Please outline the three most important macro trends that you believe will impact the market infrastructure industry in 2019?
I would not call them trends, but possible developments that could substantially impact the financial-market infrastructure:
- Direct-connectivity and aggregation platforms between issuers and investors in the primary market: they will increase transparency/comparability and therewith reduce traditional intermediaries’ margins; and they will be able to set-up secondary markets if they have enough investors since these platforms are digital.
- Explosion in number and type of digital assets (incl. digitised assets – digital representation of real-world assets): these hitherto non-bankable assets become tradable, require custody, become investment assets, require (different types) of financial information, and require an aggregated overview in customer’s accounts.
- Greater automation (through adoption at scale of robotic process automation and AI) throughout financial market infrastructure.
The WFE’s Sustainability Principles (launched in October 2018) and annual environmental, social and governance (ESG) survey show us that more and more exchanges and CCPs are taking a leadership role in promoting the sustainable finance agenda. How is your business taking a more sustainable approach to the financial system?
SIX has committed to a Corporate Responsibility Strategy that includes environmental, social and governance aspects. First and foremost, we see our responsibility in contributing to the sustainability of the Swiss financial centre by ensuring that our systems are stable and secure, and our data is well protected. At the same time we are developing innovative services for the long-term competitiveness of the financial centre. And we strive for appropriate general conditions that make economic sense – for example within the WFE.
When it comes to Sustainable Finance, since 2014 we have facilitated the trading of Green Bonds. There are currently 15 different lines admitted to trading – with a nominal value of CHF 6.6 billion. A 'Green Bond Flag' in our web site’s search function makes it easy for investors to find bonds that have been certified by the Climate Bonds Initiative (CBI). We operate a 'sustainability index' which includes the top 25 companies on our market with the highest sustainability score based on external analytics. Finally we further foster transparency on ESG-information by offering our issuers the ability to voluntarily disclose their sustainability reporting in accordance with internationally recognised standards and publish this information on our website.
In your view, what’s the technology most likely to disrupt global capital markets in the next 12 months?
Distributed ledgers/smart contracts - although we believe it has a very low probability of doing so within the next 12 months - and as a result, the digitisation of non-bankable assets. In general, we are strengthening our competencies in the areas of technologies like DLT, but also in the area of AI/Data, Robotics and Process Automation. Furthermore we are observing and investing in new business models using emerging technologies. Our focus is to proactively lead and shape the digital transformation of the Swiss financial centre. We want to be the ones in the driver seat to address value chain disruption together with FinTechs and next Generation Technologies.
What are the key strategic initiatives you’re working on at the moment?
- Maintain a reliable and sustainable Securities value chain for Switzerland, which offers best in class services to customers and generates growth: In 2018 SIX Swiss Exchange and SIX Securities Services were brought together to combine the strengths and diversity of one of Europe’s foremost exchanges with the stability and reliability of one of the most respected post-trade service providers in the industry under one business unit. Maintaining our leading role as the efficient, high quality, reliable financial infrastructure eco-system orchestrator of choice for Swiss Financial marketplace is our key priority.
- Reduce complexity and improve operational efficiency to benefit the Swiss financial market place: In an increasingly challenging market environment where cost pressure and eroding profit margins are common themes for our clients, we aim to build on our core strengths and help them reduce complexity through digitalisation/automation initiatives across the extended securities value chain, bringing efficiency for the Swiss financial market place and its participants.
- Prepare for business model transformations in a digitalised economic future: We foresee diverging regulatory environments, the decline of intermediaries/traditional infrastructures, and a rise of a digitalised economy as the most impactful scenarios for our industry in the long-term. Hence diversification and expansion into a digital value chain presents a key opportunity to play a vital role in the probable digitalised economic future, and SDX helps us explore these transformational opportunities across the whole securities value chain.