Turnover in the SIX Swiss Exchange and SIX Structured Products Exchange in February advanced 8.3% to CHF122.1bn (€112.5bn) across 5,100,692 transactions, a month-on-month increase of 10%, according to figures released by the Swiss exchange.

Activity in the equities segment, including funds and exchange-traded products (ETPS), was higher than average, with transactions rising 10.5% month-on-month to 4,901,224, while turnover climbed 12.3% to CHF99.1bn. The number of CHF bond transactions rose by 8.8%, but had little impact on turnover, which remained virtually unchanged against the previous month at CHF12bn (-1%).

The market continues to be dominated by Swiss underlyings and issuers continue to favour them because they are well recognised by investors in the market (Novartis, Nestle, Roche as example), said André Buck (pictured), head of sales at SIX Swiss Exchange.

"We see also that there is scope for other non-Swiss underlyings such as the Eurostoxx 50 which continues to be popular among Swiss investors," said Buck. "This comes mainly from non-domestic investors but Swiss investors also use these underlyings to diversify their portfolios. These investors are also driving significant activity around US-denominated structures although we don't have enough evidence to say it is a trend. Gold ETF were very active and saw huge volume on our Exchange - this renewed interest also spilled over to (Gold) mining stocks were we saw some new issues being brought to the exchange in from of Callable Multi Barrier RC."

In terms of payoff types, with the current levels of increased volatility there is a trend towards the use of multi-barrier reverse convertibles with very low barriers (up to 55%) and coupons of between 4% and 6%, said Buck. "Most of these structures also feature callable features which means that secondary market trading is affected as investors in these products don't trade them but wait until the first early redemption date," he said. "This has been happening during the last few months and has had an impact in the total market turnover."

According to Buck, as long as the interest rates are at the current low level, the trading turnover will also reflect this trend. "There is demand for other type of structures but the pricing condition are limiting the choice," said Buck. "If the European Central Bank (ECB) lowers the interest rate again in the upcoming March meeting, market participants would expect the Swiss National Bank (SNB) to act on this new situation with further relaxation of their monetary policy."

Structured products are well placed to take advantage of this situation and an increase in sales volumes can be expected, according to Buck. "In the current environment and because the market is dominated by products with early redemption features the activity in the secondary market is subdued," said Buck.

The exchange also reported that the trading turnover in the ETF segment fell 21.8% to CHF7.6bn, while the number of transactions declined 3.4% to 87,183. In structured products and warrants, turnover was down 2.8% at CHF1.6bn, although the number of transactions rose by 0.3% to 74,419.

Year to date, a total of 9,736,556 transactions have been conducted on exchange, a 4.5% decline year-on-year, largely due to the record-high transaction volumes in January 2015. The same effect was apparent in trading turnover, down 21.7% year-on-year at CHF234.9bn. Turnover has therefore averaged CHF5.7bn per day.

In February 2016, 24 new CHF bond issues (+84.6%) and 3,776 new structured products and warrants (+5.3%) were admitted to trading. In all, 37 new CHF bonds (-15.9%) and 7,362 new structured products and warrants (-25.4%) have been listed since the start of the year.

The Swiss exchange is also gearing up to go live with its bilateral over-the-counter (OTC) trading platform for non-listed derivatives XBTR launched in August 2013. The first issuer to join XBTR was Leonteq Securities in April 2015 with other undisclosed participants and issuers getting connected shortly after, according to Buck.

"Several participants are in the process of on-boarding, testing the connection with XBTR and will soon join the live market to start with bilateral trading," said Buck. "We are currently fine tuning the tools and functionalities to address the needs of issuers, but we remain confident that we will go live with the first trades very soon."

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