SIX's digital exchange SDX will take flight without Tim Grant (pictured below), who is leaving for Michael Novogratz's Galaxy Digital as the project awaits Swiss regulatory approval.

If SDX argues the license will appear «shortly,» this is too late according to some of the project's insiders, who forecast that the digital venue will have to scale back its ambitions.

Seeking International Profile

The new trading venue took shape in 2018 as a growth push by the SIX, Switzerland's stock exchange. SIX has sat out a deal frenzy which has seen some giant exchanges like Euronext and NYSE merge. Instead, SIX has sought to snap up smaller bourses, like last year's 2.74 billion euro ($3.21 billion) acquisition of Spain's BME.

SDX represents an alternative route to raise the Swiss profile: the aim is to create a platform far before competitors can, which in turn would burnish Switzerland's financial center with much-needed innovation credibility to remain a relevant hub.

Digital Defense Strategy

SDX can also be interpreted as a defense strategy: since blockchain's application largely bypasses intermediaries and central platforms, they're perceived as a threat to traditional financial services. Their disruptive potential is in theory enormous – banks, trading venues, or insurers ignore them at their peril.

In 2018, the window to respond to blockchain's potential for disruption was wide open: in Thomas Zeeb (pictured below), SDX found a passionate advocate within somewhat hidebound SIX. The geographic proximity to Switzerland's burgeoning crypto scene in Zug lent additional promise.

Banks' Varying Interests

In reality, the high-profile and high-stakes project lost momentum, in part due to its difficulty managing Switzerland's banks, which own SIX and run as a sort of utility. The institutes displayed at times wildly differing views, both of the digital exchange as well as the meaning of this type of innovation itself. 

Predictably, they haggled over both money and technological implementation, as Zeeb hinted to finews.com two years ago: «We simply have to make sure that we’re not ten steps ahead, but maybe only two. That way we can take the banks along the journey.»

This meant endless and time-consuming compromises in an incredibly rapid-moving wider industry backdrop. Asked about the role of banks in the endeavor, a spokesman for SIX said «The board of SIX backed the SDX project from the start and has continuously supported it.»  

Three Heads In Three Years

A series of management exits including that of first, temporary CEO Martin Halblaub who was replaced in 2019 by SIX executive Tomas Kindler and then finally by Grant last March as head of business ernannt.

Grant, who previously ran blockchain consortium R3, was criticized locally as a careerist who had little interest in Switzerland or its financial services center. Zeeb is milder: «I greatly enjoyed working with Tim and his team at SDX.»

A spokesman for SIX, which sent the bulk of its employees home to work last March, noted that Grant had traveled to Zurich several times as soon as Covid restrictions allowed. Strategically, SDX had adjusted course several times over its development, the spokesman noted.

The goal, however, remains the same, he said: to create the first fully-integrated infrastructure for the trading, execution, and storage of digital assets. «Competing trading venues thus far only cover part but not all of this value chain,» the SIX spokesman said.

Outside Investors

Ultimately, SDX's planned end-2020 launch was postponed, and the pandemic hindered efforts to raise money. Though SIX wanted to pump another 200 million Swiss francs ($218 million) into the project this year, it also sought outside investors – ideally those who would later be clients of the venue.

In terms of trading, SDX is emphasizing an ecosystem of partners and SIX stakeholders, while an early ambition to tokenize and list Swiss blue-chip stocks like Novartis, Nestle, or UBS has gone quiet.

Pipped By Local Lender?

Meanwhile, several digital bourses are ready to go: crypto bank Sygnum was greenlighted to trade tokens last year. Last year, Swissquote bank tested trading of tokens as part of a CMTA consortium dry-run. And Bern's cantonal bank said this week it is poised with a digital mid- and small-cap SME|X in coming weeks.

The local lender hasn't sought a license, while SDX is working closely with Swiss financial regulator Finma on backing. In October, ex-State Street executive David Newns is due to take over from Grant.

First Mover Vs Latecomer

Has the SDX's slower start than its competitors hurt its chances? Being the latecomer «isn't hugely helpful,» one observer notes. SIX's spokesman said «a market is only attractive if there is enough supply and demand» during its commercialization phase. SDX will start with several banks, but need to extend its offering which «will take time,» SIX said.