Presentation and history of the Zurich Stock Exchange:
The Zurich Stock Exchange is more commonly known as SIX for Swiss Exchange. It's naturally based in the city of Zurich where it was created in 1873, 13 years after that of Geneva which was the very first stock exchange in the country. The third Swiss Stock Exchange, that of Basel, was founded in 1876.
The Zurich Stock Exchange has been operating with an electronic trading service since 1996. Before that date, negotiations were carried out by auction. Since that time, the Zurich Stock Exchange has been managing the National Stock Exchange, which resulted from the merger between the 3 major Swiss stock exchanges. Financial securities such as government bonds, derivatives and stock options are also found on the Zurich Stock Exchange.
Finally, the main stock index of the Zurich Stock Exchange is the SMI.
The main stock index of the Zurich Stock Exchange:
The main stock market index that tracks the price of the Zurich Stock Exchange is the SMI for Swiss Market Index. This index is based on the weighted quotation of the shares of 20 Swiss companies selected according to their total market capitalization.
As is the case for most national stock market indices, the SMI reports on Swiss economic activity taking into account the representativeness of the sectors of activity of these companies.
Although Switzerland has introduced a new index retracing the evolution of mid-caps in this Zurich financial centre, the SMI remains the benchmark index and the one on which you can trade directly on trading platforms.
What is the SMI or Swiss Market Index?
Let's take a few moments to understand what the SMI or Swiss Market Index is and how it works. The SMI or Swiss Market Index is the benchmark stock market index of the Swiss stock market. This is of course the most important index of this country. As its name sometimes suggests, the SMI 20 is made up of the 20 companies whose performance and liquidity are the most important and which have medium and large caps.
Like most price indices, the SMI is not a dividend index but a performance index which partly takes these distributions into account. This index was created in 1988 with a benchmark value of 1,500 points. Its composition is reassessed every year.
The quotation of the SMI index is done in real time. This means that each time a new trade takes place, the price of the index is automatically updated following a calculation in real time.
The stocks that are included in the SMI index currently represent nearly 80% of all Swiss stock market capitalizations. They also include over 90% of the transactions of all Swiss and Liechtenstein equities that are listed on the SIX or Swiss Exchange financial centre.
The annual performance of the Swiss Market Index has moved closer to that of the Dow Jones, DAX 30, CAC 40 and FTSE 100 given that the major stock markets have been increasingly dependent on each other for the past fifteen years.
Being the representative of the entire Swiss equity market, the SMI index is also used as the underlying index for many derivative financial instruments such as options, futures contracts or even index funds such as ETFs.
What is the SMI index made up of?
The benchmark SMI index in Switzerland is calculated by the simple weighting of the free-float capitalization of the securities, divided by the divisor. This free float capitalization relates to the total capitalization of the registered shares.
The SMI index covers a major part of the total Swiss market capitalization and, the three largest capitalizations of the SIX market, namely Nestlé in the food sector, Novartis in the medical sector and Roche also in the medical sector represent alone more than 77 % of this index. You can understand that this significant weight of a few companies compared to the rest of the companies listed on this index poses a problem since as a result, the SMI no longer really reflects all the capitalizations of this market but is strongly influenced by only a few entities. To address this problem, in 2017 the SIX Swiss Exchange decided to modify the weighting system of this index so that no company can weigh greater than 18% of this index.
While the SMI index is revised once a year based on the performance of companies in the market, certain exceptional events may lead to a revision of its composition during the year. This could be the case following major acquisitions or business takeovers by foreign companies.
Regarding the criteria that companies must meet to enter the composition of the SMI index, they must meet strict requirements in terms of liquidity and market capitalization. First, the companies must represent at least 50% of the average liquidity of the constituent SPI problems and have a free float capitalization of at least 0.45% of the total SPI capitalization. You should also note that the volume of transactions and capitalization are determining factors in the ranking of companies in this index which changes every quarter. As for the index revision, it's carried out every year on the third Friday of September.
You should also remember that the SMI used to count 25 values and not 20 as is the case today. It was on September 2007 that the SWISS Exchange decided to withdraw certain companies from its listing, including Ciba Specialty Chemicals, Lonza Group, Givaudan, SGS and one of the two categories of Swatch group shares, leaving only 20 stocks in this index.
Explanations on the capped weight of the SMI index:
As we mentioned above, the SMI index saw its weighting system change in 2017. Given that the three largest companies in this index, Nestlé, Roche and Novartis, represented more than 70% of the value of the SMI index, the SIX Swiss Exchange decided to change the calculation rule to introduce a capped weighting system. As a result, since that date, the weight of each company that makes up the index can no longer exceed the threshold of 18%.
The re-evaluation of the weight of each company in order not to exceed this 18% and its ranking is usually done every quarter with regard to the SMI. But when one of the listed companies sees its weight exceed 20% during the same quarter (this is called "intra-quarter break"), its weight is automatically reduced to 18% without having to wait for the next revision.
In order to make this transition less abrupt, there was an initial transition period during which these changes were implemented gradually and in stages not exceeding 3% per quarter. Note that the SPI 20 index was created at the same time with the aim of continuing to index the 20 SMI companies without this capped weighted regulation.
What is the current composition of the SMI stock market index?
Currently (May 2020), the SMI index is made up of the following 20 companies:
- Nestlé from the food industry sector
- Rock in the pharmaceutical sector
- Novartis in the pharmaceutical sector
- UBS in the banking sector
- ABB in the Industry sector
- Sika in the chemical sector
- Richemont in the luxury sector
- Zurich Insurance Group in the insurance sector
- Swiss Re in the insurance sector
- Credit Suisse in the banking sector
- LafargeHolcim in the industrial sector
- Givaudan in the chemicals sector
- Geberit in the industrial sector
- SwissCom in the telecommunications sector
- SGS in the Industry sector
- Swatch Group in the watchmaking sector
- Adecco in the temporary employment sector
- Julius Bär Group in the banking sector
- Swiss Life Holding in the insurance sector
- Lonza in the pharmaceutical sector
Of course, this composition is likely to change over time depending on the revisions made each year.
History of the Zurich Stock Exchange from its creation to the present day:
To find out more about the Zurich Stock Exchange, take a dive into its history.
Switzerland is one of the countries where stock exchanges are the most recent. It was in 1850 that the first stock exchange was created in Geneva on the initiative of the Société des agents de change and with the aim of making up for the delay of the Swiss railway facing other countries in a radical political environment. These stock exchange projects also greatly worried brokers at that time in view of the very strict regulations they implied.
However, it took about 25 years for the Geneva Stock Exchange to be no longer the only place of listing in Switzerland and for the creation of the Zurich Stock Exchange, which was created in 1873. This date is actually the date chosen for the start of the construction site leading to the construction of a building specifically dedicated to the stock market although many quotes were already carried out without a physical location. Later in 1876, the Basel Stock Exchange was created completing the three places of listing. Many small regional exchanges then appear.
Trading on the Zurich Stock Exchange was initially carried out by auction, but this method was replaced by an electronic trading system in 1996. It was also at this time that the three major Swiss stock exchanges namely the Zurich stock exchange, the Geneva stock exchange and the Basel stock exchange merged to create a national stock exchange which is based in Zurich and is now called the Zurich Stock Exchange. The SIX Swiss Exchange is still in charge of managing this national stock exchange today.
At the end of 2007 and the beginning of 2008, however, the SWX group merged with the Telekurs Group, which specializes in financial information and electronic payments. The two entities form the SIX Group.
In 2015, the Deutsche Boerse acquired the 49.9% stake in STOXX from the SIX Exchange for $ 697 million.
Finally, more recently, in 2018, the SIX Group announced the repurchase of the 75% of shares that it didn't yet own in the Swiss Euro Clearing Bank, which is a financial company in charge of making the financial link between Switzerland and the European Union and of which it was the main client.
What are the opening and listing hours of the Zurich Stock Exchange?
Before you start investing in the Zurich Stock Exchange and its many stocks, you may want to know a bit more about the opening and listing hours of this financial centre. Here is some practical information.
First and foremost, like most other global stock exchanges, the Zurich Stock Exchange is open every day from Monday to Friday outside of federal holidays. The opening and the trading hours of this stock exchange are set in the trading and settlement calendar which also indicates the various public holidays.
However, in certain specific situations, the hours of the Zurich Stock Exchange may vary more or less distinctly. This can happen when the permanent market is extended or shortened, whether for individual securities or for certain complete market segments or even for the entire market. This can also be the case for individual securities or market segments with a temporary suspension of trading. In this case, no opening or permanent market takes place for these securities.
Here are a few more details about the cut-off times for placing orders on this Exchange:
- For securities, opening hours are 8:30 am and closing hours at 5:00 pm.
- For loans, the opening time is 9 a.m. and closing at 5.30 p.m.
- For equities and investment funds, opening is at 9 a.m. and closing at 5.30 p.m.
- For rights and options, opening is at 9:15 a.m. and closing at 5:15 p.m.
Regarding quotes and their schedules, here are the details to know:
- Securities are listed from 8:30 a.m. to 5 p.m.
- Loans are listed from 9 a.m. to 5 p.m.
- ETFs and Warrants on Swiss Confederation bonds are listed from 9 a.m. to 5 p.m.
- ETS, ETSF and ETP are listed from 9 a.m. to 5.30 p.m.
- Sponsored Funds are listed from 9.15 a.m. to 5.30 p.m.
- Structured products are listed from 9.15 a.m. to 5.15 p.m.