Swiss exchange trading will be changed radically in the very near future. Swiss market liquidity is currently split between stock exchanges in Zurich, Geneva and Basel (and other stock exchanges of minor importance in Switzerland). Standardised options and futures are traded at the Swiss Options and Financial Futures Exchange ("SOFFEX"). However, one single Swiss Exchange will replace all of these autonomous exchanges. Trading at the Swiss Exchange will be based on one single electronic trading system for both securities and derivatives. The SOFFEX will be integrated in the Swiss Exchange. Furthermore, the three cantonal laws on securities trading (i.e. of Zurich, Geneva and Basel-Stadt) will be replaced by a federal law on exchanges and securities dealing expected to enter into force by 1 January 1997.
The objectives of establishing one single Swiss Exchange are: improving the market liquidity, transparency, equal treatment of the exchange members, efficiency of settlement and, thus, to preserve and improve the international competitiveness.
The Swiss Exchange was established on 26 May 1993 as a private association, the 55 ring banks of the stock exchanges of Zurich, Geneva and Basel being the founding members. Membership is open to institutions which are not banks as well as to professional security dealers incorporated outside Switzerland. There has been significant interest by non-Swiss domiciled institutions in membership.
The Swiss Exchange introduces an electronic exchange system replacing the traditional trading floor. Bid and ask orders are entered per title into a central order book. The entry of orders into the order book is possible between 6 am and 10 pm without interruption. A pre-opening takes place from 6 to 9.30 am; the trading begins at 9.30 am for bonds, at 10 am for shares and at 10.15 am for derivatives; the trading period is over at 4.30 pm. During trading hours, orders are matched automatically by the electronic exchange system according to fixed rules.
The Swiss Exchange makes available to all members a trading system developed by the Swiss Exchange. Traders receive all information from the exchange system on the trading system. The members may run individual programmes to support their traders on the same work stations as the trading system. The members' trading systems and the Swiss Exchange are linked by gateways which are installed at the members' premises by the Swiss Exchange which also controls them. The gateways will particularly ensure equal treatment of members.
Delivery is made through SEGA (Swiss Clearing Corporation Ltd.) with respect to domestic securities and through INTERSETTLE, both of these acting as global custodians and applying a book entry system. The electronic settlement system used by both clearing organisations is called SECOM (SEGA Communication System). Settlement shall mainly take place on the basis of Delivery Versus Payment. SEGA and INTERSETTLE electronically forward instructions for payment to Swiss Interbank Clearing ("SIC") which is the payment system of the Swiss National Bank. It is expected that the electronic systems of the Swiss Exchange allow a significantly quicker settlement.
The Swiss Exchange started trading foreign shares after several postponements on 8 December, 1995. By contrast, the dealing in domestic shares, bonds, warrants and shares in investment funds could not yet be taken over by the Swiss Exchange from the traditional exchanges due to problems with the fully computerised system. Simulation tradings showed that the response time was too long in certain circumstances. After having missed several scheduled dates, the Swiss Exchange would not announce a schedule for the beginning of trading in the remaining market segments. However, it is expected that further market segments will be traded through the electronic system of the Swiss Exchange in the second half of this year.
The content of this article is intended to provide general information on the subject matter and is not a legal advice. An individual matter requires legal advice according to the specific circumstances.
