Swiss exchange owner SIX to reorganise clearing operations

A long-term plan by SIX Group to remodel its clearing business is set to come into effect, with the Swiss exchange owner aiming to show there is life beyond the lucrative fixed income derivatives market.

From the start of May it will formally take control of Oslo Clearing, which it bought from the Oslo Bors in December 2012. The same day it will take over the platform on which the Swiss National Bank (SNB) runs its money market operations.

Together, the two moves will form the basis for the exchange’s plan to revitalise its clearing business after it stepped away from interest rate futures amid fierce competition nearly three years ago.

Derivative exchanges Eurex and NYSE Liffe dominate the European market for exchange-traded derivatives and the Swiss group’s decision to pursue other profitable clearing areas is being closely watched by other regional bourses.

Six sold its 50 per cent stake in Eurex, the futures exchange it helped create in the late 1990s, to Deutsche Börse. It was barred from clearing derivatives for 24 months as part of the deal but bought the Norwegian business and won the SNB mandate.

The addition of Oslo Clearing from May pushes SIX into processing equities, equity derivatives, energy and freight.

“We will certainly not start in exchange-traded derivatives in Europe. That market is consolidating,” Urs Rüegsegger, group chief executive, told FT Trading Room, adding that currencies and commodities clearing was also under consideration.

SIX has continued to clear equities but to compensate for the dip in profits from the Eurex sale, the Zurich-based group pushed into other financial services such as payments and card processing.

It is also focusing on clearing repo or repurchase transactions, where banks pledge their assets as security in exchange for short-term loans from lenders.

“This will be another opening to enter the derivatives market,” Mr Rüegsegger said. “We want to expand the product offering under this platform. The next step will be a tri-party agency clearing, which will be implemented next year. We think it’s an interesting case. The number of transactions is dependent on the need for collateral and monetary policy moves.”

Under a tri-party repo agreement, a third party, such as a clearing house or bank, sits between two counterparties as an agent, although it does not take on risk of the transaction.

For the year to December 31, it reported an 8.9 per cent increase in operating income to SFr1.6bn (£1.1bn). Net profits halved to SFr210.2m (£142.6m) a year earlier. However the 2012 total included a profit of SFr266m (£180m) from the sale of the Eurex stake. Stripping out the one-off gain, Six said net profits rose SFr65m.