Q: What is the role of the Bern Stock Exchange on the Swiss market?
A: Currently, there are only two stock exchanges in Switzerland. The main one is the Swiss Exchange, based in Zurich, while I am the president of the smaller one, the Bern Exchange. We operate a niche market that accounts for less than 1% of the total trading volume in Switzerland, so we are not representative of the big market. While the Swiss Exchange is looking for the companies with big market capitalization, we attract the small companies that might have a problem with visibility if traded on a large exchange.
Switzerland has had stock exchanges for the last 130 years. The country is politically organized in different cantons, and many cantons had their own stock exchanges, with the main ones being in Geneva, Zurich and Basel. In 1995, however, the government introduced the Swiss law that regulates the trading activity. After the law was introduced, the three big exchanges decided to merge, while the smaller ones ceased operations. The merger created the Swiss Exchange, the main stock market of Switzerland.
We were the only exchange that didn’t participate in the merger. Instead, we retained the legal form of a private association under the Swiss law with members being the major banks operating in Bern, including UBS and Credit Suisse Private Banking.
We decided to keep the exchange as an alternative to the main market for two reasons. First, it is always good to have more than one exchange, and keeping the license was much easier than starting a new exchange and receiving a new license. Second, we acknowledged that small companies might have a problem with the visibility, the expenses, and the disclosure policy of a big exchange. That’s the situation that we face today and it provides us with a niche and an opportunity.
In Switzerland, there is also an OTC market, which is an independent market run by banks and brokers, governed by the banking law, not by the exchange law. Our exchange provides the opportunity for the companies from the OTC market to get ready for the big stock exchange and handle all the legal, transparency, and reporting issues. If they feel big and important enough, they can move to the Swiss Exchange later, when they fulfill the legal requirements.
That’s how Switzerland ended up with two stock exchanges, focused on two different types of companies. Of course, we communicate with each other, but the two exchanges are totally independent from each other.
Q: How is the trading organized on the Bern Exchange? What trading systems do you use?
A: Both of the exchanges use highly electronic trading and settlement. Clearing is also fully automatic since 1999, when we entirely changed the systems, both in the Swiss Exchange and the Bern Exchange.
The orders drive the market and, essentially, our system matches the buy/ sell orders for the number of shares. That process is guided by clear rules and regulations and is done automatically. The trading continues throughout the day, from 9 am to 4 pm. The orders may still come after the market is closed, but we match them only during the trading hours on a first-come, firstserved basis.
Q: Could you highlight some of the characteristics of the companies that trade on the Bern Exchange? Do they come from specific sectors? Are they mainly local or international?
A: We don’t target specific sectors, but while the companies that go to the main market are mainly interested in getting money through the IPO, the companies that come to our alternative stock are different and require a different approach.
These companies usually have been in private hands for the last 10, 20, or 50 years, and need to get a feeling of what it means to be traded on the stock market and to be open to the public. That means that we don’t usually have young companies and most of them come from the OTC market. The revenues of most of the companies listed on the Bern Exchange fall in the range of 20 million to 50 million Swiss Francs.
But targeting any specific sectors would be difficult for us in that environment. In Switzerland, there are about 400 listed companies. From those 400 companies, about 10 companies account for approximately 90% of the total volume. The new company listings are relatively small, at about 8 to 12 companies per year.
The total size of the Swiss market in terms of volume is approximately 1.5 trillion Swiss Francs. The biggest sector is healthcare and pharmaceuticals, which account for about 28% of the total market capitalization. The second biggest sector is banking, with about 18% of the total capitalization. Next is the food industry, where a single company, Nestle, accounts for 17% of the market. Industrials account for 9.5%, and insurance for about 8.5%.
In general, Switzerland targets the bio sector because many of the bio companies geographically are situated around Switzerland. The acceptance for an IPO in Switzerland seems to be better than in Germany, France or Italy.
Q: What is the total number of companies listed on the Bern Exchange?
A: There are 24 listed companies but the number is growing. In the past, we had a more closed policy because, during the period of the implementation of the new Swiss law, nobody really knew how it was going to be organized. Prior to that, the banks made most of the turnover selling the stocks to each other, and everyone traded UBS and Novartis. Now the investor in Nestle, for example, can look up the price himself. We have an order driven system on both stock markets, and the buyer and the seller can follow their trades exactly, trade by trade and share by share.
The market trend has been positive in the last few years. Of course, we also have volatility and quiet periods, but as long as the trend remains positive, I expect more interest and more listed companies. The potential for development is good because there are many companies already on the OTC market, which will be more and more interested in becoming public.
Q: How the forthcoming new EU regulations will impact the Swiss market, if at all, since Switzerland is not part of the EU? |
