The prototype of SDX, a Swiss digital exchange project, was ready on time, but the complete digital overhaul of securities trading will take more time, says Thomas Zeeb, head of SDX, in an interview with finews.com.

The Swiss stock exchange operator had a very ambitious timetable set for the development of its digital baby, the SIX Digital Exchange (SDX): the first offerings were scheduled for launch one year after the announcement of the project. SDX followed through on the promise for the exchange, which is based on the Blockchain technology.

For the past few weeks, customers have been exploring the prototype designed by the tech-gurus led by Thomas Zeeb, chairman of SDX, and his CEO, Tomas Kindler. The team will now have to slow down in its efforts as the digital exchange is about to surge ahead of its customers, said Zeeb in an interview with finews.com.

The Swiss banks, which own SIX, are less agile than the digital exchange, which was literally built from scratch.

Regulation and IT as Stumbling Blocs

«They support both goal and vision and agree with what we’re doing and will gladly continue financing it,» Zeeb said, describing the mood at a SIX board meeting held in July. «We simply have to make sure that we’re not ten steps ahead, but maybe only two. That way we can take the banks along the journey.»

There are two things that prevent banks from going the whole hog with a digital capital market. First of all, regulation is moving more slowly than technology. And secondly, turning off the banks’ trading platforms prematurely would leave the companies with hefty write-downs in their books.

A Decade Until Time of Harvest

Until these issues have been solved, the digital exchange – whose core system is slated for completion by the end of 2020 – and the existing systems will run in parallel. Zeeb believes that it will take at least another ten years before the advantages of the digital exchange will come to full fruition.

The main challenge facing the stock exchange operator is how to channel the enthusiasm of the banking world for Blockchain projects. Instead of working on many potential applications simultaneously, it would be worthwhile identifying those that stand a chance getting through the process of being ready to launch on the market.

Easier Conditions for Fintechs

Zeeb believes it is unfair to compare banks with agile fintech startups. The new companies aren’t held back by IT systems that date back to the 70s and therefore can more easily launch new products.

«It is true that the established banks are as agile as fintechs. But we have to be fair,» said Zeeb. «Fintechs have not in the least the same understanding of how the various parts of the market interact.»

Regulatory Questions

Swiss companies also have a limited influence on regulation, which also is in the way of a thorough and sustainable reorganization of trading. It is however only a question of time until the major issues have been sorted out – for instance the legal status of tokens.

But Switzerland isn’t alone in this and all the major financial hubs have to agree to similar rules in favor of a well functioning market.

It won’t be easy to get everybody to agree to the same rules, which means that the Swiss proposals remain test beds. Zeeb believes that the trading of securities within 10 to 15 years will see more radical change than in 400 years.

Digital Central Bank Money Project

The agreement between the Swiss National Bank (SNB) and the Bank for International Settlements (BIS) is all the more important, Zeeb said. The innovation hub installed at the BIS in Basel will look into the integration of digital central money for trading purposes.

The SNB had been enthusiastic about the idea behind SDX, Zeeb said. The central bank’s perceived caution in how it is treating the issues at hand have much to do with the problem of how to define digital money, he added.

The example of the Libra project started by Facebook is showing that the question is far from being conclusively defined.
«A central bank, or (players such as) ourselves, we can’t just burst onto the market like Uber did, upsetting everything and cleaning up later,» Zeeb said. «Markets are regulated, our role in it is strongly regulated, and if we are wrong, the consequences are enormous.»