin in companies listed on the Stoxx 50 and Euro Stoxx 50 indices.

Virt-x is to be supervised by the British market watchdog, the Financial Services Authority.

The venture is a response to the increasing competitiveness of the European market and investors wanting to trade along industry sector lines rather than national lines.

“The major international investment banks wanted a trading platform where they could trade and settle all pan-European blue chips efficiently in all the various currencies,” says SWX boss, Antoinette Hunziker-Ebneter, who is also head of virt-x.

“They wanted it supervised by a recognised regulatory body – a proper securities exchange not just an alternative trading system. So we’ll be putting the Swiss blue-chip model on a European footing.”

The merger with Tradepoint and the creation of virt-x is also a response to increased consolidation in the industry. The Paris, Amsterdam and Milan exchanges have already joined forces and Hunziker-Ebneter expects further consolidation.

“Two or three major exchanges will evolve in Europe and some will offer trading in US shares as well as European,” she says.

This is a view backed up by Hilary Cook, the director of investment strategy at Barclays. “It’s clear that we’ll see more mergers and consolidation within the industry as we move to one-stop trading.

“We are seeing a lot of link-ups and it remains to be seen who are the winners and the losers. But the fact is that if you aren’t linking up you’ll definitely be a loser.”

Hunziker-Ebneter believes the SWX has a technological edge that will make virt-x popular with investors. Unlike other exchanges, the Swiss exchange has long been fully automated allowing trading, clearing and settlement with a single click of the computer mouse.

But investors say the proof will be in the delivery. “It remains to be seen who will take volume from whom,” says Cook. “I guess what they all hope is that there will be a lot more volume for everyone.”

From July, shares offered by virt-x will represent about 80 per cent of Europe’s market capitalisation. Its main weapon in the battle for business will be to offer cheaper cross-border trading and settlement prices than its competitors.

The launch of virt-x has the support of the country’s main bank, UBS.

“Instead of trying to defend the national stock exchange, Swiss blue chips are migrating to London,” says UBS boss, Luqman Arnold. “This stands in marked contrast to other countries who are desperate to defend their exchanges when for efficient capital markets you need integrated electronic platforms.”

However, there have been accusations that virt-x will become a vehicle for international banks to avoid paying stamp duty on Swiss based share trades.

Banks and brokers who buy and sell Swiss shares inside the country must pay tax but will avoid it if they trade abroad. Some feel this will create a disadvantage for small dealers who have no presence outside the country.

The SWX says the answer is to abolish stamp duty altogether.

After next week, the SWX will continue to maintain its presence in Zurich with trading in small and medium sized enterprises. But the future of the Swiss exchange is clearly bound to the success or failure of the London-based electronic platform.

by Michael Hollingdale