Annual Report 2017 Infrastructure Annual Report 2017 Report Annual

Infrastructure

Infrastructure 4 SIX Annual Report 2017

Dr. Romeo Lacher and Dr. Urs Rüegsegger Foreword 5

Dear readers

e are celebrating an important year for SIX: 2018 marks the tenth anniversary of our company. W Four distinguished well-wishers feature in this Annual Report. Their contributions (starting from page 23) demonstrate how greatly SIX is appreciated in the sector, and underline the importance of our centralized financial market infrastructure to the entire Swiss economy. When SIX was created, two themes stood out. First, the merger of three very different businesses in the Swiss financial center, and second, the conviction that this same financial center had great potential to add value through improving the cooperation between banks and infrastructure. No one could have predicted the major financial crisis that started in ­­­ “I thank Urs Rüegsegger Sep­­tember 2008, posing unprecedented challenges for the for ten successful years entire sector. Since then, new technologies, new providers, and constantly as CEO. SIX has laid increasing costs and margin pressure, combined with evermore strong foundations under stringent regulatory requirements, have not made the chal­ his leadership,­ and I am lenges any easier. The environment in which SIX operates has been changing ever more rapidly over the course of the last ­con­fident that we can build ten years. This naturally means that the banks’ needs and on them and continue to the demands they place on the financial market infrastructure ­develop SIX successfully.” have changed too. In November 2017, the Board of Directors formulated a Dr. Romeo Lacher, ­realignment­ for SIX in order to create added value for the clients Chairman of the Board of Directors and shareholders of SIX. You can read about the main features of this realignment in the Group report on page 10 and the interview with Romeo Lacher starting on page 32. Systemati­ cal­ ly­ developing the company will make SIX and the Swiss financial center more competitive over the long term. We would like to thank our employees for all their hard work and dedication. Our thanks also go to our clients and share­hold­ers for their trust and loyalty.

Dr. Romeo Lacher Dr. Urs Rüegsegger Chairman of the Board of Directors Group CEO

Contents 7

SIX Group

8 Report on the business year SIX remains strong operationally in an ­environment that continues to be ­challenging. This, together with a solid balance sheet, enables SIX to invest in a successful long-term future.

Business areas Focus

12 Swiss Exchange 23 How important is the The Swiss stock exchange recorded infrastructure to the Swiss brisk trading and six IPOs. Recognition financial center? of equivalence by the EU for a period Four Swiss economic of one year allows European securities leaders give their views. traders access to the Swiss market in 2018 as well. Responsibility 14 Exchange Regulation and organization Trading in 2017 was conducted in accordance with the rules and without 36 Corporate responsibility any serious incidents. Issuing activity 38 Risk and security was buoyant for bonds and derivatives. management­ 40 Management structure 16 Securities Services and shareholders The business area profited from the favorable market environment and 41 Internal organization invested in new applications and and competency rules services for the benefit of its clients. 44 Board of Directors 47 Group Executive Board 18 Financial Information Tax and risk data attracted increased 49 Strategic and organizational interest from clients in 2017. Demand realignment for detailed regulatory information will continue to rise. Annual financial 20 Payment Services statements Two acquisitions as well as strong organic sales growth in the acquiring business 50 Consolidated balance sheet and income statement strengthened the market position of SIX in card-based payments. Infrastructure 8 SIX Annual Report 2017

SIX is investing in the future and writing the next chapter of its success story 2017 was an eventful year for SIX. In an environment that remained challenging, operating income was up 5.8 % . SIX strengthened its market position through strategic acquisitions. Its operating performance and solid balance sheet allow SIX to continue systematically developing the business and boost the long-term competitiveness of the financial center.

n the 2017 financial year, but fiercely competitive, card-based SIX posted operating income payment transactions market. Sales I of CHF 1,94 4.6 million, which in the financial data business came ­represents an excellent growth in slightly below expectations owing of 5.8 % compared with the previous to the delayed launch of important year. This was mainly attributable ­financial market regulations. They to the good level of revenues from were nevertheless more or less stable stock ­exchange trading, securities compared with the previous year. SIX posts solid ­custody, and rising turnover in SIX Swiss Exchange regained annual results the acquiring business. ­market share in Swiss blue-chip Various special factors had an ­trading, achieving 68.3 % compared in a challenging ­impact on the annual result. The sale with its major competitors (2016: environment.­ of a property in 2016, for example, 64.6 %). In addi­tion, SIX Swiss ­accounted for a year-on-year effect ­Exchange successfully expanded its of CHF 26.0 million in operating ­index business and completed initial ­income, EBIT, and Group net profit. public offerings for six com­panies. ­Excluding this special effect, operat- SIX Securities ­Services main- ing ­income rose by 7.3 % , EBIT by tained the strong operating perfor- 0.8 %, and Group net profit by6.2 % . mance of recent years. The slight fall Strategic ­investments, primarily in operating income was due to the made to strengthen the market­ mentioned sale of a property in 2016, ­position in ­payment transactions, the comparison year. SIX Securi­ties led to a decline in operating profit by Services capitalized on its own op­ 2.3 % to CHF 280.5 million. At the erational strength and invested in new same time, favorable conditions on applications and services. It began the capital markets enabled SIX ­operating the only Swiss trade re­ to achieve a ­considerably higher fi- pository approved­ by FINMA, and nancial result than in 2016 (+ 52.7 %) reached a milestone in the structural thanks to positive­ valuation effects trans­formation of the Swiss pay- on assets. Overall, SIX can look back ment system: By the end of the year, on a ­successful year in which it posted virtually all Swiss banks were con- ­solid annual results in a challenging nected to the new ISO 20022-com- environment. patible ­infrastructure provided by SIX­ ­Interbank Clearing. Performance of the business areas SIX Payment Services replen- The securities business benefited ished the strong organic growth in from brisk trading on stock markets the ­acquiring business with two and high index levels worldwide. ­acquisitions in 2017: SIX acquired the At the same time SIX was once again ­Frankfurt-based girocard network able to profit from the expanding, ­operations business from a subsidiary Report on the business year 9

of Deutsche Postbank AG and pur- SIX is obliged to meet demand- chased the acquiring and terminal ing regulatory and technical require- business of the Aduno Group in ments and was kept ­particularly ­Switzerland. In order to concentrate busy with the implementation fully on expanding and developing of the new rules in the run-up to its B2B services, SIX withdrew the launch of the European financial from its only B2C business area: market­ ­reform MiFID II. This led the commercial issuing business to higher costs than in the previous ­(issuing of credit and prepaid cards) year, ­especially in the SIX Swiss For more detailed information in Austria. ­Exchange business­ area. In order about the business areas in the to enable­ all stakeholders to imple- year under review, see the segment reports starting on page 12. Operational strength and a ment the new rules as easily as solid balance sheet make ­p o s s i b l e SIX Securities Services ­long-term investment possible also invested heavily in various Thanks to its operational strength ­infrastructure projects­ and services. and careful handling of the balance However, the extraordinary differ- sheet, SIX remains able to make ence in EBIT in this business area­ ­substantial investments and realize was caused by the above-­mentioned ambitious projects. A high level ­special ­effect from the property of cost discipline was once again sale in 2016. ­exercised in the day-to-day business. SIX Financial Information was The increase in operating expenses able to reduce its costs by around (+ 7.3 %) is largely attributable to 9 % in the year under review, system- the above-mentioned acquisitions atically pursuing­ the rigorous cost and investments in new services. discipline of recent years.

Overview of key figures in CHF million 2017 2016 Change in %

Figures Total operating income 1 1,944.6 1,838.6 5.8 Total operating expenses –1,664.0 –1,551.5 7.3 Operating profit 280.5 287.1 –2.3 Share of profit of associates –23.2 –0.3 n/a Net financial result 15.8 10.4 52.7 Earnings before interest and tax (EBIT) 1 273.2 297.1 –8.1 Group net profit 1 207.2 221.1 –6.2 Balance sheet total as at 31/12 10,301.5 10,279.5 0.2 Workforce as at 31/12 (full-time equivalents) 3,755 3,807.1 –1.4

Ratios (in %) Return on equity 2 7.9 9.0 –12.3 Equity ratio 3 80.0 76.7 4.3

1 2016 includes CHF 26.0m from sale of real estate. Adjusted operating income growth is + 7.3 %, adjusted EBIT growth + 0.8 %, and adjusted net profit growth + 6.2 %. 2 Return on equity = Profit previous 12 months / average equity previous 12 months. 3 Equity ratio = Average equity previous 12 months / (average adjusted liabilities previous 12 months + average equity previous 12 months). The adjustments of the liabilities include­ the positions “payables from clearing & settlement” and “negative replacement values from clearing & settlement”. 10 SIX Annual Report 2017

In addition to the M&A activities the chairmanship on an interim basis ­already mentioned, which consid­ since October 2016. erably strengthened the position of In the strategic realignment, SIX in the payment business and SIX is focusing on the needs of its therefore paved the way for the shareholders and the requirements of planned further­ development of the the Swiss financial center. It will card processing business, the EBIT ­focus consistently on infrastructure for SIX Payment Services was services for the securities business, ­affected by another ­investment for payment transactions, and financial the ­future: Following its successful infor­mation. launch in April 2017, the mobile SIX will bundle its services ­payment app TWINT naturally had for the securities business – i. e. the In collaboration not reached the break-even point by exchange and post-trading – in the with a strategic the end of the year. ­Impairments ­Securities & Exchanges business were therefore recognized on the unit. The services SIX provides for partner, SIX ­investments already made. Overall, the Swiss payment system – interbank wants to create a how­ever, SIX is very satisfied with payments, connecting to the SEPA leading European how the TWINT app has developed ­region, processing card-based and since its launch. Investing in inno­ mobile payments for banks, ­operating provider in the vation is ­crucial for SIX. It operates in ATMs, and e-bills and direct debits – card business. a regulated and at the same time will be brought together in the new highly technical environment that is Payments business unit. The card undergoing constant, rapid devel­op­ ­processing business (Cards), which ment. SIX must actively participate ­includes merchant acquiring and in this development if it is to continue ­international card processing, will be to be a relevant partner for its clients separated from the core organization and shareholders. Its financial and incorporated as part of a strate- strength, which includes an equity gic partnership. ­ratio of 80 %, allows SIX to invest In the Financial Information ­optimally in the future in a proactive­ ­business unit, SIX is aiming to ex- manner. pand its leading position in the data business – particularly reference Strategic realignment for data – ­internationally. Both the inter- a successful future national business and business with In November 2017, almost 10 years non-shareholders will remain integral after SIX was founded, the Board parts of the business model. SIX is of Directors decided to make ­also retaining­ its successful “user- strategic and organizational ad­ owned, user-governed” model and Find out more about the justments to better take account of ­existing shareholder structure. ­strategic realignment of SIX in the new or changed framework con­ A Group-wide innovation unit is interview with Chairman of the Board Dr. Romeo Lacher, starting ditions and place the company in being planned as part of the strategic on page 32. an optimal ­position for the future. realignment, with the aim of further At the same time, the Board of strengthening the innovative ­Directors ­appointed Dutch citizen capacity of SIX. Jos Dijsselhof as the new Chief In the newly created Innova- ­Executive Officer­ (CEO) with effect­ tion & Digital business unit, SIX wants from ­1 January 2018. He succeeds­ to step up its innovation collaboration Dr. Urs Rüegsegger, who successfully­ with the banks in the area of infra- led SIX from the time of its founda- structure. SIX will also be developing tion and announced his forthcoming services with individual banking retirement in May 2017. On 10 Janu- groups so that it can meet specific ary 2017, the Board of ­Directors ­user requirements in a targeted way. ­confirmed Dr. Romeo Lacher’s­ ap- In order to promote innovations in pointment as Chairman of the Board the Swiss financial center and collab­ of Directors. He had already­ held orate more closely with start-ups Report on the business year 11

and fintechs,SIX is establishing a In June, the Swiss Finance Museum­ CHF 50 million venture fund. opened at the new head office. By the end of the year it had welcomed al- Stability and competitiveness most 5,000 visitors. In 2017 SIX once SIX offers security ­continue to take priority again ­actively participated in suc- to banks: cyber SIX is enhancing its core business cessful collaborations and initiatives and developing it further by introduc- relating to the further development ­security given top ing innovative services. The reliability, and security­ of the Swiss financial priority. security, and stability of its infra­ center. Over the past two years, structure continues to be the top it has systematically pressed ahead ­priority for SIX. Maintaining the with the company-­wide innovation ­competitiveness of its shareholders – organiza­­ ­tion established in 2015. and consequently that of the entire This ­includes the F10 FinTech Incuba- Swiss financial center – in this way to r & Accel­erator, which has been is, and will continue to be, the key oper­ating success­fully for two years. mission of SIX. Equivalence, especial- SIX opened it up to other companies­ ly with EU legislation, is also funda­ in the financial sector in2016 . Fur- mental to this mission. In 2017 SIX ther two ­important institutions have therefore worked very hard to imple- joined in the meantime: Zürcher ment the new requirements arising ­Kantonalbank and Raiffeisen. from the Swiss Financial Market In the year under review, SIX ­Infrastructure Act (FMIA) and the ­employees submitted a total of new European directives MiFID II/­ 108 project proposals via the internal MiFIR. These efforts were recognized ­online platform for innovative ideas by the regulatory authorities: The launched by the Group. During the Swiss Financial Market Supervisory course of the year, seven projects Authority (­FINMA) granted the were judged so promising that SIX is CO:RE trading platform for repo planning, or has already completed, transactions the status of multilateral the development of a minimum trading ­facility (MTF). In September viable product (MVP). These include it recognized SIX as a central secu­ blockchain-based approaches The idea behind xChain for rities ­depository in accordance in the area of financial information ­corporate actions is explained with FMIA. ­(corporate actions) and for OTC trad- in more detail in the SIX Annual ­Report 2016. A short description Furthermore, on 21 December ing of structured products. of other current innovation 2017 the EU Commission recognized In November 2017, SIX cooperat- ­initiatives can be found at the equivalence of the Swiss legal ed with IBM to launch trial operations www.six-group.com/fintech and supervisory framework for trading at a new security center designed venues for a period of one year. to protect­ against cyberattacks. SIX Swiss Exchange meets all the The Security­ Operations Center (SOC) ­requirements of the EU MiFID II of SIX is the first security center in ­Directive and has gained the tempo- ­Switzerland to make use of cognitive rary status of “equivalent third-­ technologies. As a first step the country trading venue.” As a result, SOC will strengthen cybersecurity European securities traders will at SIX, and as a second step SIX be permitted to trade Swiss equities wants to ­offer tailored managed se- on the Swiss domestic market in curity services­ (MSS) to other com- the coming year as well. panies in the Swiss financial center.

Long-term commitment to ­innovation and the Swiss ­financial center With the move to a shared location in Zurich West in spring 2017, SIX Additional information and brought its four, historically separate figures can be found at Zurich locations under one roof. six-group.com/annual-results 12 SIX Annual Report 2017

SIX Swiss Exchange dominates trading in Swiss blue chips SIX Swiss Exchange is one of Europe’s key stock exchanges and is the reference market for Swiss securities. In 2017 it increased its market share in Swiss large caps and achieved 68.3 % in comparison with its major c­ ompetitors. Recognition of equivalence by the EU allows European ­securities traders ­access to the Swiss market in 2018 as well.

n 21 December 2017, the 11 years, and also one of the biggest EU Commission recognized in Europe in 2017. O the equivalence of the Swiss On the secondary market, the legal and supervisory framework ­regular investments made by SIX for trading venues with that of the Swiss Exchange were reflected in the SIX Structured Products EU, for a temporary period of one quality of the order book. For some ­Exchange was merged into SIX year. SIX Swiss Exchange meets all years, SIX has used targeted mea- Swiss Exchange in May 2017. SIX Swiss Exchange now the r­equirements of the EU MiFID ll sures to boost liquidity on its trading operates the trading segment ­Directive and has received the platform, thus strengthening its market for structured products. ­temporary status of an “equivalent share despite fierce competition third-country trading venue.” The from other trading platforms. ­decision allows European securities The attractiveness of the Swiss traders access to the Swiss market stock exchange is primarily due even when the new European to the high probability of executing ­financial market rules come into an order at the best price with the With a total force in January 2018. ­biggest possible volume. In October IPO transaction Implementing the new regulatory 2016, SIX launched SwissAtMid, requirements defined by the Euro­pean a non-displayed order book that guar- volume of rules (MiFID II/MiFIR) and the Swiss antees that an order will be executed CHF 4.5 billion Financial Market Infrastructure Act at the mid-point price (the mid-point in 2017, the SIX (FMIA) was given top priority in 2017. between the bid and ask price in the The associated costs trimmed the lit order book). This service is b­ eing Swiss Exchange EBIT of the Swiss Exchange (– 4.4 %), widely used by trading par­tic­ipants. trading venue which operationally benefited from Since its launch, monthly trading ranked third in brisk trading and activity on the turnover has risen continuously, ­primary market. At CHF 198.2 million, and in 2017 SwissAtMid recorded Europe. operating income exceeded the pre­ 266,243 transactions amounting vious year’s result by 5.2 %. to CHF 4.7 billion in total.

Six IPOs and a continual Index business contributes supply of liquidity to higher revenues The number of trades on Six initial public offerings in 2017 In 2017, the Swiss indices continued SIX Swiss Exchange climbed by ­underlined the important role played to enjoy sustained demand from 8.0 % compared with the previous year, while trading SIX by in raising capital in the Swiss ­customers in Switzerland and abroad. ­turnover rose by 5.2 %. A detailed financial center. With an IPO trans­ While the majority of issuers of breakdown by trading segment action volume of CHF 4.5 billion ­index-based investment instruments is provided in the monthly media in ­total, SIX Swiss Exchange ranked (sell side) were from abroad, most release “Key figures for SIX Swiss third in Europe. The flotation of of the investors (buy side) were from ­Exchange,” which can be found at six-group.com/media Landis + Gyr (transaction volume Switzerland. In the year under review CHF 2.3 billion) was the biggest on a record number of structured the Swiss stock exchange for ­products were issued on the SMI. Swiss Exchange 13

SIX Swiss Exchange benefits Future-oriented services from the attractiveness of the Swiss Serving the interests of its cus- indices and is continuing to develop tomers and shareholders remains this business profitably. In Septem- a top ­priority for SIX. In response ber 2017 it adapted the regulations to the need for automation on the ­governing the SMI index family, ­primary market for bonds, SIX Swiss at the suggestion of the product Exchange worked on a web-based The SPI is issuers and users of index derivatives. tool for issuing bonds. The first ver- 30 years old: The weighting of the largest shares sion is already available. “Deal Pool” in the SMI is now capped at 18 %. makes issuing, which for the syn­ The Swiss Perfor- This brings the SMI into line with dicate banks used to be a largely mance ­Index the ­diversification limits set forth in ­manual process, considerably easier. was ­published for the ­ESMA UCITS Directive, allowing Through the SIX Corporate it to be used as a reference index Bonds platform, SIX Swiss Exchange the first time on for the Swiss equity market in the is also providing an alternative to 22 August 1987. ­European Union. the highly fragmented trading of The adaptation of the index bonds, most of which is conducted rules stimulated equities trading on outside an exchange infrastructure SIX Swiss Exchange and resulted and is therefore highly inefficient. in a very high daily transaction vol- This trading platform enables market ume on 18 September 2017, when the participants to trade large corporate amendment came into force. In the bond orders more efficiently. In 2017 second quarter of 2017, a similar ef- SIX Swiss Exchange created the fect was caused by two extraordinary right conditions for a prompt start to adjustments to the index composition trading on the platform and for SIX in the wake of corporate takeovers, Corporate Bonds to be established as which caused both Actelion Ltd and a trading venue. ­Syngenta AG to be removed from the SMI index.

Key figures for the Swiss Exchange Share of turnover of tradable products business area Change Bonds CHF 2017 2016 in % 10 % Operating income (in CHF m) 198.2 188.5 5.2 Bonds in foreign currency Operating profit (in CHF m) 65.8 69.2 –4.9 2 % EBIT (in CHF m) 66.2 69.3 –4.4 Equities 78 % Workforce as at 31/12 171.0 163.3 4.7 ETFs (full-time­ equivalents) 9 % Stock exchange trading volume 1,346.0 1,279.3 5.2 (in CHF bn) Structured products Number of transactions (in m) 51.4 47.6 8.0 1 % Number of tradable products 34,639 32,188 7.6 SPI market capitalization 1,352,691 1,221,256 10.8 (in CHF m) 14 SIX Annual Report 2017

Self-regulation of the trading platforms of SIX Exchange Regulation is an autonomous unit within SIX that is responsible for issuer and participant regulations for the trading platforms SIX Swiss Exchange, SIX Corporate Bonds, and SIX Repo.

n accordance with the Swiss­ set up for this purpose: the Regula­ ­Financial Market Infrastructure tory Board, the judicial bodies – I Act (FMIA; in force since ­ Sanction Commission, Appeals Board­ 1 January 2016), trading platforms and Board of Arbitration – and SIX Please see are ­required to establish their own ­Exchange Regulation. While the six-exchange-regulation.com regulatory and supervisory organiza­ ­Regulatory Board sets regulations for for further information. tion as appropriate to their activity, ­issuers and participants and the three under the overall supervision of judicial bodies adjudicate, SIX Ex­ the Swiss Financial Market Super­ change Regulation is the Group unit visory Authority (FINMA). The regula­ responsible for enforcing the rules. tory and supervisory tasks must be According to the trading super­ carried out by independent bodies. visory body, trading in 2017 was SIX ensures strict separation of regu­ ­conducted in accordance with the latory functions and operational ac­ regulations and without any serious tivities. As part of the self-regulation incidents. Exchange Regulation prescribed by the stock exchange ­suspended one trader from trading laws, a clear separation is made orga­ for three months for manipulating nizationally between setting regu­la­ the year-end price of a share in tions, enforcing them and adjudication. 2016 (“year-end price manipulation”). Three regulatory bodies have been The results of those investigations Exchange Regulation 15

in which careful analysis supported owner confers certain powers to the suspicion of insider trading or ­exercise voting rights on a third party market/price manipulation were for­ yet ultimately decides how to exercise warded to FINMA and to the Office the voting rights itself. The Exchange of the Attorney General. Regulation website also includes In the area of issuer regulation, ­decisions relating to practice and bonds and derivatives were issued sanctions, as well as comments and at a brisk pace. Six Initial Public explanations, media releases and, Please see the SIX Swiss ­Offerings (IPOs) took place in the year ­delisting decisions. ­Exchange Segment Report, under review: Rapid Nutrition PLC, In February 2017 the Board page 12 onwards. Galenica Santé AG, Idorsia Ltd, of Directors­ of SIX Group elected Zur Rose Group AG, Landis + Gyr AG, Sabir Sheikh as a new member and Poenina Holding AG. of the Management­ Committee and The Exchange Regulation website Head Listing & Enforcement at SIX (six-exchange-regulation.com) con­ ­Exchange Regulation with effect from tains further information and 1 April 2017. FINMA approved the ­documents, such as notices issued election. by the Disclosure Office, and noti­ fications concerning significant ­shareholders and management trans­ actions. During the course of 2017, the Disclosure Office evaluated a ­total of ten requests for preliminary decisions, exemptions or relief. ­Several requests related to the duty to report voting rights pursuant to Art. 120, para.­ 3 FMIA. The Disclosure Office decided, in the context of a recommendation, that no duty to ­report within the meaning of Art. 120, para. 3 FMIA arises if the beneficial

Listing applications 2014 –2017

No. of listing applications 2014 2015 2016 2017 No. of applications for equity securities (equities and collective investment schemes) 129 194 180 233 No. of new listings for equities (IPOs and listings) 7 4 5 6 No. of new listings for collective investment schemes 140 180 210 145 No. of new listings for ETPs – 9 – – No. of derivatives (prov. admission to trading) 39,293 42,697 35,615 35,885 No. of bonds (prov. admission to trading) 360 306 283 331 16 Annual Report 2017

SIX Securities Services once again proves a strong partner in times of uncertainty In light of the increasing challenges faced by the Swiss financial center, demand for a stable but flexible financial market infrastructure continues to grow. In this context, over the course of 2017, SIX Securities ­Services once again proved itself to be a ­reliable partner for banks and their clients. In addition to various infrastructure initia- tives, it also launched three services, the first of their kind for the market.

IX Securities Services continued the only Swiss Trade Repository to its strong operational perfor- have received approval­ from FINMA. S mance from ­recent years. Ad- This was done in accordance with justed for the proceeds from the sale the Financial ­Market Infrastructure of a large property in 2016, operating Act (FMIA), which requires counter- income for 2017 was significantly parties such as banks, securities higher than the previous­ year. A main ­traders, and asset managers as well driver behind this ­positive result as companies with registered offices was the improved market environ- in Switzerland to report their deriva- ment in line with the global econom- tive transactions. Despite there being ic recovery, together with continued EU-based alter­ ­natives, over 90 % Advanced low interest rates on the capital of major financial counterparties in Settlement:­ ­markets. The Swiss ­equities market Switzerland ­reported their transac- ended the year up almost 20 % com- tions over the SIX Securities Services’ SIX Securities pared to 2016, which had a positive Trade Repository.­ ­Services helped impact on asset holdings and indi- The Advanced Services an- Vontobel to rectly also on the number of settle- nounced in 2016 were successfully ment transactions executed. The neg- launched over the course of 2017. ­reduce both ative difference in EBIT compared With Advanced Settlement, SIX its operational with the previous year is largely ­Securities Services provides a service risks and the ­attributable to the above-mentioned where it takes ownership for the pro- effect in 2016 caused by the property cessing of Bank Vontobel’s securities complexity­ sale. One of the key aspects in 2017 settlement directly­ from the trading of its securities­ was that SIX Securities Services System and therefore for some settlement­ ­invested heavily in new applications of the bank’s ­middle- and back-office and services. functions. With its new end-to-end process.­ ­Advanced Tax Services – Reclaim New market infrastructure solution, for ­example, SIX Securities paves the way for banks to tackle Services ­created a service for Swiss the future banks and investors to manage The Swiss banking sector was the complex, country-specific once again faced with regulatory ­processes involved in reclaiming changes and new standards in 2017. ­withholding taxes. To make things as straightforward as possible for all stakeholders to Harmonizing ­payment adopt the new guidelines, SIX Securi- ­transactions in ­Switzerland ties Services ensured the relevant By the end of November 2017, ­financial infrastructure was put into SIX ­Interbank Clearing reached a place. In October 2017, for example, ­major milestone in the structural SIX Securities­ ­Services launched change ­process for payment Securities Services 17

­trans­actions in Switzerland: Virtu- From Switzerland to Europe ally all Swiss banks were connected In February 2017, SIX Securities to the new ISO 20022-compliant ­Services expanded its clearing eBill: By 2027 ­financial marketinfrastructure. ­ This ­offering and now also serves stock SIX intends to means they are now ready for their markets in Denmark, Finland, and corporate clients to change over Sweden. In the middle of the year, ­dematerialize by the end of June 2018. ISO 20022 it also adjusted its equities risk model 80 % of all bills ­represents a key technical require- in line with industry standards and sent to private ment for the replacement of the realigned its inter-CCP risk exposures. ­seven current types of payment slips. Here, SIX Securities Services is work- individuals­ In April 2017, SIX ­Interbank Clearing ing closely together with other cen- in Switzerland. unveiled the ­QR -bill with an inte­ tral counterparties and super­visory grated payment element which can authorities in order to ­ensure inter­ be sent by billers to their customers operability and better align the inter- starting in 2019. ests and risks between the markets. From scanning a QR-bill with With its infrastructure, SIX a smartphone, it is just a small step ­Securities Services guarantees to the end-to-end digitized payment ­international stakeholders access to process represented by “eBill by SIX.” the Swiss market while also offering eBill is the successor­ to the original Swiss clients access to a range of solution, making electronic payments international financial­markets. For the third year in a row, via e-banking even more straight­ ­industry magazine Global Custodi- forward, transparent, and fast. Banks an named SIX Securities Services the best International Central benefit from more efficient process- ­Securities Depository (ICSD). ing, companies improve their bill In the annual Agent Banks in ­Major ­collection rate and accelerate the Markets survey, it received the ­digitization of their operations, while highest rating in all categories. ­consumers ­enjoy greater conve- SIX Securities Services was also named the best provider in the nience with a comprehensive over- ­custody business in Switzerland. view of their finance.­ The first bank It is the undisputed market leader, to use the new eBill platform will achieving the top ratings in 80 % be Credit Suisse in 2018. of the survey categories.

Key figures for the Securities Services Deposit and settlement transaction business area volumes grew steadily in 2017

Change in CHF m in CHF m 2017 2016 in % 3,500,000 50 3,315,113 Operating income (in CHF m) 375.4 377.4 –0.5 3,203,418 3,135,874 3,070,889 3,000,000 39.9 64.9 –38.4 Operating profit (in CHF m) 40 EBIT (in CHF m) 40.3 70.6 –42.8 2,500,000 40.8 37.6 38.1 Workforce as at 31/12 500.0 509.8 –1.9 30 ­(full-time equivalents) 2,000,000 27.9 Number of settlement 38,077 37,561 1.4 1,500,000 transactions­ (in 1,000) 20 Deposit volume (in CHF m) 1 3,315,113 3,070,889 8.0 1,000,000 Number of clearing 10 324,207 423,935 –23.5 500,000 transactions­ (in 1,000) 1 Number of payment 0 0 589.0 511.7 15.1 ­transactions (in m) 2014 2015 2016 2017

1 The figures from the previous year were adjusted for comparison purposes n Deposit volume

­because from 2017 onwards the annual average will be stated. n Number of settlement transactions 18 SIX Annual Report 2017

SIX Financial Information eases the regulatory­ and compliance burden on its clients­ SIX has established itself as a leading global provider of financial data by ­focusing on high-quality reference data and corporate actions. Its value-added services makes it easier for financial market participants to cope with complex regulatory requirements. Thanks to early and substantial investments, SIX is able to continue expanding its presence in this key dynamic market segment.

IX Financial Information has data services that efficiently identify built up a solid market position securities that have been sanctioned, The data services S in the global reference data thereby enabling banks to comply of SIX won and corporate actions business; SIX seamlessly with global sanctions. is set to reinforce this position in the The increased interest in this tax and multiple­ awards course of its strategic realignment. risk data in 2017 reduced the slight in 2017. The business area has continuously decline in revenue caused, among improved its profitability in recent other reasons, by the delayed launch years. Operating profit for2017 of important financial market regula- ­reflects the cost savings resulting tions, as MiFID II and the PRIIPs from restructuring and centralization ­regulation did not enter into force MiFID II represents one of in France and the Nordic region, until 2018 – a year later than orig­inally the most comprehensive and im- as well as the shift to a global oper­ planned. SIX expects a continuous portant financial market reforms ­ever seen in the European Economic ating model. Positive valuation effects high demand for regulatory services Area and will further increase the on assets also contributed to the in 2018. demands placed on the data and ­significant year-on-year increase in technology infrastructure of finan- EBIT in 2017. New data services cial companies. SIX was a depend- In 2017 SIX Financial Information able go-to partner for the banks in 2017, assisting them with the Rising demand for ­further expanded its data business complex preparations for the new regulatory ­services ­infrastructure and delivered a range requirements. By providing ready-packaged tax of new products and services for and regulatory services supported its clients in time for the launch of by world-class reference data and key regulations. These include tax ­corporate actions, SIX offers banks ­reporting services for the Automatic clear added value in the areas of Exchange of Information (AEOI) using tax, regulation, compliance, and risk the Common Reporting Standard SIX was a member of the ­management, making it easier for as well as for the Belgian stock ­working group that specified the them to meet complex requirements. ­exchange tax. standard for the Automatic ­Exchange of Information applicable The need for new technical com­ Another addition to the range in Switzerland. The directive refers ponents (RegTech) and detailed tax of services is the Premium Fund Data explicitly to SIX as a recognized or regulatory information will keep service, through which SIX ensures provider of financial information on rising. SIX continues to transition that fund data is complete and up- in accordance with CRS. its business model in the data busi- to-date, and augments it with tax and ness accordingly. regulatory information. This service In 2017 there was high demand not only enables asset managers to for the service relating to compliance comply with international rules on with section 871(m) of the United ­investor protection but it also assists States Internal Revenue Service (IRS), them to develop the best possible for example. The same was true of ­investment decisions for their clients Financial Information 19

in terms of tax exposure, risk pre-bundled and delivered through ­appetite, diversification, product one SIX channel. costs, and minimum investment In 2018 SIX will roll out SIX Flex. amount. Clients will be able to use this inno­ Once again, SIX won multiple vative data extraction method to awards for its data services in 2017. ­select the specific elements they These include the prestigious title need from the huge database (over of Best Overall Data Provider in 20 million instruments) maintained the ­Inside Reference and Market by SIX, accessing them independently. SIX is committed Data Awards. By providing an online interface, SIX to taking the saves its clients from having to pay Innovations reduce banks’ high integration costs, and ­enables lead on new operating­ costs them to order and pay for the data ­regulations SIX is committed to contributing they actually need. This new product and delivering to its clients’ efforts to reduce opera- forms part of SIX Financial Informa- tional costs by, on the one hand, tion’s efforts to achieve international “ready-to-use” ­offering extended data services, and, harmonization and stream­lining of services, available on the other hand, by optimizing data the product range. as a ­single source processing and increasing automa- tion. Both relieve the banks of a con- for a wide array siderable burden, freeing them to of regulations. ­focus on their core business. Building industry-scale services to meet the sector’s need in this respect has been a key driver of innovation in 2017. SIX launched the regulatory hub, a unique industry-wide platform that connects issuers and sellers of financial products so they can effi- ciently exchange data and documents for multiple current and future regula- tions. Banks can receive all the data they need for a compliance task,

Key figures for the Financial Information Reliable data for compliance business area

Change 2017 2016 in % IRS MiFID II Operating income (in CHF m) 400.1 402.6 –0.6 871(m) Operating profit (in CHF m) 57.6 25.7 123.9 EBIT (in CHF m) 64.8 26.7 142.9 Workforce as at 31/12 769.7 890.8 –13.6 Reference (full-time equivalents) Data & PRIIP FATCA ­Corporate Number of financial 27.3 23.7 15.4 Actions instruments (in m) Number of price updates 1,884.6 1,886.3 –0.1 per year (in bn)

Solvency II Sanctions CRS 20 SIX Annual Report 2017

SIX Payment Services looks to the future The cashless payment business is a fiercely competitive, global growth market. In recent years, SIX has positioned itself strongly and expanded throughout Europe.­ In 2017 it prepared the way for the next step: detaching its card business from its core organization and establishing it as a leading ­European provider in collaboration with a strategic partner.

IX Payment Services recorded ­operations business from VÖB-ZVD a very pleasing increase in oper- Processing GmbH, which means it is S ating income in the year under now able to provide a complete range review. Thanks to higher transaction of services to the German market.­ volumes, operating income rose by Thanks to this acquisition, SIX can 12.3 % to CHF 993.9 million. Revenue process transactions using all major SIX will create a climbed by as much as 17.6 % in payment cards in Germany, including leading European ­acquiring (merchant) business. girocard, which is the most fre­ The pressure on margins and quently used card in that country. provider in the ­market share in the cashless payment Furthermore, in August 2017 card business business remains high; in this con- SIX took over the acquiring and ter- by entering into text, consolidation will continue minal business of the Aduno Group, ­internationally. The payment business thus reinforcing its position in the a strong strategic ­depends on scale: It is imperative Swiss domestic market. This merger partnership. to achieve ­rapid growth and stan- enables SIX to achieve significant dardize the infrastructure­ to remain economies of scale in card acceptance profitable as a provider and prevail and processing.­ As part of the inte- against powerful rivals and new tech- gration of Aduno S.A., SIX is to close nologies in this fiercely competitive the branches in Bedano ­(canton of market. In November 2017, SIX ­Ticino) and Zurich Oerlikon, and cut Jürg Weber stepped down therefore announced that as part of up to 74 jobs in Switzerland. A social from his role as Division CEO its strategic development it wants compensation plan has been negoti- ­Payment Services with effect from the end of November 2017. to work with a strong strategic partner ated for the affected employees. Some The business area­ developed on the further development of the ac- of the jobs lost can be compensated ­considerably under his leadership, quiring business (payment processing by natural staff turnover and rede- such as by expanding the e-com- at point of sale and in e-commerce) ployments within SIX. merce and omni-­channel services and international debit and credit on offer. Marc Schluep, formerly Head Organizational Development card processing. The aim is to create A lean organization and at SIX Payment Services, has taken the necessary conditions for further ­continued cost discipline over from Jürg Weber as CEO. growth and enable major investment In order to concentrate fully on in technological developments. ­expanding and developing its B2B services and avoid conflicts with Acquisitions in 2017 reinforce ­existing and new customers, in 2017 the market position SIX withdrew from its only B2C During the year under review, ­business area, the issuing of credit SIX strengthened its position in the and prepaid cards in Austria. Com- DACH region (Germany, Austria, mercial issuing and the associated Switzerland) through strategic acqui- ­issuing support for Austrian banks sitions in Germany and Switzerland. were taken over by easybank. In Germany it acquired the During the reporting year, SIX ­Frankfurt-based girocard network ­further expanded its service center Payment Services 21

in Warsaw. Standardized back-office services environment, SIX needs to processes are being centralized be proactive and invest in innovations SIX invests in there, thus reducing operating costs. that will not pay off for some time ­innovations and At the end of December, SIX had to come. about 90 employees in Warsaw. They A project team worked inten- new services – carry out services such as activating sively on the revised European and therefore new customers, providing customer ­Payment Services Directive (PSD2) in a successful support, handling the billing process, that entered­ into force at the begin- and ordering payment terminals. ning of 2018. It also conducted ­long-term future. a joint analysis with Swiss banks Investing in further development of the opportunities­ and risks arising and innovative services from the ­ directive. SIX is to step PSD2 requires banks operating The participation of SIX in TWINT AG up its innovation collaboration with in the EU to allow third-party generated additional costs in the year the banks in order to develop new ­providers access to customer ­account information, free of charge, under review. The start-up costs services that will help the banks provided that the customer agrees. for the TWINT mobile payment app, ­optimize and maintain the interface This creates the possibility of new as well as the costs associated with with their customer base over the roles and business models in the the acquisitions, were major reasons long term. payment business and will lead to why SIX Payment Services recorded increased competition. a drop in EBIT, despite achieving growth in revenue. Although TWINT was launched successfully in April 2017 and had 627,000 registered ­users by the end of December 2017, it had not yet reached the break-even point. ­Impairments were therefore recognized on the capitalized invest- ments. As a key technology partner for its shareholders, the banks, SIX will continue to push ahead actively with the development of modern ­payment services. To ensure that the Swiss financial center remains rele- vant in the rapidly changing payment

Key figures for the Payment Services Acquiring turnover: continuous increase business areas in CHF m Change 100 2017 2016 in % 88,658.4 Operating income (in CHF m) 993.8 885.0 12.3 80 75,407.9 Operating profit (in CHF m) 86.4 92.9 –7.0 68,738.2 70,124.2 EBIT (in CHF m) 57.7 91.8 –37.1 60 56,174.7 Workforce as at 31/12 948.6 905.4 4.8 (full-time equivalents) 40 Acquiring turnover (in CHF m) 88,658.4 75,407.9 17.6 Number of card transactions 3,997.9 3,661.2 9.2 ­processed (in m) 20 Number of payment cards 24.6 27.2 –9.6 (in m) 0 2013 2014 2015 2016 2017

Focus infrastructure 23 How important to the Swiss ­financial center is the infrastructure provided by SIX?

Today, business is conducted globally. Our ­international­ network depends on infrastruc- tures. From transport and energy supplies to the ­financial system, our prosperity is pre- served and enhanced by stable, secure infrastruc- tures. At the same time, new technologies offer new opportunities: They improve the way we work together, increase our efficiency, and make our everyday lives easier. Yet digitalization also presents us with new challenges. Infrastructures must remain capable of innovation if they are to perform their core function and fulfill their economic responsibility. SIX is constantly develop- ing its infrastructure for the Swiss financial center.­ It ensures security and stability – includ- ing when faced with complex situations and new threats. SIX keeps the financial flows moving in our global economy, day after day – a core func- tion and an important task, as all participants in the Swiss financial center agree. Federal Councillor Ueli Maurer supports open markets and a competitive­ financial ­center. Focus infrastructure 25

Ueli Maurer, member of the Swiss Federal Council and head of the Federal Department of Finance “The capacity for ­innovation is of core importance­ to the financial center.”

The Swiss financial center is attractive, broadly diversified, and has an ­excellent international network. In order to remain successful over the long term, it requires effective and efficient regulation, open markets, and the courage to foster innovative approaches.

The Swiss financial center is one ­intertwined with the international even more impor­tant. We have of the best in the world. It is attrac­ environment. It is for this reason therefore acted promptly by taking tive, broadly diversified, and has that the Swiss authorities actively the first steps towards ­dismantling an excellent international network. support open markets, the ongoing unwarranted regulatory barriers Stable, powerful, and internationally­ improvement of market access, and to market entry. Against this back­ linked financial market infrastruc­ progress in the equivalence pro­ drop, it is no surprise that inno­ tures are a key feature of its at­ cesses that are important to Switzer­ vation is also at the heart of the tractiveness. The services provided land (such as the equivalence of ­realignment of SIX. by SIX make a vital contribution Swiss exchange regulation with to a core area of the Swiss financial EU requirements). Another general Courage and a vision are needed center, and to its success. condition for an attractive financial Innovation was, is, and will remain An attractive financial center center – and one which should not a crucial factor in the competition needs optimal general conditions. be underestimated in this fiercely between financial centers. It is up to These include efficient and effective competitive area – is the tax environ­ all of us to create general conditions regulation, which we aim to improve ment, which we want to successfully that permit and encourage inno­ continuously as part of an ­active enhance further through the Tax vation. We must take a broader view ­dialogue between Swiss ­market par­ Proposal 17. and have the courage to adopt inno­ ticipants and authorities. Switzer­ vative approaches if we are to lay land’s attractiveness as a global fi­ Innovation the key to success the foundations for a continued sus­ nancial center is also closely The capacity for innovation, which tainably successful Swiss financial is of central importance to a com­ center. petitive, agile financial center, Ueli Maurer, 67 is also something I value highly. has been a member of the Swiss A financial center cannot ­retain its federal government since 2009. international position ­unless the He has been head of the Federal ­national general conditions permit Department of Finance (FDF) and encourage inno­vation. The vital since 2016. In that capacity, he deals in particular with the role of innovation is clearly demon­ state budget as well as with strated when we ­review the devel­op­ national and international ments made by our financial center­ financial, monetary, and tax in recent years. Given the ­diverse matters. He was previously head challenges presented by digitaliza­ of the Department of Defense, Civil Protection, and Sport (DDPS). tion, fintech, and regtech, the capac­ ity for innovation is set to become Appreciates the efficiency of the Swiss financial market infrastructure and is well aware of its importance: ­Thomas Jordan, Chairman of the SNB. Focus infrastructure 27

Prof. Thomas J. Jordan, Ph.D., Chairman of the Swiss National Bank (SNB) “The Swiss Value Chain is efficient, stable, and secure.”

A robust and up-to-date financial market infrastructure is of key importance for financial stability. The Swiss National Bank will play its part in helping SIX to support a thriving Swiss economy and a prosperous Switzerland, now and in the future.

We pay for our shopping with ­national financial market infra- a distinguishing feature of our a Maestro card, settle the bill in structure provided by SIX. For over ­financial sector. a restaurant with a credit card, 20 years, it has linked the Swiss or make transfers via e-banking. ­Interbank Clearing (SIC) payment SIX fulfills a key function Many Swiss consumers hardly system to stock exchange trading for the Swiss economy ­realize how often they use services and securities settlement, thus A stable, modern financial market ­provided by SIX in their everyday ­providing an essential service for infrastructure is also an important lives. In this country, nobody has to our financial center. Over the precondition for the fulfillment worry whether the “card machine” years, the links in the Swiss Value of another SNB responsibility. will actually work at the checkout. Chain have constantly been adapted The Swiss National Bank supplies Here in Switzerland, we tend to in ­response to changing market the domestic money market with take it for granted that the payment ­requirements and technological ­liquidity as part of its implemen­ta­ system will work correctly and transformation. One example tion of monetary policy. The effi- smoothly, in the same way that we is the complete overhaul of SIC in cient distribution of liquidity expect our watches to be accurate. 2016. This created the necessary to banks then takes place on the technical conditions for the com- ­interbank money market. CO:RE, Guaranteed liquidity prehensive digitalization of the the trading platform for money for Swiss banks ­payment process. market transactions operated In fact, the “clockwork” at SIX is The Swiss National Bank (SNB) by SIX, hosts both the SNB repo much more complex than is gen- believes that a robust, efficient, ­market and the interbank market, erally evident. Take the Swiss Value forward-looking financial market which makes it attractive to both Chain, for example – the central infrastructure is vitally important. domestic and foreign participants. The Swiss Value Chain ensures The Swiss Value Chain is effi- that banks have direct access to the cient, stable, and secure. SIC handles ­financial market infrastructure, more than seven million transac- which increases financial stability. tions on its busiest days, and its sys- Thomas Jordan, 55 One of the SNB’s tasks is to tem availability rate is over 99 %. joined the SNB in 1997 and has ­facilitate and safeguard the smooth This is very important for the Swiss served as Chairman since 2012. The Bern- and Harvard-educated functioning of cashless payment economy. Companies and employees economist has published systems. SIX has operated SIC on can rely on invoices, loans, salary numerous articles on monetary behalf of the SNB for more than payments, and foreign exchange theory and monetary policy. 30 years. The SNB oversees the transactions being settled in a time- Thomas Jordan is a member ­payment system and ensures there ly and accurate manner. I am confi- of the Board of Directors of the Bank for International Settle- is sufficient liquidity. This division dent that the partners will continue ments (BIS) and the Steering of responsibilities has enabled to develop this joint endeavor suc- Committee of the Financial the Swiss Value Chain to be devel- cessfully. The Swiss National Bank Stability Board (FSB). In addition, oped and expanded cost-effectively. is ready to play its part in helping he is Governor of the Interna- Another important prerequisite SIX to support a thriving Swiss tional Monetary Fund (IMF) for Switzerland. was the strong emphasis placed economy and a prosperous Switzer- on finding shared solutions – land, now and in the future. Eveline Saupper is Vice President of the Board of Directors of Zurich Airport (Flughafen Zürich AG). Focus infrastructure 29

Dr. Eveline Saupper, lawyer and professional board director (Zurich Airport, Clariant, Georg Fischer) “We need innovation and international networking.”

The economic success of Switzerland and its companies is based on innovation­ and excellent international networking. Powerful infrastructures are therefore essential.

Today’s economy is a global one. how certain developments influ- technologies also bring opportu­ ­Infrastructure operators are respon- ence our lives and actions. Compa- nities: For decades, remote areas sible for creating and maintaining nies must be quick to recognize have been battling with the exodus the right conditions for the compa- the ­opportunities constantly being of skilled people. New technologies nies that operate in this globalized presented in the globalized environ- enable us to work in ways that are economy. Zurich Airport is estimated ment. Switzerland’s high price much less dependent on location. to generate approximately CHF 6 bil- levels mean innovation is vital One great example of this is a small lion of economic benefit each year. if this country is to hold its ground start-up in the Bernese Oberland This illustrates the fact that a large against the international compe­ that makes sophisticated software number of jobs – and a significant tition. Many Swiss companies are solutions and applications for part of our prosperity – depend on ­already very successful in this ­avalanche protection. This start-up international networking. ­respect. Switzerland’s small size, recently won the Prix Montagne, the pressure of competition, and our awarded by the Swiss Mountain ­ Innovation is key de­termination to make our mark Aid (Schweizer Berg­hilfe) and the In the competitive international are all factors that help keep many Swiss Working Group for Mountain ­environment, the biggest challenge ­companies in good shape. None­ Regions (SAB). for Swiss companies is keeping theless, it would be wonderful if up-to-date with trends. This means people in Switzerland were less identifying trends at an early stage quick to say why something won’t and reacting to them as rapidly work. We must focus our energies as possible. I do not simply mean on making­ things happen. Also, trends in the economy or new we must change our attitude toward ­technologies, but also social trends: bold projects and be willing to take a chance, even at the risk of failure.

Infrastructures are essential Eveline Saupper, 59 for innovation is a professional board director We need to create suitable frame- of Georg Fischer, Clariant, work conditions for innovation. and Zurich Airport, all of which ­Infrastructures must support the are listed on SIX Swiss Exchange. She is a doctor of law whose needs of the economy in ways particular interests include ­ranging from appropriate taxation campaigning for an economic of our start-ups through to work environment that will attract permits for qualified employees and new companies and additional support for modern working meth- investment to Switzerland,­ especially in peripheral areas. ods, such as decentralized locations or virtual project teams. The latest Lino Guzzella in the historic Semper Aula at ETH in Zurich. Focus infrastructure 31

Prof. Lino Guzzella, Ph.D., President of ETH Zurich “Technology is not an end in itself.”

Digitalization has arrived in the financial industry. However, the algorithms used are only as good as the experts who develop them. For financial services providers, it therefore makes sense to cooperate more closely with the academic community.

I regard SIX as an innovative com­ Security is a key issue logical developments in the finan­ pany that is aware of the great signi­ At ZISC we are working jointly on cial sector. ficance of new technologies and is a wide range of topics. The core con­ open to partnerships. Today, finan­ cept is always that ETH researchers Human beings play a key role cial services providers cannot avoid should investigate questions and However, technology is not an end coming to grips with topics such as problems from real life. For­ instance, in itself. Human beings still have blockchain, cryptocurrencies, and we are currently testing a new Inter­ a key role to play in designing and cybersecurity, as well as data science net architecture, “SCION,” m a k i n g monitoring automation processes. and learning systems. It therefore use of the computer and network A knowledge of information technol­ makes sense to cooperate more infrastructure­ of SIX, among other ogy is necessary in order to under­ close­ly with the academic communi­ systems. New methods of authen­ stand the language that is steadily ty. Since the end of 2016, SIX has tication are another example. SIX is being introduced in banks and been in partnership with the Zurich working on this with the ETH spin- insur­ance companies. But in addi­ Information Security and Privacy off Futurae, which is devel­oping a tion to digital skills, university Center (ZISC) at ETH Zurich. technology for two-factor authenti­ ­graduates need the ability to think cation via smartphone. ­Futurae critically and creatively. A corporate is evaluating whether this type of culture that fosters innovation more secure, user-friendly authenti­ must demand and encourage critical Lino Guzzella, 60 cation could have benefits for SIX ­scrutiny and creative solutions, and has been president of ETH employees. A third working group allow room for experiments that Zurich, one of the world’s most at ZISC has set itself the goal of will not necessarily succeed. prestigious technical universities, since January 2015. He himself de­ tecting­ sophisticated network­ studied at ETH, where he earned ­attacks at an early stage. his doctorate and has taught Providing security is vital in as a full professor of thermotron- a digitalized, networked economy ics since 1999. He was rector in order for customers to continue from mid 2012 to the end of 2014. Lino Guzzella has also worked to trust Swiss financial services. as a mechanical engineer in ­Although security is one of the industry, having been employed Swiss financial industry’s major in the group research department strengths, it can often be a problem of Sulzer in Winterthur and in for fintech. Thanks to its special the mechatronics development department of Hilti in Schaan. role, SIX can bring together differ­ ent perspectives and boost techno­ 32 SIX Annual Report 2017 “We want to satisfy the needs of our clients in full.”

In Dr. Romeo Lacher, SIX has an exceptionally experienced Chairman of the Board who has for many years been committed to delivering a strong financial market infrastructure in Switzerland. AsSIX celebrates its tenth anniversary, he faces what is perhaps his greatest challenge: ­successfully leading SIX into a new decade in a totally changed competitive environment.

Interview: Franziska Garbe and Matthias Bill

Dr. Lacher, you’ve been Chairman of the ­turmoil sparked by the removal Board of Directors of SIX since January of the EUR/CHF floor. Between 2010 2017. However, you’ve served on the Board and 2016, revenue in the Western ever since the company was founded in ­European ­financial sector increased 2008. You’ve therefore been with SIX right by just 1.5 %. Despite this exception- SIX has been synonymous with from the start. What do you regard as the ally difficult environment, we’ve stable and efficient infrastructure highs and lows of the last ten years? ­succeeded in more than doubling for the Swiss financial center That’s hard to sum up in a few the profit ofSIX in the last ten years. since 2008. However, the com- pany’s origins date back to words! Much has happened since We’ve continually increased our 1930. Read the whole story at SIX was founded in 2008. I could ­turnover and dividend payments. six-group.com/history mention the major financial crisis We’ve expanded­ internationally and that started in September 2008, established ourselves as a European ­posing unprecedented challenges player. We’ve launched innovations for the entire sector. Or the market such as Terravis, TWINT, and the repo trading platform, and we’ve started up a successful fintech incu- bator. In addition, we’ve constantly support­ed a strong Swiss financial center through our participation in numerous committees, partnerships and initiatives. Our task now is to ­reinforce the successful development of SIX over the long term.

At the end of November 2017, the Board of Directors decided on a strategic and organizational realignment for SIX. Why is this necessary, and why now? Our industry has changed radically in the past ten years. New technolo- gies, evermore stringent regulatory Focus infrastructure 33

“Our infrastructure, geared to the long term, will continue to play a key role for the Swiss ­financial center. All the participants agree on that.”

requirements, strong international And do we want to do this alone competition, and the constantly or with partners? Second, which ­increasing pressure on costs and ­services do the banks – our clients margins necessitate new strategies and shareholders – want to receive? and measures to ensure long-term And which ones do they want to success. Our clients’ business mod- ­participate in? This wasn’t a matter The shareholders of SIX comprise els are also being put to the test, of simply thinking up new services, around 130 national and inter­ which in turn affects what they but also of questioning the existing national financial institutions. They are also the main users of the ­expect from us. We want to satisfy ones. The answers to the first two ­services provided by SIX. Find out the needs of our clients in full, while questions led on to a third: Are more about the Group structure working with the banks to develop changes to the shareholder base and and shareholder base on page 40. potential new business areas. I’m governance needed so that we can firmly convinced that the realignment continue to act in a targeted manner? will enable us to continue building on the SIX success story. And what were the answers? I’d like to start with the last question: What questions did the members The shareholder base will continue of the Board of Directors address in to exist in its present form, but could this regard? be opened up to new shareholders. We wanted answers to three main We’re in talks with PostFinance*, questions. First, which services for example. We stand by the “user- should SIX provide in the future? owned, user-governed” model. 34 SIX Annual Report 2017

A successful, shared infrastructure Social media have been particularly geared to the long term will continue excited about the announcement of a to play a key role for the Swiss venture fund for innovation, to which ­financial center. All the participants CHF 50 million has been allocated. agree on that. Can you say more about this? In the first instance, our commitment And what about the services that SIX to more innovation is being demon- will provide in the future? strated organizationally: in a new Over the past few years, we’ve business unit called “Innovation & grown and established ourselves on Digital.” We’ll be collaborating a firm footing. Our realignment has even more closely with the banks in a focus on securities business, pay- our work on innovation. We’ll be ment transactions, and financial ­developing services with individual information,­ so we’re concentrating banking groups in order to meet their more intensely on our core business specific user requirements in a more once again. We aim to increase targeted way. Internationally active ­efficiency, quality, and innovation banks have a different business model in these areas, right across the banks’ and different requirements from, value chain. Furthermore, we want say, regional banks, which focus on to develop new and ­innovative infra- the domestic market and are active structure services, working with in retail business only. As well as and for the banks. strengthening our innovative capaci- ty organizationally, we’re launching Are we talking only of the Swiss banks here? the venture fund you mention, Our core business is to provide in order­ to promote innovations in ­infrastructure services for the Swiss the Swiss financial center and seize financial center. However, in our the opportunity to participate in ­globalized world it’s unthinkable for promising start-ups. a service provider in the financial sector to restrict its activities to You’ve also restructured the Group Execu- Switzerland alone. We are of course tive Board of SIX as part of the organiza- continuing our international opera- tional realignment. SIX is entering the next tions and our business with non- decade with Jos Dijsselhof as its new CEO. shareholders, in order to take advan- Yes, I’m delighted that in Jos Dijssel- tage of synergies. hof we’ve found an experienced manager for SIX with strong leader- So what does the reorganized ship qualities and an outstanding SIX look like? track record. At the same time, I’d We’re breaking up the old divisions, like to thank Urs Rüegsegger for his SIX fosters innovation and abolishing their names and organiz- achievements and dedication as CEO talent – both within the company ing ourselves into lean, focused of SIX over the past ten years. SIX and throughout the entire Swiss ­business units. These are Securities & has laid strong foundations under ­financial center. Find out more in the article by Professor Lino Guzzella Exchanges, Payments, Financial his leadership, and I’m confident that on the partnership between SIX ­Information, and Innovation & Digital. Jos Dijsselhof will be able to build and ETH Zurich: page 31. We’re thus optimizing our internal on these and take SIX forward into processes and serving our clients a successful future. in ways more suited to their needs. We can pass on economies of scale to our shareholders. In areas where our shareholders are unable to ­partic­ipate directly as clients – such as in the card processing business – we make use of strategic partner- *Editor’s note: The addition of PostFinance ships. And we’re strengthening the to the shareholder base of SIX was announced SIX brand. in a media release on 8 March 2018.

36 SIX Annual Report 2017

Corporate responsibility: the stability of the financial center has top priority for SIX When measuring the long-term success of the company, SIX takes ­economic, ecological, and social considerations into account. The company’s sustainability principles are based on its mandate to guarantee the security and stability of the Swiss financial center for its clients and owners, particularly when faced with new challenges such as cybercrime.

s a central infrastructure It expects its suppliers to do the ­provider, SIX ensures the same. In 2017, SIX introduced A flow of information and a Code for Suppliers that set out ­money between banks, merchants, ­binding guidelines for its suppliers. investors, and service providers The “Code for Suppliers” applies throughout the world. If SIX stops, to all suppliers of SIX and their sub­ the financial center stops. Some contractors throughout the world. Thanks to a of the services rendered by SIX They must systematically regulate long-standing are systemically critical. They are their behavior in accordance with ­therefore monitored by the Swiss the “Code for Suppliers,” and ensure partnership ­National Bank (SNB) and the Swiss that the code is communicated, with ETH Zurich, Financial Market Supervisory ­integrated, and applied internally. information Authority­ ­(FINMA). Clients, owners, and society as a Using artificial intelligence ­security at SIX whole expect SIX to guarantee the to fight cybercrime benefits from security and stability of the financial Every time the network of SIX is the latest research center. SIX consequently prioritizes ­accessed, a potential security risk its sustainability principles as arises that could disrupt the stability findings. follows:­ of the financial center. In order 1. Ensuring stability to protect it properly, SIX operates 2. Being a responsible employer a ­security center that constantly 3. Working for the good of society ­records and logs every single access. and protecting the environment In 2017, this security center was ­developed into Switzerland’s first SIX implemented these principles Security Operations Center (SOC). Further information on the SOC in 2015 under the heading “Enabling From 2018 onwards, the SOC will ­also may be found on page 39. a sustainable future.” In 2018 it be available to ­clients in the financial will ­review whether the principles sector, especially smaller, and medi- should continue in the same form. um-sized banks that could not afford The aim is to underpin them with the high cost of defensive systems. concrete ob­ jectives and thus make The SOC will thus increase the the c­ ommitment shown by SIX ­security of the entire financial center. even more binding. Maintaining attractive Binding standards for suppliers framework conditions SIX guarantees to uphold the highest On 21 December 2017, the EU standards in its business activities. ­Commission recognized the equiva- Corporate Responsibility 37

lence of the Swiss legal and super­ bond-issuing prototype. The xChain visory framework for trading venues platform based on distributed ledger with that of the EU, for a period of technology also went into operation. one year. SIX Swiss Exchange meets The aim of xChain is to improve data SIX Social Days, all the requirements of the EU MiFID ll quality in the cor­porate action pro- throughout Directive and has received the tem- cess, thereby minimizing the risks porary status of an “equivalent third- ­involved. SIX ­also wants to use dis- Europe: around country trading venue.” The ­decision tributed ledger technology to process 100 employees allows European securities traders OTC transactions more efficiently in London, access to the Swiss market even on the bilateral trading platform when the new European financial ­XBTR. Professional market partici- Luxembourg,­ market rules come into force in pants in the interbank business use and Zurich January­ 2018. Earlier in 2017 FINMA XBTR to trade in s­ tructured products volunteered­ for had already granted the CO:RE trad- that are not listed on an exchange. ing platform for repo transactions Previously, the processing of such OTC charitable­ and the status of multilateral trading facil- transactions had been partly manual, environmental ity and recognised SIX as a central and therefore time-consuming and causes. securities depository in accordance prone to ­error. XBTR automates and with Financial Market Infrastructure simplifies this process. Act (FMIA). In addition, the SIX Trade Repository is the only Swiss Trade Three colonies of bees on the Repository to have received a­ pproval roof of Hard Turm Park from FINMA. Since summer 2017, there have been three beehives on the roof Blockchain innovations of the SIX building in Zurich West. in the spotlight They are each home to a colony In 2017, SIX explored blockchain of the endangered dark bee. SIX and distributed ledger technology auctioned­ 30 pots of Urban Honey ­intensively through its participation among its employees. It donated More information available in the Corporate Responsibility in a number of innovation partner- the proceeds, which came to almost Report 2017, which will be ­ ships. In February, for example, CHF 1,400, to the Swiss Friends available in summer 2018 at SIX and D­ igital Asset presented a of Mellifera Bees Society. six-group.com/responsibility

SIX Corporate Responsibility: key steps 2017 2016 Code for Suppliers 2015 Corporate Responsibility Pan-European implemen- Report tation of SIX Social Days Placement of three 2013 CR Strategy GRI G4 Guidelines Core Implementation of Corporate Responsibility bee colonies on the roof Brochure of the SIX building in 2011 SIX becomes GRI Gold ­Sustainability Principles Member of Swissholding in Zurich West ­Member CR Workgroup Integration of Sustaina­ and economiesuisse Code of Conduct bility on website ­working group Introduction of SIX Social Start of Stakeholder Days in Switzerland ­Dialog 38 SIX Annual Report 2017

Risk and security management at SIX: strengthened for new challenges The risk and security organization of SIX helps employees to identify internal and external threats, evaluate them correctly and react to them appropriately. The aim is to ensure the long-term stability and security of the company and of the Swiss financial center, and to continue to provide the usual efficient, high-quality services.

isk and security management The risk and security organization is a key element of corporate of SIX constitutes the second line of R management at SIX. A lean ­defense (2nd LoD). It assists and and efficient risk and security orga­ ­supports the first line with the moni- nization under the leadership of toring and control of critical topics. the Chief Risk Officer has reported The third line of defense (3rd LoD) ­directly to the CEO since July 2017. is formed by the internal and external Risk and security management is auditors and the Board of Directors. constantly being developed by SIX They are responsible for independent- to ensure it fully complies with the ly monitoring the risk and security business model of SIX and the re- ­organization and management. quirements of the business environ- The following functions were ment. In 2017, SIX therefore embed- ­added to the second line of defense ded its risk management organization in 2017 when the security organiza- even deeper within the company, tion was embedded in the risk ­expanding the security functions organization:­ and employing more staff. • “Business Continuity Manage- Risk and security ment & Physical Security” is responsi- management Risk and security organization ble for the continuity and restoration of SIX of critical business processes in an at SIX is based The risk and security organization emergency – this includes the recovery on the internation­ of SIX continues to build on the capabilities of the IT infrastructure. ally recognized ­internationally recognized “three It also includes the protection of lines of defense” model already employees,­ premises, and business- “three lines of ­implemented at SIX: critical information. defense”­ model. The first line of defense (1st LoD) • “Security Business Partner” continuously identifies and manages ­ensures information security during the risks faced by SIX in its daily IT projects and throughout the IT life business. This line of defense is usu- cycle. Any risks identified are evaluat- ally assigned to the line organization. ed and handed over to the business Risk and security management 39

and IT with a recommendation for step SIX will ­also offer tailored ­action. This function also ensures ­managed security services (MSS) to that the security aspects of statutory, Swiss financial ­services providers regulatory, and contractual provisions via the SOC. are being observed and implemented. It assists with external audits and Risk management supports provides appropriate employee train- ­innovation and transformation ing on security matters. at SIX • “Security Governance” introduces Risk management at SIX promotes standard methods of handling IT and supports the responsible use and security risks as well as topics. of innovative technologies and the • “Cyber Defense” ensures the ­ development of innovations SIX. digital security of SIX and protects In addition to setting up the SOC, SIX from cyberthreats. the risk management team thoroughly evaluated and actively gave support Cybersecurity has priority to the topic of blockchain and block- In view of the growing threats, chain-based solutions in the year SIX gives top priority to protection under­ review. against cyberattacks and to its The strategic and organizational own cybersecurity, because any realignment of SIX will also actively A special report on cyber­ disruption of its infrastructure could support the risk and security orga­ security can be found at cause huge damage not only to the nization. This will guarantee that the six-group.com/media company, but also to the entire Swiss services provided by SIX meet the economy in a very short time. The usual standards of quality and effi- task of the newly created “Cyber ciency at all times, including during ­Defense” team is to identify potential the transformation phase. threats at an early stage and ward off hacker attacks, thus reducing the vulnerability of critical systems to the minimum. In order to achieve this, in 2017 SIX began setting up a next-generation “Security Operations Center” (SOC). This is the first secu­ rity centre in Switzerland to make use of cognitive technology to identify cyber attacks. At the end of the year it launched trial operations. The ­state-of-the-art SOC will enable SIX to react to cyberattacks faster and more efficiently in the future. In a first step, the SOC will strengthen ­cybersecurity at SIX; in a second 40 SIX Annual Report 2017

Management structure and shareholders SIX Group Ltd (SIX) is an unlisted public limited company based in Zurich. SIX operates in four business areas via six divisions.

Shareholders and Subject to Art. 685b para. 4 of the equity ­structure Swiss Code of Obligations (CO), Equity structure All former owners of the merger ­approval may be refused for signifi- of 31 December 2017: ­partners are represented among the cant reasons as mentioned in the shareholders. The shares are widely ­articles of association. A resolution Ordinary share capital distributed, i. e. no single owner by the general meeting, backed by CHF 19,521,905 or bank category has an absolute at least two-thirds of the represented Registered shares ­majority. All shareholders are bound votes and an absolute majority of (par value CHF 1.00) by a shareholders’ agreement. the par value of represented shares, 19,521,905 The total equity of SIX amounts is re­ quired along with a statutory to CHF 19,521,905 and is divided into quorum pursuant to Art. 704 para. 1 Security number 19,521,905 registered shares with CO in order to: 3768228 a par value of CHF 1.00 each. Of this 1. ease or lift the transfer restriction amount, 607,864 (3.1 %) are owned on registered shares by SIX (treasury shares). The transfer 2. convert registered shares into of registered shares is restricted by bearer shares the articles of association. 3. dissolve the corporation through The transfer of shares must be liquidation ­approved by the Board of Directors. 4. a mend this provision

Ownership structure of SIX

in % 35 30.1 30 25 20 16.9 17.1 15 14.0 10 9.1 8.5 5 3.1 1.2 0

Others Big banks Regional and Regional Private banks Private Foreign banks Cantonal banks Treasury shares Commercial and Raiffeisen Raiffeisen banks ­ ­ investment banks Organization 41

Internal organization and competency rules As the company’s highest governing body, the Board of Directors is responsi- ble for supervising the Group Executive Board. The tasks and competencies of the Board of Directors and its committees and of the Group Executive Board as corporate bodies of SIX are defined in the articles of association, the rules of organization, and the competency rules.

asks of the Board of Directors minutes. The minutes of the commit- are generally carried out tees are sent to all members of the T by the committee responsible. Board of Directors. The committee The Board of Directors has three chairs also deliver a verbal report on Members of the Board of committees: the Audit Committee, important events and resolutions Directors from page 44 onward. the Nomination & Compensation at every Board of Directors meeting. Committee, and the Risk Committee. In the year under ­review, the Board Insofar as the committees are as- of Directors c­ onvened on nine occa- signed discretionary powers by the sions, one o­ f which was a one-day competency rules, the duties of the strategy ­seminar. Board of Directors are limited to ­supervision of the committees. Audit Committee (AC) The committees of the Board of The AC consists of three to four Directors accept reports pertaining non-executive members of the Board to their sphere of responsibility from of Directors. The activities of the AC the Group Executive Board and super­ are stipulated by the law, the applica- vise the relevant operating business, ble FINMA Circulars, the articles of in particular with regard to compliance association, the rules of organization with the articles of association, regula- (including the competency rules), tions, and directives. Meetings of and the regulations of the AC. the Board of Directors and commit- The AC assumes tasks relating tees generally last between two hours in particular to accounting and finan- and half a day. The Chairman of the cial reporting, the internal c­ ontrolling Board of Directors is invited to a­ ttend system, the external a­ uditors, and all committee meetings as a guest. the Internal Audit department. AC The Group CEO and Group meetings are attended by the Group The organizational chart CFO are present at all meetings of CEO, the Group CFO, and represen­ for SIX can be found online at the Board of Directors. The chairs of tatives of the internal and external six-group.com/organization the committees decide whether fur- ­auditors. Seven meetings were held ther members of the Group Executive in the year under ­review. Board or other management staff are to be summoned, depending on the agenda. If deemed necessary, representatives of the external audi- tors participate in the Board of Direc- tors’ discussion of their reports. The chair of the Board of Direc- tors, or the chairs of the committees, set the agenda for meetings. Debates and resolutions are recorded in the 42 SIX Annual Report 2017

Nomination & Compensation SIX and all legal entities. It has the Committee (NCC) right to inspect all business documents The NCC consists of three to four at any time. Internal Audit coordi- non-executive members of the Board nates its a­ ctivities with the external of Directors. The activities of the NCC auditors and those responsible are stipulated by the law, the articles for compliance and risk controlling. of association, the rules of organiza- tion (including the competency rules), Information and supervisory and the regulations of the NCC. tools regarding Group Executive The NCC prepares the ground- Board work for all decisions on important SIX has a fully developed manage- personnel and related organizational ment information system (MIS) that issues at the Group Executive Board supports the Board of Directors in and senior management level for ­performing its supervisory duties ­submission to the Board of Directors, and monitoring the powers assigned including all issues pertaining to to the Group Executive Board. remuneration.­ NCC meetings are A comprehensive interim statement ­attended by the Group CEO and the containing budget and year-on- Head Human Resources. Six meetings year comparisons is submitted to were held in the year under ­review. the Board of Directors each quarter. The Chairman of the Board Risk Committee (RC) of D­ irectors receives the minutes of The RC consists of three to four the Group Executive Board meetings non-executive members of the for inspection. Board of Directors. The activities of the RC are stipulated by the law, Risk management and the ­articles of association, the rules compliance of organization (including the com­ The Board of Directors is informed petency rules), and the regulations about the risk situation on a regular Further information on risk- of the RC. basis. The Group has an internal and security management at SIX The RC assumes the duties of ­control system (ICS) consisting of from page 38 onward. the Board of Directors in respect of regulations, internal directives, and risk management in accordance corresponding measures that serve with the risk policy of SIX. In addition, to ensure that business operations the RC has responsibilities r­elated to are conducted properly. the ­Securities Services business area. A corresponding compliance RC­ meetings are attended by the ­program also ensures that statutory Group CEO, the Group CFO, and the and regulatory requirements are Group CRO. Six meetings were held met. The Risk Committee is informed in the year under ­review. about compliance activities on a ­yearly basis. Internal Audit Internal Audit reports directly to Remuneration the Audit Committee in functional At the request of the Nomination & terms and the Chairman of the Board Compensation Committee, the Board of D­ irectors in administrative terms. of Directors defines remuneration It supports the Board of Directors guidelines. The Chairman and mem- in ­carrying out its legal supervisory bers of the Board of Directors receive and controlling tasks and executes a fixed salary. The members of the the ­audit tasks assigned to it. It has Group Executive Board receive a fixed an ­unrestricted right of audit within basic salary as well as a variable Organization 43

­remuneration in the form of a cash tatives of the external auditors or payment. The latter is dependent Group Auditors. on company revenue, targets met ­according to the Balanced Scorecard, Remuneration of the auditors and individual performance. In order to gear corporate governance to in CHF 2017 ­longer-term objectives and make it Auditing services 2,432,317 more sustainable, part of the variable Audit-related services 293,081 remuneration of Group Executive Advisory services 929,624 Board members takes the form of a long-term incentive plan, which pays Information policy out after three years (cliff vesting), Up-to-date information is available provided that the predefined quanti- at six-group.com. Calls to attend tative and qualitative objectives have meetings and communications to been met. This ensures that the inter- the shareholders are sent by letter to ests of the owners and the Group the addresses recorded in the share ­Executive Board are aligned over an register. Subject to legal require- extended period. ments, announcements to creditors In the year under ­review, nine are published in the Swiss Official members of the Group Executive Gazette of Commerce. SIX publishes Board and ten members of the Board its business results semiannually. of ­Directors were paid a total of CHF 16.56 million. This in­ cludes those members of the Board of ­Directors or the Group Executive Board who ­either left or joined during the course of the financial year. Along with the basic and variable remuner­ation, the amount also covers payments or benefits in kind that are standard in the industry. Social benefits are not included in the amount. SIX does not grant loans of any kind to its ­employees or ­cor­porate bodies.

Auditors Ernst & Young Ltd was appointed as auditor of SIX Group Ltd on 1 January 2008. The auditor in charge is Jan Marxfeld, accredited audit expert. Rolf Walker, accredited audit expert, assumes the role of lead auditor recognized­ by FINMA. The Board of Directors is responsible for super­ vising and controlling the external The Annual Report is available ­auditors and Group Auditors. It also in German and English, and can handles the internal and external be ordered online at ­auditors’ ­reports, and is supported in six-group.com/annual-report this task by the Audit Committee The financial report is also (AC). The AC regularly receives and ­published in English online at processes ­reports from represen­ six-group.com/annual-report 44 SIX Annual Report 2017

Board of Directors

Dr. Romeo Lacher (1960) she worked for McKinsey & Company, At the Annual General Me­ eting Chairman where she was a partner for the last on 19 May 2017, the shareholders A Swiss citizen and member of the seven years. Sabine Keller-Busse elected Urs Beeler to the Board of Directors. Board of Directors since 1 January holds a master’s degree and a doctor- 2008, elected until 2020. He took ate in business administration from over the chairmanship of the Board at the University of St. Gallen. the beginning of 2017, having already chaired the Board on an interim basis Urs Beeler (1959) since 1 October 2016. After receiving A Swiss citizen and member of the his graduate degree and PhD from Board since 19 May 2017, elected un- the University of St. Gallen, he com- til 2020. He has a strong background pleted the Advanced Management in banking and finance and many Program at Harvard Business School years’ experience in trading and asset in Boston. Since 19 9 0 he has held and liability management. He has ­various management roles at Credit worked for Credit ­Suisse AG in Zurich Suisse, and was member of the Private since 1997, and was appointed Head Banking Management Committee of Fixed Income Trading Switzerland from 2004 to 2015. He was Global in 2008. He became Head Trading Head of Private Banking Operations Switzerland in 2015. At present he is from 2004 to 2 011; Head Private Head International Trading Solutions Banking Western Europe from 2012 Switzerland and a member of the to 2014; Head Private Banking EMEA ­Executive Board of Credit Suisse from 2014 to 2015, and Chief Operat- (Switzerland) AG. From 2013 until ing Officer of the International Wealth his appointment to the Board of Management Division and member ­Directors of SIX, Urs Beeler was also of the IWM Management Committee a member of the Regulatory Board from 2016. At the end of February of SIX Exchange Regulation. 2017 Romeo Lacher stepped down from all his roles and resigned from Dr. Jürg Bühlmann (1967) Credit Suisse. A Swiss citizen and member of the Board since 20 May 2016, elected Dr. Sabine Keller-Busse (1965) ­until 2020. After receiving his gradu- Vice Chairman ate degree in Business Administration A German and Swiss citizen, member and his PhD at the University of of the Board since 18 June 2012, ­Zurich, he completed the Executive elected until 2020. She was appointed Program of the Graduate School to the Group Executive Board of UBS of Business at Stanford University, Group AG and UBS AG in January and the Senior Executive Programme 2016, and has been Chief Operating of the London Business School. Officer of UBS and President of the He has worked for ­Zürcher Kantonal- Executive Board of UBS Business bank since 1994. He held various Solutions AG since January 2018. ­executive positions in Controlling From 2014 to 2017 she was Group in the Executive Board unit and was Head Human ­Resources, following a Member of Management from 1998 four years as Chief Operating Officer onward. In 2002, he took charge of UBS Switzerland. Before joining Logistics IT as Head of Application UBS in 2010, she was Head Private Engineering. From 2004, he assumed Clients Region Zurich at Credit Suisse responsibility for project manage- for two years. From 1995 to 2008 ment, IT projects, and their develop- Board of Directors 45

ment (Change the Bank). In 2011, ­Development at the International he became Head of Real Estate, ­Institute for Management Development and since 2012 he has been Head (IMD) in Lausanne. Following various of L­ ogistics and a member of the positions in audit and controlling ­Executive Board. in the food industry, in 2003 Stefan Helfenstein moved to Nestlé Taiwan Dr. Patrik Gisel (1962) as Finance Controller of Shanghai A Swiss citizen and member of Fuller Foods Co, China. From 2005 he the Board of Directors since 16 May spent another three years at Nestlé 2014, elected until 2020. He com­ China before becoming Head of pleted both his graduate degree in ­Finance and Control (CFO) of Nestlé Business Management and his PhD Greater China Region in 2008. He has at the University of St. Gallen. After been Head of Group Accounting and stints at Swiss Bank Corporation Reporting at Nestlé Group. (1987–1993), Boston Consulting Group (1993 –1994) and Union Bank Søren Mose (1964) of Switzerland / UBS AG (1994–1999), A Danish and Swiss citizen and in 2000 he became Head of the Cor- ­member of the Board since 19 May porate Development, ­Finance, and 2014, elected ­until 2020. He holds IT Department of ­Raiffeisen Switzer­ an MBA from Henley Management land Cooperative, St. Gallen. From ­College (­England) and an H. D. from 2002 to 2015 he was Vice Chairman Aarhus Business University (Denmark). of the Executive Board and from At Jyske Bank, Denmark, Søren Mose In November 2017, the Board 2005 to 2015 Market Department first worked as a trader and invest- of Directors decided on a strategic Head. Patrik Gisel took the helm ment advisor, ­before rising to become and organizational realignment for SIX. Find out more on page 49. as CEO of Raiffeisen ­Switzerland director of the HNWI (High-Net-Worth in October 2015. Individuals) department in 1988. From 1992 to 2002 he was Head Lorenz von Habsburg of Private ­Banking, Deputy CEO, Lothringen (1955) and member of the Board of Directors A Belgian and Austrian citizen and of Jyske Bank (Gibraltar) Ltd., and member of the Board of Directors then from 2002 CEO of Jyske Bank since 16 May 2014, elected until (Switzerland)­ AG in Zurich for five 2020. Lorenz von Habsburg Lothrin- years. Søren Mose was CEO of Saxo gen studied Business Management Bank (Switzerland) AG, Zollikon, at the University of St. Gallen and from 2007 to November 2014. the University of Innsbruck (Austria). He has been a Director of E. Gutz­ Herbert J. Scheidt (1951) willer & Cie Banquiers, Basel, since A German and Swiss citizen and 1987 and a General Partner with member of the Board since 1 January ­unlimited liability since 1990. 2008, elected until 2020. He studied Economics at the University of Sussex Stefan Helfenstein (1966) and holds an MBA from the Univer­- A Swiss citizen and member of the sity of New York. He held a range of Board since 20 May 2016, elected management positions at Deutsche ­until 2020. He has a graduate degree Bank in Frankfurt, Essen, New York, in Business Management from the and Milan. In 1996 he moved to University of St. Gallen and complet- ­Deutsche Bank (Suisse) in Geneva: ed the Programme for Executive as Head of Private Banking Europe 46 SIX Annual Report 2017

and Middle East he served as Deputy CEO; he later headed up International Private Banking in Geneva, became a member of the Group Executive Committee, Wealth Management, in Frankfurt, and in 2001 was appointed CEO in Geneva. He moved to Vontobel Group as CEO in 2002. Since May 2011 Herbert J. Scheidt has been Chairman of the Board of Directors of Bank Vontobel AG and Vontobel Holding AG, Zurich.

Shannon Thyme Klinger (1971) A US citizen and member of the Board since 20 May 2016, elected ­until 2020. After completing a B.A. in Psychology at the University of ­Notre Dame (USA), she obtained a Juris Doctor (J. D.) at the University of North Carolina at Chapel Hill. In 19 9 6 she joined Alston & Bird LLP as an a­ ssociate, and later as a partner. In 2005 she changed sectors, be­ coming Vice President, Marketing Compliance, and Associate Counsel at Barr Laboratories / Duramed Phar- maceuticals; Senior Vice President, General ­Counsel NAFTA at Solvay Pharmaceuticals and General Counsel North America at Sandoz Inc. She moved to Germany in 2012 as Global Legal Head and General Counsel for Sandoz International GmbH. Since 1 May 2016 she has been Chief Ethics and Compliance Officer and Head of ­Litigation at Novartis International AG in Basel.

Further activities and mandates of the members of the Board of Directors and details of the composition of the committees can be found at six-group.com/board-of-directors Group Executive Board 47

Group Executive Board in the year under review

Dr. Urs Rüegsegger (1962) ­departments as well as the expansion Jos Dijsselhof succeeds Group CEO of the international airport activities. Dr. Urs Rüegsegger as CEO of SIX Urs Rüegsegger, a Swiss citizen, Before joining Flughafen Zürich AG, on 1 January 2018. Urs Rüegsegger had successfully led SIX since CEO was Group from the beginning he held various management posi- its foundation in 2008; in May 2017 of 2008 to the end of 2017. Prior to tions in the field of finance within the he announced his forthcoming this he was of Head of the Executive German Bosch Group, such as Head ­retirement. Committee of St. Galler Kantonal- Division Controlling at Scintilla AG bank. He joined the bank in 19 93 as and Chief ­Financial Officer of Robert Head of Controlling, Accounting and Bosch ­Internationale Beteiligungen AG. Risk Management and was appointed ­He has a Federal D­ iploma as an to the Executive Committee in 19 97. ­expert in Accounting and Controlling. In 2000 he took charge of the IPO, In 2013 Daniel Schmucki was named which was successfully launched in “Switzerland’s CFO of the year.” 2001. As Head of the E­ xecutive ­Committee he also held various po­ Christoph Landis (1959) sitions with the Association of Swiss Division CEO Swiss Exchange Cantonal Banks beginning in 2001. Christoph Landis, a Swiss citizen, After completing a degree in business became Division CEO Swiss studies at the University of St. Gallen, ­Exchange on 12 November 2015. Urs Rüegsegger started his c­ areer He had previously managed the at Swiss Re in the IT department. ­business area on an interim basis He was deeply involved in the devel- since May 2015. Christoph Landis opment of commercial applications has been at SIX Swiss Exchange and the restructuring of Swiss since 19 92. He was Deputy Director Re’s service branch, and most of Information Technology from ­re ­cently ­assumed financial respon­ 1999, with a major focus on devel­ sibility for Audatex, its international opmental and external IT projects. ­subsidiary group. He was appointed to the Manage- ment Committee of Swiss Exchange Daniel Schmucki (1968) as CIO in 2003. He has been re­ Group CFO sponsible for Operations since 2010, Daniel Schmucki, a Swiss citizen, in the capacity of Deputy Division took up his role as Group CFO CEO since 2012. After graduating on 1 March 2017. He joined SIX with a Type B Matura in Zurich in from Flughafen Zürich AG, where 1978, he continued his studies in the he had been Chief Financial Officer fields of human medicine, informa- and Deputy­ CEO since 2008. In tion technology, and economics. ­addition to all traditional finance ­functions, he was also responsible Thomas Zeeb (1964) Thomas Zeeb, Division CEO for fee ma­ nagement, information Division CEO Securities Services ­Securities Services, assumes and ­communication technology, Thomas Zeeb, a Canadian citizen, ­responsibility for the new “Securi- ties & Exchanges” business unit CEO risk and c­ ompliance management, became Division ­Securities on 1 April 2018. Christoph Landis, central procurement as well as M&A, ­Services in 2008. He previously Division CEO Swiss Exchange, incl. the operation of all the compa- worked at Clearstream Banking in is the new Head IT. Find out more ny’s global commitments. He joined London and Luxembourg. As Execu- on page 49. Flughafen Zürich AG as Head Con- tive Director of Client Relations, he trolling at the end of 1999. In 2002 he was part of the company’s Executive also took over ­responsibility for the Management and a member of the Treasury and I­nvestor Relations Board of Directors of Clearstream 48 SIX Annual Report 2017

Banking Frankfurt. In charge of he successfully launched new sales, relationship management, and credit cards, set up ­innovative credit client services, Thomas Zeeb was card programs and established an respon­sible for the development of ­efficient organizational structure for the ­European and US business. He credit cards within a bank. He holds previously held positions in compa- an MBA, with a major in finance nies such as Bank of New York in and strategic management, from ­London, Sim & Fed SpA in Florence, the Wharton School, University of and Deutsche Bank AG in Frankfurt. ­Pennsylvania (USA). Over the course of his career, Thomas Zeeb has gained a wealth of experi- Robert Bornträger (1960) ence in the post-­trading sector. Division CEO Global IT Robert Bornträger, a Swiss citizen, Robert Jeanbart (1956) was Division CEO Global IT from Division CEO Financial Information April 2014 to 28 February 2018. He Robert Jeanbart, a Swiss citizen, was responsible for the development became Division CEO ­Financial and operation of the entire IT infra- ­Information in May 2014. He has structure from 2008 onwards. From ­many years of international manage- 2005 until the end of 2007, he was ment experience and proven expertise CEO of Telekurs Services Ltd. and a in various areas of the fi­ nancial in­ member of the Management Commit- formation business. Most recently tee of Telekurs Group. Prior to this, he was Global Head of Market Data he was Managing Director of and Information Services at SunGard. ­Integralis S­ chweiz AG for a brief He was formerly CEO of I­nfotec S.A. ­period and ­subsequently Chief Infor- and worked for 15 years in a number mation ­Officer at Swiss International of managerial positions at Reuters Air Lines. From 199 8 to 2001 he Ltd., most recently as Managing was a member of the Management ­Director for UK & Ireland. He studied Committee of Swisscargo AG and electrical ­engineering at EPFL Cargologic AG, before which he was ­Lausanne and holds a Master of based in Sweden and Hungary as ­Sciences degree. Managing Director of Swissair AG from 1993 to 19 98. While studying for Jürg Weber (1961) his Masters of ­Science in IT and Jürg Weber and Robert Division CEO Payment Services ­business ­administration at the Uni- ­Bornträger left the Group Executive Jürg Weber, a Swiss citizen, was versity of Z­ urich, Robert Bornträger Board with effect from 30 Novem- ber 2017 and 28 February 2018 Division CEO Payment Services from worked as a programmer and analyst ­respectively. The new composition September 2015 to 30 November at Eldag Informatik AG. In 19 8 6 of the Group Executive Board, 2017. Founder and owner of ­Golden he transferred to Swissair’s IT unit, as of the second quarter of 2018, Horn Management Ltd. in ­Istanbul where he worked as a consultant, is shown on the right on page 49. and Kiev, where he worked from ­instructor, and software engineer. 2000 to 2005. Prior to that, he was CEO of Benkar A.Ş. ­within Boyner Holding, based in ­Turkey, from 19 97 to 2001 and Consultant and Partner at McKinsey & Co from 19 92 to

19 97, where he was ­responsible for Further activities and mandates at establishing a ­McKinsey office in six-group.com/ Turkey. In his ­former roles as CEO, group-executive-board Organization/Development 49

Strategic and organizational realignment of SIX In November 2017 the Board of Directors decided to make strategic and ­organizational adjustments to take account of an altered business environment and place the company in an optimal position for the future.

he realignment is adopting The new Executive Board of SIX Find out more about the a systematic focus on infra- will comprise the following members ­strategic realignment of SIX structure services for share- and areas of responsibility under the in the interview with Chairman T of the Board Dr. Romeo Lacher, CEO holders and the financial center management of Jos Dijsselhof starting on page 32. in the areas of securities, payment as of 1 April: services, and financial information. • Daniel Schmucki, These areas represent the future Chief ­Financial Officer (CFO) core business of SIX. Furthermore, • Dr. Jochen Dürr, all ­innovation activities of SIX will be Chief Risk Officer (CRO) consolidated in a new innovation • Thomas Zeeb, unit and substantially more funding Head Securities & Exchanges Biographical information placed at its disposal. In future, • Marco Menotti, Head Payments about the new Group Executive the company will operate on the • Robert Jeanbart, Head Financial Board ­members, together with ­downloadable portrait photos, ­market exclusively under the ­Information may be found from 1 April 2018 at “SIX” brand. • Christoph Landis, Head IT six-group.com/ • Marc Schluep, Head Cards group-executive-board

New organizational structure

CEO

Finance & Services Marketing & Communications Risk, Legal & Compliance Human Resources IT

Securities & Financial Innovation & Payments Cards* Exchanges ­Information Digital

* In participation with a strategic partner 50 SIX Annual Report 2017

Consolidated balance sheet

in CHF million 31/12/2017 31/12/2016

Assets Cash and cash equivalents 4,462.6 4,921.2 Trade and other receivables 263.4 213.6 Receivables from clearing & settlement 3,566.9 3,326.4 Financial assets 754.8 688.2 Inventories 17.4 12.0 Current income tax receivables 23.6 13.4 Other current assets 218.1 112.8 Disposal groups and assets held for sale – 317.9 Current assets 9,306.8 9,605.4 Property, plant, and equipment 277.6 255.2 Intangible assets 393.4 167.3 Investments in associates 23.5 40.8 Financial assets 260.1 184.7 Other non-current assets 28.0 9.3 Deferred tax assets 12.1 16.9 Non-current assets 994.7 674.1 Total assets 10,301.5 10,279.5

Liabilities Bank overdrafts 1.0 0.1 Trade and other payables 262.1 190.4 Payables from clearing & settlement 6,861.5 6,986.0 Financial liabilities 68.9 56.7 Provisions 33.6 29.5 Current income tax payables 23.1 31.2 Other current liabilities 247.1 217.0 Liabilities directly associated with disposal groups held for sale – 83.6 Current liabilities 7,497.3 7,594.6 Provisions 28.4 38.5 Other non-current liabilities 40.6 52.1 Deferred tax liabilities 59.3 39.8 Non-current liabilities 128.3 130.4 Total liabilities 7,625.6 7,725.1

Equity Share capital 19.5 19.5 Capital reserves 234.1 234.1 Other reserves –36.6 –51.7 Retained earnings 2,449.0 2,342.8 Shareholders’ equity 2,666.0 2,544.8 Non-controlling interests 9.9 9.7 Total equity 2,675.9 2,554.4 Total liabilities and equity 10,301.5 10,279.5 Annual Financial Statements 51

Consolidated income statement

in CHF million 2017 2016

Commission revenues 777.1 694.3 Transaction revenues 405.6 394.1 Service revenues 641.3 627.7 Net interest income from banking business 25.3 15.1 Other operating income 95.3 107.4 Total operating income 1,944.6 1,838.6 Personnel expenses –626.1 –628.4 Other operating expenses –952.3 –838.8 Depreciation, amortization, and impairment –85.6 –84.3 Total operating expenses –1,664.0 –1,551.5 Operating profit 280.5 287.1 Share of profit of associates –23.2 –0.3 Financial income 42.8 23.9 Financial expenses –27.0 –13.6 Earnings before interest and tax (EBIT) 273.2 297.1 Interest income 4.0 5.1 Interest expenses –6.3 –7.5 Earnings before tax (EBT) 270.9 294.7 Income tax expenses –63.7 –73.6 Group net profit 207.2 221.1 of which attributable to shareholders of SIX Group Ltd 206.4 220.5 of which attributable to non-controlling interests 0.9 0.5

Earnings per share (CHF) Basic profit for the year attributable to shareholders of SIX Group Ltd 10.91 11.66 Diluted profit for the year attributable to shareholders of SIX Group Ltd 10.91 11.66 52 SIX Annual Report 2017

Publisher SIX Group Ltd, Zurich Pfingstweidstrasse110 P. O. Box 8021 Zurich, Switzerland T +41 58 399 2111 six-group.com

Editorial and production ­management SIX Management Ltd, Corporate ­Communications, Zurich

Concept, layout, and design C3 Creative Code and Content (Switzerland) AG

Translations CLS Communication AG, Zurich Glattbrugg Robin Scott (editor)

Proofreading Text Control AG, Zurich

Photography Nils Sandmeier: pages 4, 32, 33 Helmut Wachter: pages 24, 26, 28, 30

Printing Neidhart + Schön AG, Zurich

Paper Planojet, Heaven 42

Addresses and locations can be found under “Contacts” on © SIX Group Ltd, Zurich 03/ 2018 six-group.com

Infrastructure

six-group.com

Annual Report 2017