Looking Ahead, Going Upward

2 19

Focus An Answer to “Standard” Questions Open Banking – an Opportunity for the Financial Center Page 10

Tokens ICOs, STOs, and IDOs Page 20

Ecosystems A Concept Is Taking Root Page 30

The Magazine from SIX

The Next Level of SIX Looking Ahead, Going Upward

In his second year as CEO, Jos Dijsselhof wants to grow with SIX. Page 4 SIX_Ad_SSE says thank you_200x270.indd 3 2019-08-12 10:26:17 THE MAGAZINE FROM SIX RED 2.19 3

10 Focus Open for Open Banking The secure, standardized exchange of client data between banks and accredited third-party providers – initiated by the client – is currently taking root worldwide. With its platform, SIX will enable Switzerland’s financial center to enter the open banking era as efficiently as possible.

4 Impulse Interview: The Next Level of SIX SIX CEO Jos Dijsselhof reminisces a bit and looks far ahead in the runup to Sibos. Takeaway 8 Sideshow The Magazine in 30 Seconds Swissloop student team proves innovative and fast at the SpaceX Hyperloop Pod Competition. Page Collateral Cockpit 18 Caught in the Act 16 Jochen Dürr, Chief Risk Officer atSIX , SIX will permanently revolutionize makes use of the long days in Sweden. ­collateral management with a workflow as easy and intuitive as using a smart- phone. The Collateral Cockpit reduces 20 What Kinds … the flood of information and helps … of tokens exist? ­traders by automating­ back-office and risk management processes. 22 Marijuana-related Businesses The regulatory landscape in the Page cannabis market remains complex. 25 MRB Securities More and more countries are legalizing 26 After-Tax Returns marijuana. But not everyone can or SIX Tax Score makes investment wants to invest in marijuana-related decisions transparent. businesses (MRBs), which is why SIX lists MRBs and their issued securities, as 30 Future Talk: Ecosystems well as structured products and options Lisa Yerebakan, Junior Open based on those securities, on a new watchlist six days a week. Innovator at SIX, meets the head

of the Helvetia Innovation Lab. Page 26 SIX Tax Score SIX Tax Score helps financial advisors meet their clients’ needs for better and more transparent investment decisions. The higher the computed SIX Tax Score, the lower an expected return­. Jos Dijsselhof Since January 2018 Jos Dijsselhof has served as the CEO of SIX. The Dutch national holds degrees in computer science and busi- ness administration, and has extensive international managerial experience in the financial industry. His career path led him to locations including Hong Kong and Singapore in his previous work for ABN Amro Bank, Royal Bank of Scotland, and ANZ ­Australia & New Zealand Banking Group. Prior to joining SIX, from 2014 through June 2017 Dijsselhof was the Chief Operating Officer of Euronext in ­Amsterdam, where he also served as the interim CEO in 2015. THE MAGAZINE FROM SIX RED 2.19 5

Deliver, Deliver, Deliver! Impulse Interview: The Next Level of SIX He arrived at the start of 2018 and personally drove the transformation at SIX, a process that is now completed. In his second year at SIX, CEO Jos Dijsselhof is striving to steadfastly pursue the path that the company has embarked on.

Interview Matthias Bill

We’re meeting here in the runup to Sibos. come on this path. Because, believe me, neither You attended the annual trade event my acquaintances nor our clients will allow me for ­financial service providers in 2018 to palm off the same response as last year’s. as the new CEO of SIX. What are your ­memories of the convention? And, how far have you gotten? Jos Dijsselhof A year ago, the transformation The year 2019 has shown that we’re not just at SIX was a big­ topic. So Sibos came at an on track, but on the right track. We have already opportune time toward the end of my first reached a number of milestones, with more year in office. We had strategically realigned to come by year-end. Let me give you just a SIX and had launched the SIX Spirit program couple of examples of how we, with our inno- aimed at instilling­ our corporate culture vations, have enhanced our clients’ competi- in our employees. One naturally meets tiveness this year and will further strengthen many old acquaintances at an international it going forward. The managed security event. ­Everyone there asked me how I liked ­services offered­ by our Security Operations ­Switzerland and my new job, but also wanted Center are now up and running, giving small to hear about the strategy and culture at and mid-size companies in the financial sector SIX. It was the perfect moment to show what access to highly sophisticated cyber­security SIX is made of. solutions that otherwise only larger companies can ­afford. Our threat intelligence platform How did you reply? currently has more than 20 users. I, of course, said that Switzerland was very Our digital exchange SDX is proceeding beautiful and I liked my job. But, jokes aside, on schedule [see box on page 7]. I’m delighted I mainly gave an account of my vision for that at Sibos we’ll be holding presentations SIX, describing how we would orchestrate the about SDX at our stand, where we will show ­reshaping of Switzerland’s financial industry a simulation of how fully integrated ­digital and actively promote digital transformation trading, settlement, and ­custody works. Our with innovative services. But what I intend clients will also get to see how our Collateral to recount this year is far more interesting: Cockpit will revolutionize collateral manage- I’ll be pointing out how far we’ve already ment [see page 16]. 6 RED 2.19 THE MAGAZINE FROM SIX

This year’s Sibos is being held in The EU, in fact, did not extend the London. How important is the presence ­recognized “equivalence” status of stock of SIX there? ­exchanges in Switzerland. London also is one of the 23 branch offices This activated a protective measure on that SIX operates outside Switzerland. These 1 July 2019: a Swiss Federal Council ordinance ­offices are important, in part because that’s prohibiting trading in Swiss equity securities where we run our international financial on venues in the EU. That shifted the trading ­information business. The series of milestones volume in Swiss stocks in the EU to our ex- that I began to tick off earlier continues here, change. The switch went absolutely smoothly. for example with our Sanctioned Secu­rities But regaining EU recognition of equivalence, ­Monitoring Service [see page 25], which is for which Switzerland’s­ exchange regulation proving very popular with our clients in the fully meets all technical specifications, remains midst of the ongoing geopolitical turmoil. our highest priority. In order to continue to In general, we have repeatedly succeeded in ensure legal certainty and satisfy investors’ creating customer­ value out of complex and needs for transparent and effective open confusing regulatory situations, as evidenced ­markets, we closely coordinate our activities by our recently­ launched watchlist for secu­ with the Swiss authorities and support them rities connected­ with marijuana-related busi- in their efforts. nesses [see page 22].

While we’re on the topic of London, we can hardly get around talking about “SIX and the Swiss stock Brexit. I’ll leave commenting on Brexit to the exchange have never stood still. British. But as a Dutchman working in Zurich, I definitely have an opinion on relations Innovation is in our DNA.” ­between Switzerland and the EU, all the more so since the Swiss stock exchange has been center stage in recent months in the debate about the proposed institutional agreement Measured in terms of free-float market with the EU. The EU put pressure on Swiss ­capitalization, the Swiss stock exchange ­policymakers by announcing­ that it would not is the fourth-largest in Europe. Congratu­ extend the recognized­ “equivalence” status lations! of the Swiss stock exchange. Three of the five companies with thelargest ­ But let’s face it: The draft institutional market capitalizations in Europe are listed on agreement is not a bilateral treaty anymore, our exchange, and we’re proud of that. But but rather has the potential to become the Swiss stock exchange is more than just a much more than that due to its dynamic­ trading venue for Nestlé, Roche, and Novartis. ­nature. I understand that many Swiss citizens We continue to be the platform for big and see their sovereignty and direct democracy small companies looking for capital.­ Shares in danger. And initiatives like the platform­ in around a hundred companies with market for open banking from SIX [see page 10] caps ranging between CHF 100 million and ­demonstrate that Switzerland is capable­ of CHF 1 billion also get traded­ here. That’s the establishing reasonable standards on its beauty of the Swiss stock exchange. own without regulatory compulsion by the Switzerland’s economy is substantially EU, in this instance the PSD2 payment smaller than Germany’s economy, but the services directive. market capitalizations of the two countries’ In any event, the Swiss must carefully equity markets are similar. Switzerland weigh their decision on the institutional thus has an extremely strong capital market ­agreement. As a citizen of the EU, I envy this in relation to its gross domestic product. pivotal moment of democracy. I’ve heard ­cogent arguments on both sides and sense What makes it so successful? solemn earnestness. Democracy takes Its success has many reasons, and I’d like to time. It would be good of the EU to grant stress a couple of them here. The financial this time to the oldest democracy on the sector is a major driving force behind the continent.­ Swiss economy. Around CHF 6 trillion of assets THE MAGAZINE FROM SIX RED 2.19 7

are managed in Switzerland. The capital- rich investor base creates a good environment for company listings. In addition, the Swiss capital market is highly efficient and fast. After submitting a listing application, a decision is made within a maximum of four weeks. It’s therefore no surprise that we attract “I expect us to continually companies of different origins, sizes, and sec- tors. So far this year, the Swiss stock exchange improve the way we provide has seen four company listings with a total transaction volume of CHF 2.3 billion. The IPO our services today.” by Stadler Rail was one of the biggest in ­Europe. The IPO by Medacta and the listing by Alcon testify to our expertise in the life ­sciences market. We represent around 40% of the capitalization of this market across ­Europe’s major stock exchanges. And, of course, we benefit from the fact that ­Switzerland ranks among the most compet­ itive ­countries on the planet, as the World ­Economic Forum’s Global Competitiveness Report attests­ year after year. But another reason is the most import- ant one of all: SIX and the Swiss stock ex- change have never stood still. Innovation is SDX – a SIX Company in our DNA. I’ve already mentioned what we’ve achieved this year alone, but I also think back to the year 1996, when the Swiss stock Becoming the World’s Leading exchange migrated all equity trading to a ­Exchange for Digital Assets fully electronic platform, thus replacing open SIX is building the world’s first fully integrated platform for the outcry trading. New York wasn’t the first to ­trading, settlement, and custody of digital assets in a secure and regu- do that, nor was London or even Tokyo – lated environment. On the SIX Digital Exchange (SDX), trading and Zurich­ was. ­settlement will no longer be separated. They will operate in the same Today, we rank among the industry cycle, allowing riskless trading. Every matched order will be settled ­pioneers that aren’t just talking about artifi- instantly. Delivery and payment happen simultaneously. Currently cial intelligence, but are also putting it to use, this process takes two days. Riskless trading effectively means that for example to handle post-trading support there is no need to mitigate risk and, potentially, no need for clearing requests and financial information queries. as a function.

By immutably linking digital assets and digital money with owner- Innovation is great, but doesn’t SIX ship claims, SDX aims to set the global standard for tokenization. stand first and foremost for stability? All asset properties are captured directly in the token – a single source Our stability and reliability are crucial, of truth. The commercial opportunity is to establish new asset classes and they lay a rock-solid foundation for the (e. g. difficult-to-trade assets and non-bankable assets like real estate next level of SIX. Nevertheless, I expect us or paintings) in the form of asset tokens (see page 20). to critique­ our processes and to continually SDX is purely focused on a B2B model. With SDX operating as a fully ­improve the way we provide our services regulated financial market infrastructure, encompassing an exchange ­today. We also need to add more services. and a central securities depository, its clients will have to fulfill The message is clear: We want to grow. certain criteria to obtain direct membership. We’ll do that by pursuing new ideas and The result of SDX will be greater transparency, reduced counterparty ­exploring new technologies, but perhaps risk, and significant efficiencies. also by working with additional strategic ­partners and through acquisitions. Above all, however, we have to “deliver, More information: sixdx.com deliver, deliver,” as I’m always saying. In other words, we have to make good on the promises we made a year ago at Sibos. Sideshow

A New Motor for Elon Musk

In a white paper published back in 2013, Elon Musk proposed employing a linear motor to accelerate pods in a high-speed hyperloop transportation system. But it took until the fourth staging of his SpaceX Hyperloop Pod Competition for him to finally see one in action, for instance in the “Claude Nicollier” pod engineered by the Swissloop team, which won an innovation award for its work. But the Swissloop team, composed of students from the Swiss Federal Institute of Technology in Zurich and other Swiss ­universities, was also fast on the SpaceX test track in Los Angeles. In the final round featuring the best 4 teams of the 21 that traveled to the competition, the pod – named after Switzerland’s first ­ astronaut – posted the second-fastest speed at 252 kilometers per hour. Victory went to the team from the Technical University of Munich, whose pod reached a speed of 463 kilometers per hour, breaking its own record from the previous year. If Elon Musk has his way, freight and people should soon be ­hurtling through hyperloop vacuum tunnels at speeds of up to 1,200 kilometers per hour. SIX backed the Swissloop team as a gold sponsor. More information: swissloop.ch 10 RED 2.19 THE MAGAZINE FROM SIX

Focus: Open Banking Binding Connections for the Financial Industry

Open banking is a quiet revolution sweeping the financial industry. It gives Swiss banks and insurers an opportunity to succeed in competition­ against big technology companies.

Text Simon Brunner

he electrical wall socket was rolled financial institutions have to share, but not out on a broad scale in the 1920s, how the exchange of data is to be carried out. and almost everything went wrong. In Asia, there has been a wild proliferation T The US solution was supposed to of different interfaces. In the USA, banks have prevail to become the world stan- developed their own customized solutions dard, but it was deemed too wobbly together with their partners. And the UK has and unsafe. 15 different inter­ enacted its own open banking legislation on national standards quickly came top of the PSD2 rules in force there. into being and, despite intense efforts, were never harmonized. Rectifying that today is The Digital Key practically impossible because the existing The problem isn’t a trivial one. Wherever infrastructure – all of the wall sockets and new services come into being and align with plugs – would have to be replaced. consumer interest, they increasingly often A similar situation faces the financial require banking or insurance data indepen- ­industry: open banking – i. e. the secure, dent of where the bank account or policy ­standardized exchange of client data between ­resides, be it for automatically synchronizing banks and accredited third-party providers and reconciling bank accounts with account- (TPPs) initiated by the client – is currently gain- ing programs, for example, or for executing a ing a foothold worldwide. The Financial Times payment transaction via a mobile solution. even calls open banking “the quiet digital All of these situations necessitate an interface – ­revolution.” But as was the case with electrical a kind of plug-and-socket connection – wall sockets, a profusion of different open that transfers the data securely, banking standards and solutions are popping ­reliably, and quickly. up. In the EU, a guideline called the Payment APIs have established them- Services Directive (PSD2) stipulates what data selves as the modus operandi for this

type of digital interface. API stands for “ap­ plication programming interface.” Examples are Apple and Google, which use APIs to define the way in which apps from third-party devel- opers have to communicate with iPhone or Android operating systems. In a world where more and more systems “talk” to each other, Janet Echelman: an Ode to the Node APIs are “key to successful digital transfor­ In an open banking ecosystem, mation,” Business Insider writes. “In the future, ­participants connect with each other via standardized nodes. US artist APIs will continue to play the crucial role in Janet Echelman connects buildings communication between different digital sys- the world over by literally ­weaving tems,” says Cornelius Dorn, Head Strategy & networks. Taking inspiration from the nets utilized by Indian fishermen,­ Business Development in the Banking Services she uses lightweight filigree mate- business unit of SIX. “But,” he adds, “a situa- rials to create voluminous, ­billowing tion where every single financial institution ­sculptures in public spaces. Our photo sequence presents the artist’s builds a proprietary API for the same business­ “Dream Catcher” sculpture on the features has to be avoided as much as possi- ­Sunset Strip in West Hollywood. ble.” Otherwise, a scenario similar to the “elec- It connects the dual towers of a hotel, figuratively intertwining the dreams trical wall socket” story would loom, though of the sleeping guests. this time within Switzerland, he explains. Dorn, who is also involved in the Open Banking More information: Working Group set up by the Swiss Bankers echelman.com Association (SBA), warns of an API jungle that would severely slow innovation in Switzerland. THE MAGAZINE FROM SIX RED 2.19 13

“It is simply impossible for small companies says e-commerce project head Nicolas to integrate APIs from each and every bank or Guillet from Abacus, the company behind the insurer,” he says. eponymous all-in-one ERP solution and the The innovation argument is particularly operator of Abaninja.ch, a cloud-based invoic- dear to Dorn, who holds a Ph.D. in engineer- ing tool for SMEs. José Fernández, the director ing. He explains that many young FinTech of partner management at digital office companies “mainly solve isolated single prob- ­administration solutions supplier Klara.ch, lems and do that really well, often better than adds: “By actively participating in the eco­ traditional financial institutions can. But end system, banks can ­collaboratively develop new customers seldom benefit from this – no business models.” one loads 15 apps on a smartphone that each “Incorporating services from third par- master only a single service element and ties meets customers’ desire for integrated are not integrated.”­ Traditional­ financial solutions,” SBA President Herbert Scheidt ­institutions, for their part, would have diffi­ ­confirmed recently in an interview. “The culty quickly adding new, ­external solutions SBA sees great potential in open banking because their business models are complex for ­Switzerland’s financial industry,” he said, and their infrastructures have grown com­ but it “opposes a government-imposed, plicated over the years. one-sided opening of access rights to third What is to be done, then? In the early parties analogous to what the EU’s PSD2 days of digitalization, incumbent Swiss finan- ­directive requires.” cial institutions had plenty of reservations Cornelius Dorn is convinced that the about disruptive FinTechs, which is not a prom- clock is ticking for the Swiss financial indus- ising strategy, as the media sector illustrates, try. “If we don’t take action ourselves to for instance. Some publish- ing houses rejected the new products and distribu- “It is simply impossible tion channels and missed for small companies the boat as a result. But most banks and insurers to integrate APIs shed their initial skepticism from each and every relatively quickly. As early as in 2016, Credit­ Suisse bank or insurer.” Switzerland CEO Thomas Cornelius Dorn, SIX Gottstein declared­ that the bank was applying the “frenemies” principle, turning rivals into Lexicon ­business partners. “Young upstarts are ­working ­together with traditional institutions API stands for application program- like ourselves,” he disclosed. ming interface. APIs enable TPPs to ­utilize bank clients’ account data and The Clock Is Ticking banking functions in connection But how far does the cooperation between with those accounts. the old financial world and the new one go? PSD2 stands for the second EU Pay- Do financial institutions run the risk of selling ment Services­ Directive, which has been off their crown jewels – their client relation- in force since January 2018. PSD2 envis- ships and data – or even being compelled ages, among other things, opening the to give them away like in the EU under PSD2? banking market to TPPs in the area of The Swiss business newspaper­ Handelszeitung payment transaction services. Banks are recently wrote that a specter is haunting the required by law to have implemented European banking world – “the specter of the PSD2 rules by mid-September 2019. open banking.” Banks, it reported, are going TPP stands for third-party provider. to great lengths in an effort not to lose contact TPPs are generally non-bank financial with their end customers after the forced institutions that are granted regulated opening of the banking market to non-bank access to bank clients’ accounts financial­institutions. “Banks that take part in (via APIs, for example). open banking as first movers can gain a lot,” 14 RED 2.19 THE MAGAZINE FROM SIX

devise innovative solutions, our financial of clients, banks, TPPs, and other potential ­institutions risk getting crowded out of the ­participants. “The platform from SIX will set market by the US technology giants.” In fact, the standards for efficient open banking in Apple, Google, and the like are increasingly the Swiss financial center,” Dorn says, “and at ­encroaching on the territory of banks and the same time will guarantee all participants­ ­insurers, often using payment solutions as a a high level of security.” gateway. Facebook, for instance, just recently­ The platform will link the different announced plans to launch its own global ­participants via standardized APIs in a way ­currency, called Libra, next year. The California- that will enable them to develop new, inno­ based social media company has held a vative, ­user-friendly solutions and to get them ­banking license since 2016. to customers­ more easily. “It is also intended to be kind of like a petri dish for cultivating The Petri Dish of Banking ideas and business models,” Dorn explains. So, to enable Switzerland’s financial center Other approaches are also being pursued to enter the open banking era as efficiently as in Switzerland, he says, “but the platform from possible, SIX has developed a uniform data SIX is currently the only solution being offered exchange platform – without any regulatory by a centralized infrastructure service provider. compulsion and in alignment with the needs Moreover, it eschews shortcuts like ‘screen scraping,’” a process of automatically capturing screen display data that some companies­ are forced to resort to if there are no interfaces available. Screen ­scraping has a bad repu­ tation; it is generally considered error- “Incorporating prone and is frequently Open Banking for Switzerland services from third misused by hackers. Another advan- The Platform ­parties meets tage of the platform from SIX ­customers’ desire for from SIX is that “it can be adapted to any SIX is bringing open banking to Switzer- integrated solutions.” international stan- land on a broad scale. “With its platform, dards that emerge,” SIX will become a central hub for the Herbert Scheidt, SBA Dorn adds. “That way sharing of data in the banking sector,” says Marco Menotti, Head Banking­ we would make it ­Services at SIX. “With it, we are laying ­easier for even small, highly specialized the foundation for our platform users’­ Swiss startup companies to sell their services ­innovative products and supporting inter­nationally.” In April, the Handelszeitung Switzerland as a financial center.” hailed the solution from SIX, which will be rolled out initially to corporate clients, as a The platform went into pilot operation with Credit Suisse, UBS, and the two “milestone” for open banking in Switzerland. third-party providers (TPPs) Abacus and The platform went into pilot operation in Klara.ch in July 2019. SIX is initially July (see box). testing two services. An account infor- In an extensive report on open banking, mation service gives TPPs access to bank McKinsey & Company wrote that change is account data in order to synchronize rarely comfortable, but the forces of change and reconcile it with companies’ are inevitable. “Banks are better served ­accounting software. A payment service ­getting ahead of and defining the trend rather enables TPPs to automatically initiate than waging a futile battle to repel it.” their ­corporate clients’ payments at the cor­responding bank. The clients then just have to release them. “We are guided by the needs of the market and our clients,” Menotti says, “and will con- tinue to add new use cases.” The ­platform is scheduled to go into regular operation at the start of 2020.

16 RED 2.19 THE MAGAZINE FROM SIX

The Date The Problem: Managing Collateral Is Hard Work

It’s actually the most normal thing in the (financial) 12 November 2019 world: A bank receives money or securities from SIX presents a threat assessment for the Swiss financial ­another bank for a certain period and places one center in its 2019 Cyber Security Report. Phil Venables or more securities as collateral. But this practice from Goldman Sachs and Troels Oerting from the World ­affecting nearly all interbank transactions and all Economic Forum will be guest speakers in Zurich. parties involved has a catch – it’s complicated. A bank can have collateral at different central secu- More information, and registration to attend the event: six.swiss/cyber-security-report19 rities depositories (CSDs). The two counterparties can be located in different countries, as can the ­collateral itself. The involved stakeholders at the bank may not all have access to the same informa- tion. Money (e. g. interest coupons) must be ­re­mitted to the beneficial owners, and liquidity The Head / The Count ­regulations also must be obeyed.

The Solution: The Collateral Cockpit from SIX

10 Program SIX will permanently revolutionize collateral ­Increments ­management in November 2019 with the launch of its Collateral Cockpit. The objective is to make the workflow as easy and intuitive as using a ­smartphone. Regardless of the trading­ purpose and where the collateral is located, the innovative Laurent ­Lefèvre Collateral Cockpit solution helps traders­ by auto- Head Delivery Capabilities, mating back-office and risk man­agement processes. Financial Information, SIX Drop-down menus with predefined­ algorithms ­standardize the placement of collateral, and recur- SIX Flex is a new, intuitive a program increment. ring alerts help to prioritize by reducing the flood way for clients of SIX to Laurent Lefèvre, as the of information to the bare essentials.­ The process select, order, and integrate product manager, is in of exchanging a security, for example, will now award-winning ­financial charge of the program take only a few clicks and a couple of seconds. information such as refer- backlog after already ence data, corporate ­having worked for the ­actions, as well as tax and project in other roles. regulatory information. SIX Flex was launched To create a user experi- ­recently, but its develop- ence akin to that of Ama- ment doesn’t end with zon and Co., SIX opted that. Lefèvre is dangling to employ the Scaled Agile the prospect of adding Trader Back Office Risk Manager Framework (SAFe). Under ­integrated cost tracking, Collateral Cockpit this method of develop- for example, because­ with ment, the program back- SIX Flex, ­clients pay only log catalogs the features for the data they actually and functionalities de- use. The tenth program A s u D sired in the product from increment was thus far to S S t C m a w s a n ie s a client’s standpoint. The from being the last one. t da rv o io rd ve cr n ize d O a product developers imple- of d a tize n P nd Priori tio ro za ces mi ment those specifications ses Opti in a series of small itera- More information: six.swiss/six-flex tions called sprints that fit into a longer period called Trading Custody THE MAGAZINE FROM SIX RED 2.19 17

WatchWatch athe “making “making of” of” video: video: six.swiss/homebasesix.swiss/homebase

The Picture A little more than a year after the founding of the Innovation & Digital business unit of SIX, its 55-member team moved into its new collective home base in July 2019. But the flexible workspaces on a converted floor in the headquarters ofSIX in Zurich makes it an attractive place for all employees. Lounge-like meeting rooms and writable walls encourage creativity and collaboration. A “focus area” and a number of “phone booths” allow employees to work without distractions. Caught in the Act

Brunkebergstorg (Riksbank) Stockholm, Sweden

3 July 2019 4:30 pm

15°C Humidity 56% Scattered clouds

Dr. Jochen Dürr Chief Risk Officer, SIX The sun won’t set here in Stockholm until around 10 o’clock tonight and will already rise again at around 3 o’clock tomorrow morning. Such long days come in handy for Jochen Dürr, Chief Risk Officer atSIX . He has a ­jam-packed appointment book in the far north. Yesterday he accompanied Thomas Koch, Chief Security Officer at SIX, to the World Federation of Exchanges’­ technology conference on cybersecurity in Umeå, and today he paid a visit to the office of SIX in Sweden.

Meeting with colleagues at the international branch offices of SIX is a labor of love for Dürr, one in which imparting and integrating global ­standards are in the foreground. Global standards are vital to guaran- teeing clients the stability they expect, he says. He is particularly con- cerned with creating lasting enterprise value through a future-­oriented risk ­management framework, clear security governance, and high awareness of compliance standards. 20 RED 2.19 THE MAGAZINE FROM SIX

What Kinds of Tokens Exist? Digital assets based on distributed ledger (a.k.a. block­ chain) technology can’t be discussed without using the terms “coin” and “token.” From a historical standpoint, two different concepts lie behind the supposed syn­ onyms. Until recently, the term “coin” denoted crypto­ The individual token currencies like Bitcoin that functioned, and still do, ­c­ategories are not mutually solely as a means of payment. The advent of initial coin exclusive. Asset and utility offerings brought tokens into play, and the distinctions tokens can also be classi- between coins and tokens started to blur. fied as payment tokens if they serve a hybrid function­ That’s why the Swiss Financial Market Supervisory (hybrid tokens). ­Authority FINMA now only uses the term “token” in its guidelines, distinguishing three categories: payment ­tokens, utility tokens, and asset tokens. FINMA classifies asset tokens as an ownership claim on an asset, which makes them securities akin to stock shares from a regulatory­ perspective. Utility Tokens

Access rights to digital services or voting rights within protocols like Ethereum. Payment Tokens ­(Cryptocurrencies)

Digital money that exists on its own distributed ledger, like Bitcoin does on its blockchain. Payment tokens are a means of payment with no intrinsic value.

Media of Payment

Stablecoins

Cryptocurrencies that are less volatile because they are pegged to one or multiple assets like the US dollar, the euro, or gold. THE MAGAZINE FROM SIX RED 2.19 21

Asset Tokens

Ownership claims on assets. Asset tokens enable trading of existing assets (e. g. stock shares, Stock Shares bonds, or mutual funds) and new assets on a digital exchange like SDX from SIX (see box on page 7). Non-bankable assets Securities like real estate or paintings can also be tokenized.

Utility tokens with an investment compo- nent are treated by FINMA as securities, like asset tokens.

Media of Exchange

SIX Digital Exchange (SDX) establishes a new standard for digital assets and clearly sets itself apart from unregulated ICOs. With initial digital offerings (IDOs), SDX will Stablecoins pegged to under- also surpass the quality of today’s STOs. lying securities are treated by IDOs have a lot in common with traditional FINMA as securities like exchange- IPOs because they, too, are subject to traded funds. ­applicable securities laws.

THE MAGAZINE FROM SIX RED 2.19 23

Budding Business, Regulatory Jungle

Marijuana-related Businesses More and more countries are legalizing marijuana for medical and even recreational use. The number of marijuana-related businesses is growing exponentially. However, the regulatory situation remains confusing for the time being.

Text Matthias Bill

ince the late 1970s, coffee shops in potential. Around 30 more countries in the Netherlands were places of MRBs’ ­addition to Uruguay and Canada have since yearning for marijuana consumers. revenues legalized marijuana at least for medical S Possession of small quantities of purposes.­ MRBs have accounted for 3% of all marijuana was tolerated, but the dried buds of are initial public offerings (IPOs) in those coun- cannabis plants were never entirely legalized. projected tries thus far in 2019. Annual worldwide sales That’s why Amsterdam had to cede its status revenue of MRBs is projected to climb to as a marijuana mecca by early 2018, when to climb above USD 60 billion by 2024. ­Canada, following Uruguay in 2017, became to above the first industrialized nation to completely Gold Mine or Reputation Trap? legalize the cultivation and sale of cannabis. USD 60 bn Marijuana seems to be losing its stigma The legalization move by the Canadian govern- by 2024. as a gateway drug. However, investing in this ment was aimed at promoting safer marijuana market isn’t a no-brainer given the heteroge- use and more effective youth protection, neous regulatory landscape worldwide, which as well as opening a new business and invest- looks set to stay jumbled for a long time to ment sector for the economy. come. What’s legal on one side of the globe Hopes in the latter aspiration, at least, can be punishable under criminal law on are justified. The market for marijuana-related the other side of the world. Take the sub-mar- businesses (MRBs) possesses huge growth ket for cannabidiols (CBDs) as an example. 24 RED 2.19 THE MAGAZINE FROM SIX

In Switzerland, low-THC cannabis has been sold freely since 2011. Market leader BioCan harvests CBD-rich buds from fields and greenhouses throughout Switzerland.

CBD products contain only a very small of low-THC marijuana and CBD products un- ­concentration of psychoactive tetrahydro­ der certain circumstances. US federal law, cannabinol (THC). They have been sold ­however, still criminalizes the use, possession, freely in Switzerland since 2011 (also see photo Marijuana cultivation, and sale of marijuana. sequence), whereas in Texas their sale is is com- An investment requires careful con­ ­restricted to epilepsy patients. sideration – inside and outside the USA. pletely Even though marijuana has been legalized in Differing Legislation legalized a growing number of countries, it remains Particularly in the US market, the legal land- ­illegal in the vast majority of nations. Resi- scape is exceptionally complicated. Drug in 13 US dents of those countries that outlaw cannabis ­offenses in the USA fall under the legislative states. who invest­ in MRBs run the risk of violating jurisdiction of the 50 individual states. State ­anti-money-laundering laws. The new MRB laws, though, can deviate from US federal Securities Watchlist from SIX (see box on the law, which banks are heavily subject to. right) helps to assess this risk. Cannabis is currently legal for medical use in 34 states, the District of Columbia, Guam, Puerto Rico, and the American Virgin ­Islands. It is completely legalized also for ­recreational use in 13 states for adults over the age of 21. Twelve other states permit the use THE MAGAZINE FROM SIX RED 2.19 25

MRB Securities Watchlist 30,000 Financial Instruments Affected

Some investors wish to avoid investing changes – including regulator updates authorities in the EU, Switzerland, in marijuana-related businesses (MRBs) and shareholder changes, for example – Singapore, Hong Kong, Australia, altogether, or at least want to be able to per week, making it one of the most Canada, the United Kingdom, the United make risk-based decisions on investing comprehensive monitoring services on States, and the United Nations­ Organi- in such companies. “Not just in view the market. zation. of regulatory uncertainty, but also for The SSMS meets a great need, reputation reasons,” says Oliver Bodmer, Always Up to Date as attested also by partnerships of Senior Product Manager in the Finan- A geopolitical environment with a SIX with well-known providers of asset cial Information business unit of SIX. constant onslaught of new and ever- management services like SimCorp But since MRBs operate in a wide array shifting sanctions poses an enormous and Eagle Investment Systems, which of sectors ranging from research and challenge for compliance officers at ­integrate the SSMS in their compliance cultivation to transport and sales, it is banks worldwide. Identifying securi- modules. “Their customers can di- hard for banks to maintain an over- ties connected with sanctioned rectly access our constantly up-to- view in the interest of their investor business entities or individuals is a date ­information on global sanctions. clients, Bodmer explains. SIX supports laborious and complex undertaking, Doing that enables them to employ banks in this task with its new MRB also because sanctions often apply ­internal resources elsewhere and Securities Watchlist, which lists MRBs only to specific countries and are im- ­minimizes their risk of incurring fines and their issued securities, as well as posed abruptly. When the US Treasury and reputational­ harm,” explains structured products and options based Department recently classified96 Joe Chimenti,­ Partners Director for on those securities, six days a week. Russian oligarchs as high-risk individ- the US market at SIX. Approximately 400 companies and uals, the first six sanctions quickly 30,000 financial instruments are followed. ­currently on the watchlist (see graphic). That’s why the SSMS provides The MRB Securities Watchlist a daily compendium of companies and builds on the award-winning Sanctioned persons under observation in addition Securities Monitoring Service (SSMS) to its daily list of sanctioned companies that SIX has been providing since 2016. and individuals. It does this by drawing More information: six-group.com/sanctions The SSMS monitors 6.7 million active on information from a wide range instruments and more than 26,000 of international regulators, including

SIX has identified more than30,000 financial instruments that are­directly or indirectly connected with roughly 400 marijuana-related businesses (status as of June 2019). A wide array of sectors are affected.

Consumption Devices

Marijuana Products Cultivation and Retail

Pharmaceutical Marijuana Hemp Products

Other Sectors (e.g. AgriTech and Transportation)

Finance 26 RED 2.19 THE MAGAZINE FROM SIX

nvestors increasingly require their ­financial advisors to enlighten them I about the potential tax consequences­ of specific investments. Regulations such as MiFID II – and FinSA in Switzer- land – are also putting mounting pressure on them to discuss tax costs with clients prior to undertaking an ­investment. In their at- tempts to meet those requirements,­ ­fi­nancial advisors thus far have had to fight their way through thick tax manuals and ­interpret these Tax Savings themselves. Under such ­circumstances, a ­comprehensive perspective is not guaranteed, particularly in the case of cross-border invest- Begin at the End ments. Tax ­estimates therefore often confine themselves to a high-level view focused on After-Tax Returns with SIX Tax Score “What’s asset classes. ­However, the devil really lies in the details at the level of an individual security. left over in the end?” This is the question that all Thanks to its comprehensive reference data ­investors regularly ask themselves. For in financial and its extensive in­formation on corporate transactions, the “end” doesn’t come until all taxes actions and tax laws, SIX can provide these details in the form of SIX Tax Score. have been paid. But today it’s hard to estimate the tax impact of an investment. Financial advisors, A New Dimension of Transparency however, will receive help in doing just that by SIX Tax Score helps financial advisors meet their clients’ needs for better and more trans- means of SIX Tax Score starting in 2020. parent investment decisions. The higher the ­computed SIX Tax Score, the lower the Text Matthias Bill ex­pected return. Tax law information concern- ing tax domiciles and applicable tax rates flows into the SIX Tax Score, as does ­additional information (tax attributes) in the form of Security A ­historical corporate actions data, such as divi- Security B dends, interest rates, and fund distributions. 4.52% Expected SIX Tax Score’s inclusion of this added informa- Return 5.47% tion is the key that enables a financial advisor to transparently determine that security A in our graphic could present the more attrac- tive investment option for his or her client. Prior to examining the tax situation with SIX Tax Score, security B, ­with a higher expected Switzerland Tax Domicile Switzerland return on investment, appeared to be the ­better choice. In the past, however, dividends 0% Tax Rates 33.97% (from Dividends) on security A came from capital reserves

Dividends from Capital Reserves are Tax-exempt Tax Attributes and were thus tax-exempt. In total compari- son with SIX Tax Score, this leads to a higher 0.00 SIX Tax Score 0.62 ­expected return on ­security A.

Expected 3.55% Return 4.52% after Taxes

SIX Tax Score will become available for the tax domiciles Switzerland, the UK, and France during the course of 2020. More from SIX on the subject of taxes: six.swiss/tax Gold

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Focus Focus Focus Focus Understand Data – Taking the Focus Cybersecurity Focus A History SIX on Tax Combating Cybercriminals Missed an issue? For Real Now! Future into with Cognitive Computing Bank 4.0 of Time Fiscal Matters Made Easy Theses on a How Big Data Will Become Page 14 SIX: 20 Years of Account Page 12 Digital Future a Success After All The Successor to Advancements eBill Page 12 Page 12 the Payment Slip #SIXHackathon 2018 Page 10 Page 12 Sleep Is The New Fake News Best Execution Digital Bill for Say It Right on the myAnalytics “All Sufficient SDX – a SIX Company Overrated Getting to Know SIX Is Building Page 22 Switzerland Stock Exchange Steps” Page 24 Page 4 Customers Read all editions online: Page 22 the Digital Internet of Things Cashless Events Omnichannel through Their Card Cloud Technology E-Commerce Exchange When Speed How Today’s Purchases Page 4 the Smart Way Safe and Sound Is the Need Customers Page 22 Artificial Intelligence Page 26 in Switzerland Page 26 Page 30 Want to Pay Autonomous Driving Meeting Page 22 of Minds: Machine Ethicist Meets Automotive six.swiss/red-archive Hemispheres Apart? Visionary Page 30 Page 30

The Magazine The Magazine The Magazine The Magazine The Magazine The Magazine from SIX from SIX from SIX from SIX from SIX from SIX

Future Talk Impulse Interview Can the Future Impulse Interview “Blockchain Fighting Cybercrime Regulatory Compliance 2.0 of Innovation Impulse Interview won’t wreck I’m Also Guardian of the The Good Be Found Cyberspace Playfully the financial a Bot Hacker Game designer Philomena Schwab in the Past? Security analyst Evrim has Keren Elazari gives the proves that computer programing In London, Professor Michael Mainelli Jacob Gertel from SIX is not only everything under control at the SIX hacker community a friendly doesn’t have to be a man’s realm. Steampunk Dan Aetherman’s gadgets can be grasped has been working on the the namesake, but also the soul of JACOB Security Operations Center. face in the campaign Page 6 both physically and intellectually. But soon this will not be the case for technology of the hour since 1995. Successful digitalized bank-customer interactions, says his interview partner, the automated compliance bot. indu str y.” Page 22 for greater cybersecurity. Page 4 Page 24 Page 4 designer Gerhard Buurman. Page 30

RED_00_e_Cover [PINTEN]{INTLEN}.indd 1 20.04.18 10:55

30 years SMI: equity indices explained! Special exhibition at the Swiss Finance Museum

www.finanzmuseum.ch

SIX_RED_AZ_Finanzmuseum_SMI_200x90_DE_v04_RZ.indd 1 22.07.19 15:52 28 RED 2.19 THE MAGAZINE FROM SIX

The List

QR Codes Are Back Because They …

1 2 3 4

… Eliminate … Share … Facilitate … Keep Track Media Information. Payments. of Things. Discontinuities.

QR codes are currently Numerous social media Independent of NFC inter- QR codes never entirely ­experiencing a renaissance companies utilize QR codes faces, QR codes are the ­disappeared from the as an alternative to URLs. or similar techniques and driver of mobile payments ­industry for which they Two crucial things have are thus making them pop- worldwide. In Switzerland, were originally conceived: changed since QR codes ular again. Snapchat has TWINT allows you to pay logistics.­ Where supply first made their debut on led the way in making scan- via QR code at payment ter­ chains are starting to printed matter and were ning cool again. Snapcodes minals, self-service vending ­employ distributed ledger quickly adjudged by enable Snapchat users machines, and even park- technology, QR codes look consum­ers to be a point- to easily add new friends ing meters. In online destined to become­ even less marketing tool. First, in a flash. Pinterest has its stores, TWINT does away more important­ for consumers no longer have ­Pincodes, Spotify allows with the tedium of typing in ­identifying and tracking to download an app to you to scan songs, and credit card numbers. Addi- goods. But QR codes will scan a QR code – the cam- even Twitter­ generates a tional use scenarios for continue to leave traces eras on most smartphones QR code of a person’s user QR codes come into being on people, too – just think today support the format. name on command. It’s with cryptocurrency trans- of flight or concert tickets. Second, when you scan arguably only a matter actions and at the ATM. QR codes nowadays, you of time until QR codes also And the Swiss financial land on websites that have ­reappear on printed busi- ­industry is introducing ­actually been optimized ness cards. QR bills as the successor for mobile use. to the standard payment slips currently in use.

The Find Brave in Bronze

And suddenly she stood there, self-confident and of the visit was perfect, coinciding undaunted. On 27 April 2019, the Fearless Girl with the invitation from SIX to its made an appearance at the Swiss stock exchange “The Value of Gender Diver- at SIX in Zurich. The bronze girl has been stand- sity” event. Jos Dijsselhof, ing akimbo and defiantly demanding a balanced CEO SIX, Stefanie Ruf ­distribution of women and men in leadership from State Street Global ­po­si­­tions since 2017. The original statue (see photo), Advisors, and Natacha which was commissioned by asset management Catalino, Head of Diversity firm State Street Global Advisors, stands on and Inclusion for McKinsey & Wall Street. A copy came to Zurich after previous Company in Europe, spoke stops in Oslo, Dublin, and Melbourne. The timing at the conference. THE MAGAZINE FROM SIX RED 2.19 29

The Glossary

PROSPECTUS REVIEW OFFICE The Financial Services Act (FinSA) and the Financial Services ­ Ordinance (FinSO) will harmonize prospectus regulations in ­Switzerland effective 1 January 2020. This strengthens the competitiveness of the Swiss financial industry and enhances protection of investors similar to the way the EU ­Prospectus Directive does.

In the future, whoever intends to publicly offer securities for sale in Switzerland or to seek their admission to trading in Switzerland must first publish a prospectus containing information on the security and its issuer. The prospectus must be submitted to a review office for approval prior to its publication and afterwards must be stored on record with that office.

SIX Exchange Regulation AG, as the regulatory and monitoring organization overseeing the ­trading venues operated by SIX, possesses requisite expertise unique in the market and over two decades of experience in handling prospectus review processes. SIX Exchange Regulation AG ­expects to receive an official license as the review office for prospectuses from the SwissFinancial ­ Market Supervisory Authority FINMA toward the end of 2019.

RED – The Magazine from SIX The Quote Circulation: 5,000 copies

Publisher SIX Group AG P.O. Box 8021 Zurich, Switzerland “FinTechs will play a role six-group.com/red [email protected]

Subscription, Unsubscription, in banking, but they Change of Address six.swiss/red-subscribe won’t infiltrate into Editorial Staff Claudia Holfert (SIX, Overall Direction); Matthias Bill (SIX, Editor in Chief); the core business, which Simon Brunner Publication Design C3 Creative Code and Content is based on trust and (Schweiz) AG, Zurich, c3.co/schweiz Picture Credits Thomas Eugster (Cover/pp. 4/8–9/17/ experience.” 18–19/31–32); Janet Echelman (pp. 11–15); Kyeni Mbiti (pp. 16/29); Christian Beutler, Keystone (pp. 22–24); Wang Ying, Elly Hardwick, Chief Digital Officer atUBS , in response to a question ­Keystone/Xinhua (p. 28) on banking in the year 2050 posed in the Zukunft Banking (“The Future of Banking”) special edition magazine from netzwoche.ch. English Version Mark Rabinowitz (Translations); Robin Scott (Copy Editing); Claudia Marolf (Proofreading)

Printer linkgroup AG, Zurich, Switzerland 30 RED 2.19 THE MAGAZINE FROM SIX

“The Value Proposition Is the Starting Point”

Future Talk: Ecosystems A term from the field of biology is now­ flourishing in the business world. Lisa Yerebakan, Junior­ Open Innovator­ at SIX, and Bernhard Lingens, the head of the Helvetia­ Innovation Lab, know why ecosystems are pro­liferating like mushrooms.

Interview Matthias Bill

Here, under a dome in the Botanical Garden marketplaces can be designated platform of the University of Zurich, we can get a ­ecosystems, where network effects and sense of the ecosystem of tropical drylands. a large number of partners stand in the fore- But the term “ecosystem” is also taking root ground. These partners are interchangeable outside of flora and fauna, isn’t it? at any time. Bernhard Lingens The term, originating The situation is quite different in a busi- from the field of biology, has indeed found ness ecosystem, where just a few partners join its way also into the business world. It has forces to leverage their respective strengths ­become something of a trend. One study, for and are difficult to substitute. “Business eco- ­example, came to the discovery that the term system” is thus the appropriate term to use in “ecosystem” occurs in large-cap US compa- connection with strategic management and nies’ annual reports 13 times more frequently business models [see box on page 34]. today than it did a decade ago. This also L Your important and spot-on interjection owes to the fact that companies like to adorn allows me to return to the initial question. themselves with the term in an eagerness A real economic challenge is the driver behind to appear innovative. Conveniently, the term the buzzword “ecosystem”. And business “ecosystem” is very versatile. The buzzword ­ecosystems, to adopt the expression, have be- seems to be a catchall for almost anything. come a practicable option particularly for stagnating or intensely competitive industries. “Seems” to be a catchall? It sounds as Y Furthermore, digitalization facilitates busi- though the term also gets used incorrectly. ness ecosystems because it lowers transaction Lisa Yerebakan Perhaps this would be a good costs. Standardized interfaces of the kind that moment to define the term. There is not just SIX will provide with its platform for open one ecosystem. We frequently use the term, banking [see page 10] will also reduce collabo- for instance, as a synonym for a business ration and innovation costs in the future for ­sector – an industry ecosystem, so to speak. startups, banks and other partners. Technology Or we can talk about a knowledge ecosystem makes coordination easier. when it’s primarily a matter of exchanging L And there’s scientific evidence that sub- information. Amazon and other similar stantiates this. Use of the term “ecosystem” Lisa Yerebakan knows how an ecosystem grows best.

Bernhard Lingens knows how ecosystems spring to life.

THE MAGAZINE FROM SIX RED 2.19 33

Dr. Bernhard Lingens ­technology – I include the financial perspective, this network would be Since 2017 Bernhard Lingens sector in this group – lack the requi- too big to function as a business has headed the Helvetia Innova- tion Lab, a joint undertaking site in-house expertise and resources. ­ecosystem. But since the partners – between the University of Even if a concept for a service of that Swiss banks and SIX – were already St. Gallen’s Institute of Technol- kind was ripened in an innovation networked with each other prior ogy Management­ and the ­Helvetia Insurance Switzerland process, sooner or later it got relegat- to the advent of TWINT, the coordi­ group. Together with his team, ed to a drawer. The drawer reopens, nation between them never­theless he is researching the phenome- though, in a business ecosystem. works. non of business ecosystems ­ in collaboration with companies Y And ironically, that happens not in a variety of industries. because a company strays from its How big, then, can a business Lingens has a background core competencies, but because it ­ecosystem be? in mechanical engineering and business administration. can even better concentrate on them. L As small as possible and as large He holds a doctorate in Business At SDX, the digital exchange operated as necessary. During the setup stage Innovation from the University by SIX [see box on page 7], we can of a business ecosystem, having too of St. Gallen and was a visiting researcher at Imperial College leverage our status as a regulated many partners is an impediment – London. He previously worked as securities exchange while at the same and a cost factor. For the involvement a strategy consultant at the time exploring distrib­uted ledger of four to five partners, for instance, consultancy firm Roland Berger. technol­ogy possibilities with partners. the orchestrator of the ecosystem has

Lisa Yerebakan By the way, I share the view that to calculate in two to three full-time As a Junior Open Innovator the financial industry needs to catch job equivalents for the coordination. at SIX, Lisa Yerebakan has been up technologically, which is also the supporting internal innovation The orchestrator? initiatives and running projects explanation behind the large number of her own with external part- of FinTech startups. But the financial Y Coordination between the partners ners since 2018. After complet- industry benefits from having a kind of in a business ecosystem has already ing a bachelor’s degree in ­business administration at the natural affinity toward ecosystems. come up a few times in our conver­ University of St. Gallen, she is The financial sector has always func- sation. The orchestrator is the central currently working on a master’s tioned like a network. Just think of partner that handles the coordination in business innovation. For her master’s thesis on business the process that ensues when I use an work. The other partners chip in ecosystems, she has found an automated teller machine at Bank A products or services that drive a joint ideal study object in her em- to withdraw money from my account value proposition, which is the most ployer, SIX, with which to put theory to an empirical test. at Bank B. important element and the starting Prior to joining the Innova- L Good point. We can see that point of a business ecosystem. As the tion & Digital business unit of also with the Swiss mobile payment orchestrator, I have to ask myself SIX, Lisa Yerebakan worked as a Customer Advisor at SIX app TWINT. From a purely doctrinal what missing elements I need to ob- ­Payment Services. tain to fulfill the value proposition. That question guides my search for partners. has exploded exponentially since the turn of the millennium hand in hand “Business Suppliers also provide companies with the advancement of digitalization. with missing elements. But there are two other factors be- ecosystems have Y But that’s a traditional supply chain. sides technology that are also fueling become a If I, as a company, am no longer satis- the trend. fied with Supplier A today, I switch The first one has to do with the practicable option to Supplier B. Both supply more or less market. Alongside the urge – or particularly the same product. In a business eco- ­compulsion – for companies to differ­ system, in contrast, the crucial aspect entiate themselves, consumers are for stagnating is that the products that the partners ­demanding a new way of thinking. or intensely develop aren’t generic. Each element They increasingly want a user experi- in itself should represent an innova- ence similar to what they get from competitive tion. Only that way do business eco- an online travel agency, for example, industries.” systems create added value and maxi- even for complex procedures like mize their growth potential. And ­buying a house. Bernhard Lingens, growth ultimately is the motive for That leads directly to the third Helvetia Innovation Lab establishing a business ecosystem. factor: Companies in industries that L Organization theory tells us that traditionally have little to do with we save transaction costs when we 34 RED 2.19 THE MAGAZINE FROM SIX

operator for Switzerland’s financial establishing a technical platform; center, SIX takes a neutral position. on the other, it’s about satisfying the Through its shareholders, the Swiss partners, because as an orchestrator banks, and through its existing client you depend on them. relationships, SIX already has a strong Y Pleasing all the partners isn’t all network in place. SIX also has the that easy when each one wants “The financial ­requisite level of technical expertise something different. It takes a bond industry benefits and many years of experience dealing of trust and, by extension, employees with complex ecosystems like the on the orchestrator’s side who pos- from having Swiss payment transactions system. sess social skills and are adept at a kind of natural For my master’s thesis, I’m inves- ­integral thinking. The demands placed tigating what skills an orchestrator­ on employees increase further if the affinity toward needs to possess to successfully­ set orchestrator itself furnishes technical ecosystems.” up a business ecosystem. With its elements as well. Not every tech-savvy ­Innovation & Digital business unit, specialist is also good at coordinating. Lisa Yerebakan, SIX SIX is optimally positioned organiza- L Sometimes, though, one even tionally to sensibly interlink a variety has to separate from partners, most of different partners. On top of that certainly when the value proposition there’s the company’s engagement in is at risk. Conversely, taking new the F10 FinTech Incubator & Accelerator ­partners on board usually doesn’t and in SIX FinTech Ventures, our cor- make sense until a platform is up and porate venture capital fund. Both running and is capable of integrating vehicles enable SIX to maintain very them via standardized interfaces. manufacture in-house or design sim- close contacts and a lively dialogue From that moment on, the ecosystem ple supply chains. For business eco- with startups across industry bound- scales up without causing any addi- systems, this means that the generat- aries. This can be of great value partic- tional transaction costs. ed added value must exceed the ularly in the partner-search stage. Y What I, as an orchestrator, can additional transaction costs caused by L The value of this, in fact, can’t be also do is to extend the value prop­o­ the coordination expenditure. Whether overstated. Anyone who is unable to sition by adding additional services, it does in the end largely depends draw on such a network during the though that requires me to re-con- on customers’ willingness to pay. stage of setting up a business ecosys- vince all of the partners of the altered That’s why business ecosystems do tem will probably encounter failure version of it. not prove successful in all industries. unless they have the possibility to call For example, the food and beverage in a co-orchestrator for support. industry, with its low profit margins, After the setup stage, a different will probably find it difficult to break set of skills is required: managerial away from the supply chain. A cup skills. On the one hand, it’s about low- of coffee, after all, is a cup of coffee. ering transaction costs, for example by ­Customers won’t be willing to pay considerably more for it. But every company has to come up with its own way of pursuing inno- Ecosystems in the Business World vation to fulfill its value proposition. This can also mean acquiring another On Predators and Prey company or setting up a new division instead of an ecosystem. The first person to transplant the term “ecosystem” from the field of biology to the business world was James F. Moore in 1993 in the Harvard SDX, the electronic invoice eBill, ­Business ­Review. In his article titled “Predators and Prey: A New Ecology of TWINT, and the platform­ for open Competition,” he described how different companies in a business eco- banking – SIX, at least, appears system co-evolve­ capabilities around a new innovation, working coopera- to be taking a liking to the concept tively and competitively to better satisfy customer needs. With his coining of the term “central ecological contributor,” Moore also defined the key of the business ecosystem. role of the orchestrator who must hold all the reins. Y Yes, and that also has to do with the fact that SIX is ideally qualified to Read the entire article by James F. Moore: take over the role of ecosystem six.swiss/ecology-of-competition ­orchestrator. As the infrastructure THE MAGAZINE FROM SIX RED 2.19 35

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