Swiss Stock Exchange Considers Tariff Changes, CEO Katz Says

By Nandini Sukumar

Sept. 8 (Bloomberg) -- The SIX Swiss Exchange, home to Nestle SA and UBS AG, is considering cutting some trading fees and plans to introduce new services and woo new members as it seeks to claw back market share.

“We are going to work on the cost base to get further tariff flexibility,” Christian Katz, who took over as chief executive officer in May, said in an interview in Zurich yesterday. “We are looking at being more client- and product- specific in terms of tariff. We might cut tariffs over time in some segments, in others they may rise.”

Traditional bourses including London Stock Exchange Group Plc, Deutsche Boerse AG and NYSE Euronext are losing customers to so-called multilateral trading facilities, which focus mostly on trading in the largest stocks. The Swiss exchange has surrendered about 20 percent of market share for the benchmark Swiss Market Index to rivals including Chi-X Europe Ltd., Bats Europe and Turquoise, according to data from Bats.

“All equities are priced the same on our market, but do they need to be priced that way?” Katz said. “We charge the same way whether it’s to trade a bigcap stock or a smallcap stock. I’m not sure this is what the market needs.”

The increasing number of market participants has fragmented liquidity between competing trading systems. Last week, Budapest-based Quote MTF became the latest to start operations.

‘Swung Too far’

“There was a time when market share was liquidity-driven and you went where the liquidity was,” said Katz, previously head of equities in Zurich at Goldman Sachs Group Inc. “Now the pendulum has swung to price. The pendulum has swung too far and people are neglecting liquidity.”

The bourse, the largest of Europe’s traditional exchanges not to be publicly traded, moved trading of stocks in the SMI and the Swiss Leader Index to Zurich from London on May 4, after a seven-year push to get into pan-European trading.

“Stock exchanges provide a lot of the externalities for which they’re not adequately compensated,” Katz said. “They provide access to the markets for small- and medium-size firms and also supervise issuers. They are part of the financial structure and play a key role in the stability. We need to consider all these tasks when looking at tariffs and recognize that the exchange provides more than trading.”

SIX Group, which controls the Swiss bourse, is owned by 162 brokers and banks that are users and was formed in a three-way merger at the start of 2008. Swiss cantonal banks own about 13.6 percent of SIX Group with commercial banks and asset managers having about 15 percent. Foreign banks own about 22.7 percent and UBS and Credit Suisse Group AG, the two biggest Swiss banks, another 30 percent.

To contact the reporter on this story: Nandini Sukumar in Zurich at nsukumar@bloomberg.net.