The Swiss stock exchange: from the way it works to trading opportunities
Economic and political stability, efficient capital markets, a transparent legal system, exceptional infrastructure and low corporate tax rates have attracted traders and investors to the Swiss stock exchange for decades.
Ever since a federal state of Switzerland was established in 1848, the country has been working hard on building its economy in the way we see it today – one of the most advanced in the world.
The country’s neutrality and national sovereignty, recognised by the international community, have fostered a stable environment in which the economy of Switzerland has been able to develop and thrive. It is known for its modern and prosperous market economy with a highly skilled workforce, low unemployment rates and exceptional per capita GDP.
The country’s thought-out strategy is to concentrate on its most beneficial sectors: a highly developed service sector, tourism, pharmaceutical industries, financial services and a manufacturing industry that specializes in high-technology, knowledge-based production. No doubt, every one of us has heard of major Swiss brands like Nestlé, Sika, Roche or Sarnafil at least once in our lives.
An interesting fact: Switzerland is a leading global exporter of high-end watches and clocks. In 2018, the value of Swiss watch exports was CHF 21.2 billion – an increase of 6.3% from 2017. Swiss watches are exported to every region of the world, though most revenue is generated in Asia and Europe.
Switzerland is a member of several international economic organisations, such as the United Nations, the World Bank and the World Trade Organization.
The country is considered to be a safe-haven investment destination among the traders, with the SIX Swiss Exchange group offering access to shares of world-renowned companies. From its political neutrality to its banking secrecy, Switzerland has a superb reputation for protecting valuables.
What is the SIX Group?
Swiss Infrastructure and Exchange, also known as SIX, is a financial service provider that operates the infrastructure of the Swiss financial centre, with its headquarters located in Zürich.
SIX was formed in 2008 to ensure the flow of information and money between banks, merchants, investors and traders worldwide from the merger of several Swiss financial corporations.
The group is owned by 130 national and international banks that also act as the main users of its services. SIX keeps its main focus on the ongoing development of new services for the Swiss financial centre and working in cooperation with several fintech companies and shareholders.
SIX Swiss stock exchange
SIX Group operates the Swiss stock market. It develops and maintains securities trading and post-trading platforms, monitors trading activities and provides financial information.
In 1995, the Swiss stock exchange became the first in the world to adopt a fully-automated trading, clearing and settlement structure.
Currently, the exchange is under the control of an association of 55 banks. Each of these banks’ shares are equivalent to voting rights in relation to the regulation and management of the exchange.
Earlier this year, SIX announced blockchain integration for its upcoming trading platform for digital assets, called the SIX Digital Exchange (SDX), which is expected to start operating from the second half of 2019.
As planned, it will work in parallel with the regular exchange platform. However, since it is blockchain-based, it can serve as a bridge between cryptocurrencies and old-school financial assets.
The existing exchange allows the trading of derivatives, bonds, equities, investment funds and certificates. SIX also calculates and provides indices such as the Swiss Market Index (SMI).
Swiss stocks to invest in
SIX Swiss Exchange offers a full range of securities, such as bonds, derivatives and ETFs, while its main role as operator of the stock exchange remains central. The Swiss government attracts foreign investors and traders by ensuring the ease of buying or selling a stock on the Swiss Exchange.
Due to the outstanding performance of the Swiss economy, there are plenty of stocks in which traders can invest. The list of globally popular Swiss shares includes NESN – Nestle SA, ROGz – Roche Holding AG, NOVN – Novartis, ABBN – ABB Ltd and ADEN – Adecco AG.
However, the easiest way to trade any market is to choose a broad market index, which, in the case of Switzerland, is the Swiss Market Index (SMI). The index is seen as a top preference of many traders worldwide.
The SMI is the main and most important stock index in Switzerland. It consists of the blue-chip stocks of the twenty largest and most liquid mid- and large-cap equity securities, based on the Swiss Performance Index.
Since the SMI is referred to as a benchmark of the Swiss equity market, it is used as an underlying index for many financial products, such as futures, options, contract for difference (CFDs), exchange-traded funds (ETFs) and structured products.
The SMI was introduced at a baseline value of 1,500 points on 30 June 1988. The constitution of the index is annually reviewed on the third Friday of September.
What makes trading with Swiss Market Index even more convenient is that an updated index level is calculated in real-time as soon as a new transaction, related to any of the securities included in the SMI, occurs.
The securities listed on the SMI cover more than 80% of the total capitalisation of the Swiss equity market, as well as 90% of the trading volume of all Swiss and Liechtenstein equities listed on the SIX Swiss Exchange.
The index has good volume and volatility, as it is made up of a wide cross-section of liquid trading instruments. The key benefits of trading the SMI include its high liquidity, full transparency, relatively predictable price dynamics outside crisis situations, ease of access to information regarding the main index price movers and vast news coverage.
The Swiss Market Index is useful for traders as it offers an exceptional way to gain access to the Swiss stock market without a need to analyse the performance of individual companies.
There are few ways you can trade the SMI. However, one of the most popular ways is through contracts for difference (CFDs).