Fireside Friday…with SIX’s Jos Dijsselhof

The TRADE sits down with chief executive officer at SIX, Jos Dijsselhof, to discuss the exchange operator’s integration of BME, the European exchange competitive landscape and whether proposed changes to Mifid II will foster more competition in Europe.

How is the integration going?

We completed a lot of the pre-transaction activities before covid but the actual closing of the transaction happened during covid so most of the integration activities happened online and in challenging and slightly more difficult circumstances. It’s progressing really well. We’ve integrated on many different levels already. For instance, we now have one business unit responsible for the exchanges in Spain and Switzerland and one unit for post-trade. We’ve integrated the data businesses that BME had into our existing financial information business. And we integrated all Corporate Services like HR, Legal and Marketing.

What was most challenging was the people element. If you look at cultures in Switzerland and Spain, there are very clear differences between Swiss culture and the Spanish culture. Especially on the Spanish side the affiliation and connection with people is so important. You connect with people individually first and then you do business. It was a challenge but I’m amazed at how flexible and open people were.

What drove the acquisition of BME?

The acquisition itself was driven by a couple of strategic drivers. First of all, SIX wants to continue to grow. Growth is really important for us because we know that all our competitors are growing and considering further consolidation we need to be able to make the investments required to be fit for the future. You need to be of a certain size so you can compete with the top three or five exchanges in Europe. Second, we wanted to be present in the Swiss market and the Spanish market. By having these, we have two home markets with one being in the EU and connected to South America so we could expand there. By combining the geographies, it gives us more optionality and more opportunity for growth. Lastly, we want to benefit from integration of technology and corresponding investments, so we will migrate the Spanish trading platform onto the same system as we now use for the Swiss market. We’re going through the whole value chain to see what we can integrate.

What is the European exchange landscape like and how are you evolving to compete?

The real competition is with the MTFs. The platforms which go after our market share. That’s a highly competitive environment. So far we’ve been successful in terms of both defending but also bringing new products and services, new order types, new order books, new markets. We do a lot of activity to make sure we are not only defending but also continuously developing our business. That’s the competitive landscape in a normal day-to-day business. Of course some of the exchange groups e.g., Euronext, Deutsche Borse, LSE want to get bigger and so we will be competing with them too but some parts of the value chain are still relatively domestic and are a bit more protected.

We continuously look at how we organise the liquidity and the quality of our order book and where we can improve and create new order types or new ways of structuring certain processes within the day. In Spain, we saw that there was a whole growth segment all about SMEs in equity and fixed income. We didn’t have that in Switzerland so we looked at the corresponding setup in Spain and in Switzerland and the requirements and we started a new segment called Sparks to make sure we have the capability in Switzerland for small and medium sized companies to list. Previously, these companies didn’t have many options and sometimes went to the US instead and it’s important to keep those companies in Europe.

We are heavily investing in creating the digital exchange SDX. For the last three years we’ve been investing in creating capabilities to create a new exchange next door to our existing exchange where assets can be tokenised and traded and utilise atomic settlement. That’s another innovation we’re driving to make sure we are on top of our game to compete not only today and next year but also in the long term. We are of course also looking at the wider industry and whether there are acquisition opportunities. We bought the remaining 50% of REGIS-TR. We bought a company called Orenda, which has very strong capabilities around ESG and alternative data. We bought Ultumus which is the leading data provider around ETFs. We also invest quite heavily in creating our own capabilities by partnering with multiple parties in the ESG space and creating indices around diversity among other topics.

What are your views on the proposed changes to Mifid II? Do you think they foster competition?

There are some good elements to the changes but as always there are some ways that the regulations could be used in a way that doesn’t always give the outcome that was intended. One thing I’m still worried about is the level playing field. For instance, are systematic internalisers, alternative platforms and regulated markets actually on a level playing field? I hope these things are properly catered for going forward. In general, I’m less in favour of prescriptive rule-based regulation. I’m more in favour of principle-based and intention-based regulation.

A consolidated tape can have a place in the market. I’m not sure if all market participants intend to bypass direct real time performance information coming from the exchanges. I think it can partially democratise the data but I think there will still be market participants who want to get the data directly from the source as fast as possible. At some point in time those two will probably exist together and whether that will influence the competition of some parties being quicker than others in terms of getting their information I don’t know. It’s a direction that the EU wants to take and wherever we can play our part we will. From a business perspective, I am not sure if there will be suppliers who can provide a corresponding offer profitably.