Swiss Discount Brokers Suffering in Market Downturn

by Ulrika Lomas, Tax-news.com, Brussels

31 May 2001

Swiss discount brokers are hurting as a result of last years technology stocks crash, and are being forced to shut up (virtual) shop or consider consolidation with other organisations in order to stay afloat.

As Doris Fellenstein Wirth, the spokesperson for Basler Kantonalbank which set up Discount Direct in 1996, pointed out: 'From the start, there was a tough fight for this market, also through price competition' adding that 'those with a stronger parentage will have the most breath left.' And she may well be right. Many of the smaller discount brokers, some of which only opened to business in the last 12 to 18 months, are being gobbled up by their larger competitors, or the parent companies thereof.

Discount Direct appears to be one of the least affected by the sliding trading volumes caused by the abating (arguably abated) euphoria over technology stocks; Ms Fellenstein Wirth said that although the number of transactions had fallen over the last year, this had had no marked impact on the brokerage's profitability. However, this may be partially attributed to the fact that from the start it was able to leverage off its parent bank, which has recently acquired its former rival, swissbrokers.com. It is estimated that the move will raise Discount Direct's client base to about 7,000, thus making it the fourth largest discount broker in Switzerland.

The present market leader is youtrade.com (part of the Credit Suisse Group), with an estimated client base of 25,000. Although those that remain are now gearing up to compete for the institutional investors and the second wave of older, and undoubtedly wiser mass investors, experts are predicting that it could be over a decade before there is a mass discount brokerage market in Switzerland similar to that seen in the US.

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