The SWX Group and Deutsche Boerse AG will combine their trading activities in structured products from January 2007 into a jointly owned subsidiary known as “Alex”.
The goal of the new joint venture is to create an European exchange for warrants and certificates.
The new exchange expands the existing cooperative efforts between Deutsche Boerse and SWX, which include the world’s largest futures and options exchange, Eurex, as well as the European provider of security market indices, STOXX.
The new company, to which both partners will contribute their existing business in securitised derivatives, will operate exchanges in both Switzerland and Germany. SWX will spin off its business in warrants and certificates into a new Swiss-based exchange, which will commence operation on 1 January 2007. In parallel, the holding company will found an exchange in Germany under the banner of the Bremen Stock Exchange, which SWX acquired in 2005. This new exchange is scheduled to open in the fourth quarter of 2007.
Trading on the Swiss-based exchange will initially be conducted via SWX’s Quotematch system, which was successfully introduced almost a year ago. This will allow issuers to list their products quickly and inexpensively by means of the Internet Based Listing (IBL) process. In the German market, the Xetra trading platform will come into play in early 2008 to simplify access for European participants. Over the medium term, trading on both exchanges will be conducted via a common technological platform; full migration to the Xetra platform is planned for the end of 2009.
In Frankfurt, Alex will rely on the Smart Trading quality standard for specialist-based trading. According to a joint statement by SWX and Deutsche Boerse, the Frankfurt Exchange guarantees order execution within 30 seconds, while more than 75 per cent of all orders are executed in fewer than 10 seconds. The maximum commission amounts to EUR12 (US$15.25) for investment products and EUR3 for leveraged products.
The Alex holding company will have its registered office in Luxembourg, with subsidiary companies domiciled in Germany and Switzerland. The two-man Management Board of Alex will comprise Marc Zahn as CEO, currently Head of Marketing and Sales at the SWX Swiss Exchange and the London-based blue chip exchange virt-x, and Michael Jung as CFO/COO, until now Senior Project Manager at Deutsche Boerse.
A comprehensive report in our Intelligence Report series examining offshore investment, offshore stock exchanges, and hedge funds is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
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