Six Structured Products Exchange will introduce significant changes in their fee model in a move to increase its competitiveness as 'efficient and attractive' stock exchanges. As of January 1, 2017, the Swiss exchange will introduce a progressive discount model for listing derivatives.
A fee of CHF625/€575 (previously: CHF 1,100) will be charged per derivative. This fee will decrease over the course of the fiscal year depending on the number of listings. The maximum discount is 88%. The changeover to the 'pay as you go' tariff model combined with lower fees will significantly reduce the listing costs and financial risk for the issuers.
According to André Buck (pictured), head of sales at Six Swiss Exchange, for the listing of structured products the exchange is offering a discount model based on listing activity so the more an issuer lists the cheaper it gets.
"In addition to this, the listing fee structure has been changed completely lowering the overall price level for listing," said Buck. "Before the introduction of the new fee structure issuers had to buy a package (usually 5,000 or 10,000 listings) which would be valid for a year but this meant that issuers had to buy the package even if they would not use the whole capacity."
However, with the new structure the more an issuer lists the less it has to pay (pay as you go) which will enable issuers to adjust their listing to the demand as opposed to buying a package without knowing if they would use it. "The most active providers will benefit from the monthly new set up and the whole market will benefit from a simplified process," said Buck.
In addition, Six Structured Products Exchange will lower its quotes per second (QPS) capacity fee, allowing investors to benefit from an improved quality of execution of their stock exchange orders in structured products.
Six Swiss Exchange will lower its QPS capacity fees for the market segments traded in the Market Maker Book (MMB) model, including exchange-traded funds (ETFs) and bonds, while increasing capacity. The additional capacity is aimed at further enhancing the quality of execution and generally increasing available liquidity, particularly in niche products.
On the QPS side which is the connectivity between the market maker with the exchange, Six exchange has had a number of promotions for issuers, according to Buck. "However, by law as an exchange you can only have a promotion for a certain period of time and then you have to drop it and implement it into the exchange's directive," said Buck. "So we analysed how to harmonise the QPS regime across all assets, ie. for ETF, structured products and bonds [and] because of the different requirements and particularities of these products we had to spend some time to make the appropriate adjustments to come up with the solution presented now."
The new fee structure does not apply to XBTR, the exchange's OTC platform, which has a different fee set up, according to Buck. "There are now five participants in the XBTR platform and we are getting an increasing number of requests from the buy-side which have shown interest in joining the platform," said Buck. "This is a very interesting concept for the market and we see that it is getting traction slowly but surely. There is one issuer (Credit Suisse) making full use of the platform to issue eligible products and we now have around 700 structured products offered on the XBTR and another issuer (Leonteq) that is making adjustments to begin issuing through the platform."
Buck expects that by the end of the year the number of products will increase which will boost the choice for the buy-side. The other undisclosed users of the platform, three Swiss buy-side firms, are already plugged-in into the platform. "We expect this number will increase because there are issuers that also have wealth management arms seeking to benefit from transacting in such a platform," said Buck.
At a market level, the US elections are still a major concern for investors because it could have an impact on the direction of the market around volatility although the exchange has not recorded a decrease in activity yet.
"The same applies to the 871m tax rules," said Buck. "Issuers are concerned and some may be holding on the issuance of new products but the overall activity in relation to US underlyings remains stable. As an exchange we continue to work in the side lines and will be flexible with issuers so that the issuance of products linked to US underlyings is not affected. We are confident the industry will find a solution to address any issues relating to this tax requirement so that investors can still invest in products using US underlyings, and be compliant."
The main exchange, SIX Swiss Exchange, will also lower the registration fee per transaction for securities dealers from CHF1.00 to CHF0.20, subject to the approval of the Swiss Financial Market Supervisory Authority (Finma).
Click in the links to read detailed information on the adjustments to the exchange's pricing model, listing fees, and QPS capacity fees.
Swiss market looks at US underlyings as 871 (m) section looms
Switzerland Market Review - July 2016
Former UBS head of WM re-emerges at SIX