Business Performance & Highlights
Despite a global situation that remained challenging for businesses and individuals alike, SIX maintained the stability and reliability of its infrastructure and services at all times. Besides the contribution of the Spanish business acquired in mid-2020, new offerings and targeted initiatives in all four business areas reflected the Group’s growth strategy.
As of January 2021, SIX established a new organizational structure to integrate the business of BME, acquired in mid-2020, in order to serve its customers best and bring about synergies and economies of scale from the acquisition as swiftly as possible. The securities business of SIX and BME was thus combined across countries and divided into Exchanges and posttrading activities (“Securities Services”). The financial data business of BME, including indices and value-added services, was integrated into the respective business portfolio of the Financial Information business unit. The Banking Services business unit stayed as it was, continuing its activities focusing on the Swiss financial center. All Finance and Services functions of BME as well as Human Resources, Risk, Legal and Compliance, IT, and Marketing and Communications were integrated into the SIX management.
Although travelling remained difficult and many of the staff at SIX still worked from home or in split operations for a large part of the year, the integration went well, with people and business continuously growing together. SIX was able to keep its platforms and services running smoothly in the interest of all market participants. Safety of staff was ensured thanks to consistent measures, which were adapted to the current pandemic situation.
With SDX, SIX now offers the highest Swiss standards of oversight and regulation in the digital assets ecosystem.
The successful launch of SIX Digital Exchange in autumn stood out in the year under review as it marked an important milestone in the biggest innovation project of SIX, giving Switzerland a pioneering role in the internationally evolving field of digital assets. On September 10, SDX formally received the authorizations from Swiss Financial Market Supervisory Authority FINMA to operate a stock exchange and a central securities depository for digital assets in Switzerland. The authorizations enabled SIX to go live with a fully regulated, integrated trading, settlement, and custody infrastructure based on distributed ledger technology (DLT) for digital securities. With these licenses, SDX can now offer the highest Swiss standards of oversight and regulation in the cutting-edge ecosystem of digital assets.
Another innovative achievement was the launch of the Secure Swiss Finance Network (SSFN) in collaboration with the Swiss National Bank (SNB). The SSFN is a monitored and protected network that allows authorized participants operating in the Swiss financial center to communicate securely with each other and with financial market infrastructures. This is intended to increase the security and stability of communication with the SIC payment system and other SIX services. The launch of the SSFN should make a significant contribution to combating cyber risks.
Several new offerings were introduced in all four business units, and with two acquisitions in the financial information business and the signed acquisition of the European trade repository Regis-TR, SIX continued to grow inorganically as well.
As trading volumes return to normal, SIX prepares the ground for further organic growth on its exchanges.
Exchanges Business Unit
At CHF 381.3 million, the Exchanges business unit accounted for a quarter of operating income at SIX in 2021.
Compared to the unprecedented market fluctuations of the previous year, volatility levels were high but stable in 2021, resulting in a year-on-year decrease of trading volumes on the exchanges of SIX in Switzerland and Spain.
Trading in Swiss equities on platforms outside of Switzerland was resumed in the UK following the mutual recognition of equivalence of market regulation between the two countries in February. Consequently, the market share of SIX in Swiss equities trading declined from 100% in 2020 to an average of 70.2% in the fourth quarter of 2021. With CHF 1,281.6 billion, the trading turnover on SIX Swiss Exchange was 26.9% less than the previous year, while on the Spanish stock exchange trading turnover in equities was down by 11.7% (EUR 379.5 billion in 2021).
Indices reached new highs in the year under review. The SMI ended the year 20.3% above 2020, at 12,875.7 points, while peaking at the all-time high of 12,980.1 points (intraday value) on the year’s last trading day on December 30. The IBEX-35 grew 7.9% compared to the previous year, ending the year at 8,713.8 points.
With the stabilization of the economy, more companies than last year decided to list on the stock exchange: SIX recorded five IPOs on SIX Swiss Exchange and five on the Spanish exchange in the year under review, including the first SPAC (special purpose acquisition company) that went public in Switzerland. In response to a regulatory need, SIX had developed a new listing standard specifically for SPACs as of December 6. Approval from all relevant authorities has been granted.
Another new trading segment was launched in October 2021: With “Sparks,” SIX Swiss Exchange has created an equity segment specifically for small and medium-sized enterprises (SMEs). In addition to more efficient capital market access and a liquidity-enhancing trading model, SMEs benefit from various ancillary services, for example, from the Sparks IPO Academy, which is a training program for managers from high-growth SMEs preparing them for a possible IPO. SIX estimates that around 200 Swiss SMEs could seek equity capital on public markets in the next five to ten years. About ten to twenty could decide to list on SIX Swiss Exchange.
SIX in Switzerland and BME in Spain have both been working for several years to facilitate the financing capacity and liquidity of SMEs on the stock market. The Spanish exchange has had an equity market specifically for SMEs since 2009 (BME Growth). It developed very positively over the last decade, counting 127 listed companies at the end of 2021 – some 16 of which had been admitted during the course of the year.
Further trends that shaped capital markets in 2021 included the increasing relevance of ESG (environmental, social, and governance) factors for investors as well as high investor demand in crypto-based assets. With its exchanges in Switzerland and Spain, SIX was well positioned to profit from both trends: On the Spanish fixed income market, in particular, the number of ESG-linked bonds increased by 31 in the course of 2021, totaling a volume of EUR 12.7 billion tradable on the Spanish exchange at the end of the year. In September, the Spanish government listed its first green bond with investor demand exceeding the issuance volume (EUR 5 billion) 12-fold.
The Swiss stock exchange struck a chord with its great variety of tradable crypto products. Trading turnover reached CHF 8.6 billion, an increase of 673% compared with the previous year (CHF 1.1 billion). With 191 products in 15 different cryptocurrencies at the end of 2021, the Swiss stock exchange is one of the world’s leading regulated trading venues for crypto-based assets.
With its biggest innovation project, SDX, SIX has underscored its ambition to be a key player in the innovative ecosystem of digital assets. With the receipt of FINMA licenses, SDX now offers the highest supervisory and regulatory standard in the Swiss digital financial ecosystem. By issuing the world’s first tokenized bond on this fully regulated infrastructure in November, SIX officially put SDX in operation (see “SIX strengthens its financing capabilities by entering the capital market”). Along with the Bank for International Settlements (BIS) and the Swiss National Bank (SNB), SDX continued its work on the issuance and use of central bank digital currency (CBDC).
The combined post-trading services of SIX account for a third of its operating income in 2021.
Securities Services Business Unit
In the Securities Services business unit, SIX combines its post-trading activities in Switzerland and Spain: clearing, settlement, and (international) custody as well as collateral management, repo trading, and trade repositories. With CHF 474.7 million, the business accounted for the biggest income share of the four business units in 2021 (32%).
Besides the combined strength of the two successful businesses in Switzerland and Spain, the favorable market environment with elevated volatility and high index levels contributed to the strong results. Clearing and settlement transactions of the business unit rose due to organic growth at Swiss and EU trading venues. Average deposit volumes increased by 15.8% in Switzerland, and by 8.4% in Spain. New custody volumes were added from Athex, the Greek central securities depository (CSD), which moved all international assets under custody to SIX. BME has a new settlement connection with the Italian CSD.
The Swiss repo market once again recorded record volumes of over CHF 70 billion in outstanding trades. The reference interest rate SARON is generated in this market; the multitude of trades and offers results in the robust benchmark that has now finally replaced LIBOR for calculating derivatives and mortgages in Swiss francs.
With the establishment of new legal entities of its central securities depository in Singapore and the US, SIX further expanded its global reach in the custody business in 2021. Therewith, SIX not only aims to attract additional volumes, but also to enhance its proximity to the market to better understand the needs of its clients in the individual regions and offer them support regardless of time zones. This was already rewarded in 2021 when SIX as international central securities depository scored above average in the annual Agent Bank of Major Markets survey conducted by the trade magazine Global Custodian.
Besides the expansion of global reach and the attraction of additional volumes, further growth in the post-trading area is expected to come from an acquisition: In September, SIX signed an agreement to become the sole shareholder of Regis-TR, the leading European trade repository for reporting trades and transactions across multiple product classes and legal systems. Founded as a joint venture between Iberclear, the Spanish settlement and custody entity of SIX, and Clearstream, which is part of Deutsche Börse Group, SIX will take over Clearstream’s stake of 50%. The transaction is expected to be completed in the first half of 2022.
SIX accomplished the targeted turnaround to a growing data business.
Financial Information Business Unit
In mid-2020, SIX entered the next phase of driving its data business, with an optimized strategy that fully focuses on growth and further improving margins. The year under review saw a successful turnaround to an increasing growth rate. Accounting for an income share of around 27% (CHF 401.8 million), the Financial Information business unit is expected to become one of the growth engines of SIX in 2022 and beyond.
Main growth drivers in 2021 were the core business of reference data, pricing data, and corporate actions, which traditionally accounts for the largest share of the financial information business at SIX, as well as tax and regulatory services, which has been a growing segment for the past several years. SIX is today regarded as one of the leaders in the tax and regulatory space, and will continue to expand its coverage in the future. In 2021, it further expanded its offering to ESG regulatory data supporting the upcoming Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy.
The SIX index universe also expanded in 2021, with the launch of several new indices in Switzerland, Spain, and the Nordics. The Swiss Performance Index (SPI) and the Swiss Bond Index (SBI) are the basis for the first Swiss ESG indices by SIX which serve as benchmarks for corporate sustainability in the Swiss capital market. Gender Equality Indices, part of the ESG series, were launched in both Switzerland and Spain with the SPI Gender Equality Index (and the IBEX Gender Equality Index, respectively). SIX enhanced the cryptocurrency index offering with the SIX crypto market index 10 and the SDX Bi-Cap Index. The first one includes the SIX Crypto Currency Average rates for ten major cryptocurrencies and the latter comprises of the SDX BTC (Bitcoin) and SDX ETH (Ether) indices. With its new indices, SIX continues to support new market developments and investment trends as outlined in the Exchanges business unit chapter.
Two strategic acquisitions were completed in the year under review: In February, SIX expanded its offering in ESG and alternative performance data by taking a majority stake in Orenda Software Solutions. In July, SIX completed the acquisition of international index and ETF data specialist Ultumus. With a data universe that covers approximately 7,700 ETF products, accounting for 95% of the market, Ultumus is among the largest ETF calculation houses in the world. The acquisition expands the data offering of SIX on the fast-growing ETF trading market and already contributed to revenue growth in 2021.
As well as on a strong growth agenda, SIX is focused on efficiency improvements. In 2021, SIX was able to increase the automation rate in its data operations, further reducing operational costs. A major achievement in terms of efficiency, not only for SIX but for the financial industry as a whole, was the migration of the Association of National Numbering Agencies (ANNA) service bureau from a legacy infrastructure to a cloud-based platform. ANNA is a global association dedicated to efficient capital markets through the use of widely embraced ISO standards, and the ANNA services bureau is jointly operated by SIX and Cusip Global Services. The infrastructure migration improved latency, efficiency, and security, as well as data analytics.
SIX leads its customers through the shift in payment behavior.
Banking Services Business Unit
With CHF 201.4 million, the Banking Services business unit contributed around 14% of operating income in 2021. The smallest business unit of SIX, and the only one with a clear Swiss focus, Banking Services was seriously affected by Covid-19 since the outbreak of the pandemic. Consumers’ payment behavior changed significantly, with an accelerated shift from cash to cashless payments. Consequently, the decline of ATM transactions continued in 2021. In view of this shift in payment behavior, SIX is launching new services for banks aimed at reducing operating costs of ATMs and ultimately contributing to an orchestrated reduction of the number of ATMs in Switzerland.
While cash payments decline, the trend in cashless payments is going in the opposite direction: After very low transaction numbers due to the pandemic in January and February, card transactions recovered strongly during the course of 2021. Additionally, SIX launched debiX+, a mobile application that allows banks to offer consumers a state-of-the-art card management experience. At the end of the year, SIX for the second time in a row recorded more than one billion card transactions processed and an increase of 11% over the number of transactions in 2020. Cashless payments therefore more than offset the negative effect that the declining use of cash had on the revenues of Banking Services.
Interbank payments increased in the year under review, with transaction numbers rising year-on-year in Swiss Interbank Clearing (SIC, +23%), European Interbank Clearing (EuroSIC, +14%), and at the European correspondent bank SECB (+16%). These developments underline the importance and success of these central platforms that SIX provides to the Swiss financial community.
Digital billing and invoicing continued to increase as well, with eBill becoming the established digital invoicing standard in Switzerland: With over 2.4 million users at the end of 2021, the eBill platform reaches almost half of all Swiss households. The service is fully digital and allows users to receive and pay their invoices within their online banking application. A new high of over 50 million eBill transactions (+27% over 2020) was reached in the year under review, with additional volumes also coming from new network partners. Network partners provide access to eBill for billers, and enable transmission of eBills via the SIX platform to almost 100 financial institutions. SIX introduced the network partner model at the end of 2019. Today, 14 network partners are active – of which seven partnership agreements were concluded in 2021.
Due to this successful development and for the benefit of the further growth of eBill, SIX decided to sell the e-invoicing business run by SIX Paynet Ltd (network partner) to PostFinance in March. SIX can thus focus on the operation of the eBill infrastructure as well as on its continuous development and marketing.
With the open banking platform bLink, which was launched in 2020, SIX also leads the field in another innovative area of banking services, exploring the enormous potential of API-based business models for banks. To provide Swiss banks with easy access to the platform, SIX has ensured connectivity toward the complementary API hubs of Swisscom, Inventx and, as of January 2022, Finnova. A significant milestone was reached in the fourth quarter of 2021, when St. Galler Kantonalbank and Zürcher Kantonalbank activated the OpenWealth APIs via bLink. They are thus the first banks in Switzerland to offer external asset managers standardized interfaces (APIs) for their custody services. In addition, four new accounting solutions connected to bLink at the end of the year, enabling SMEs to integrate their bank account information into their tools via the Account Information Services (AIS) API. Existing use cases such as AIS and OpenWealth are just the start of a new API world evolving within the financial services industry and beyond its borders. ■