#13 Lucas Bruggeman CEO at BX Swiss

The Nalu Finance Podcast

In this episode of Nalu Finance, we sit down with Lucas Bruggeman, CEO of BX Swiss, to explore the evolving role of stock exchanges in today’s financial ecosystem.

Lucas dives deep into what makes a modern exchange relevant, including:

• Why transparency, trust, and real-time oversight matter more than ever
  

• How BX Swiss is embracing actively managed certificates and digital content
  

• What makes Switzerland a natural hub for independent asset managers and AMCs

He also explains why listing AMCS publicly could boost investor confidence and how BX Swiss plans to be a modern marketplace centred on investor needs.

🎧 Listen Now On: Apple Podcasts | Spotify | Youtube | Podomatic

🎙️ Transcript:

Lucas Bruggeman: 00:04 There's only two stock exchanges in Switzerland. People just don't know that. And I'm the little David, you know, against the Goliath in the market.

Sponsor: 00:15 This podcast is courtesy of the Zurich branch of Commerzbank AG, which offers over 20,000 publicly offered leveraged structured products in Switzerland. These structured products are accessible through a multitude of channels, including the BX, SIX Exchanges and Swissquote Bank. More information can be found at certificate.commerzbank.ch.

Stefan Wagner: 00:38 Thank you very much. I'm here with Luca Bruggemann, the CEO of BX Swiss, also formerly known as the Berner Stock Exchange. Let's just start with the stock exchange. You know, what are the most important functions of a stock exchange for you in a sense? What do you see as your important?

Lucas Bruggeman: 00:54 I started four months ago, and looking at the exchange from the outside, I always thought it was providing liquidity, transparency. And once I joined the exchange, it changed a little bit. Because it's more about tradability and market surveillance. So the way that you need to control and making sure that the market participants are trading in a certain way that they apply the rules. And follow the rules. And our market control and market surveillance team is doing daily checkups, permanently checkups, whether, you know, is the price correct? Is the bid and the offer, the sizes which are on there, correct? something that happens in the market where we have to stop trading. The constant monitoring of the market provides a high level of security to the investor and trust. And, you know, being part of a 136 year old company, which I call the oldest startup I ever worked for, is giving me that perception of how good an exchange can be. But exchange maybe is an old-fashioned word. Maybe the word of the future is marketplace. It's a marketplace.

Stefan Wagner: 02:20 And how do actually the investors benefit from a securities exchange? Why not just trade with each other?

Lucas Bruggeman: 02:28 The benefit for the investor I think you could sum up with is that it is a guaranteed liquidity. There is market makers that are able to provide price and liquidity on such a platform between certain times. And there is an obligation to do so, like say 90% of the time. Then you have the regulator, which is checking the exchange, whether it applies, that it basically takes all the different regulations series. So when a new company is listed at the exchange, they have to do a whole series of actions. They have to publish ad hoc everything that they do, which could influence the stock exchange price or the stock price. It has to be reported. There is the investor relations, the reporting quarterly, semi-annually. There are rules and regulations which have to be adhered to. And that is being checked by the team at the exchange in order to make sure that these companies are doing their job properly. And transparency. Transparency is the result. Liquidity is the result. So to me, those are the most important functions of an exchange. But future wise, I would say also to provide content, to provide stories, to provide a narrative around the products and the stocks which are traded on such an exchange.

Stefan Wagner: 04:00 I mean, you have been here now for four months, but clearly you had a vision and a view. What do you think a modern stock exchange should mean? BX Swiss has a very long history, more than 100 years. But what do you think is sort of a modern stock exchange should look like and what trends have you seen for your business?

Lucas Bruggeman: 04:17 Well, a modern stock exchange is a marketplace. And a marketplace is based on an ecosystem. The ecosystem has members. So you have banks, you have advisors, you have investors, you have regulators. And they all together, they are providing, hopefully, a platform which is efficient. And a modern place is not necessarily about speed or about cheap saving money. It's all about service, about after service, pre-service, giving transparency on the actual themes or stocks which are traded on such an exchange. A modern exchange is all about the investor. It's all about the client. It's all about what the client, the customer, the user needs and how to lower the barriers. for such a user. And that is a modern place. Regulation is in one way the protection of the place, but you have to properly use it to not make it heavy. And modern tools like a good trading system, a good portal where you have online prices live. For example, our mother company, Börse Stuttgart, is offering live prices on all of their products and all of their traded stocks. And we want to do the same at BX. I see. So that is a thing that we're now installing, which is coming on our new website. We have a website which is quite slow and old fashioned at the moment. I've arrived four months ago and one of my bigger projects, I would say, is to make the website more user friendly, to provide more content, more narrative, more stories.

Stefan Wagner: 06:13 And maybe that leads me to the next question is a little bit, you said you want to publish always the prices and everybody assumes. There's a price and you see it, but I don't think very few actually understand how the price of a security is actually determined on a stock exchange. How does this actually work? Is it auction based? How does it work on the BX?

Lucas Bruggeman: 06:33 Well, there's no auction based system at BX. But there's one segment with the listed shares where basically that's order driven. So there's no market maker. The orders are coming in and, you know, they match. That is one principle. The second principle is when you use market makers for all other products which are at our exchange. So the structured products, the AMCs, etc. There is a market maker and they provide liquidity. They provide a bid and offer in a certain size on both ends. And then when that bid is lifted or hit, then basically you have the next one coming and they provide liquidity for, you know, most of the time. And then, of course, there's situations where there's a fast moving market or like Wirecard today when, you know, we have Wirecard also. you know, quoted at our end, and then you have to stop trading. And that is where the exchange comes in, that you have this overwatch. People are looking at it and are making sure that then basically there's no price shown. So not people can, you know, sell or buy something which is not there anymore.

Stefan Wagner: 07:42 Yeah, which has gone into insolvency.

Lucas Bruggeman: 07:44 Yeah, exactly.

Stefan Wagner: 07:45 You just managed Actively Managed Certificates. I believe you called your mother company the OIVAX, but also you have a dedicated segment for AMCs, Actively Managed Certificates. I've seen this incredibly growing this market. I would probably estimate it's probably in excess of a trillion now globally outstanding, but not much of that is currently say, listed on the public market, what do you think a stock exchange could do to make that more attractive to list these products?

Lucas Bruggeman: 08:20 First of all, Switzerland is a predestined market for actively managed certificates because of the nature of the independent asset management market. The independent asset manager in Switzerland is able to use this vehicle uniquely to manage their money for their customers much better. And one reason that we said we want our own segment is that we think You know, this is such a fast-growing market, and it's not just a structured product. It's more than that. And we created our own segment, and we expect quite some growth in the next few years. With regard to, like, say, what's important of a listing, I would say that the main reason is the publication of the AMC itself. So once the independent asset manager is managing its AMC and it's listed at the exchange, it's visible, so automatically transparent, and it will enable the investors to follow much easier, with much more confidence, the performance of the AMC. In the beginning, I was quite surprised because a couple of years when the AMCs came, I always thought, oh, it's not going to be listed because they're going to just, you know, go somewhere and there's like a fund and you just make a wrapper and you just take them. But in the end, it's also a sign of quality to the investor, like say to the investor, but both the manager that you have something which actually outperforms maybe the benchmark. Yeah. So it's quite an interesting vehicle in my view. But in the end, you know, the exchange provides also access to the investors because of the transparency and the publication. And I foresee a trend that most of most of these AMCs are going to be listed in the future because that's going to be, you know, like a sign of trust to the community.

Stefan Wagner: 10:24 Can you share any statistics about the part of the business already that is on the BX?

Lucas Bruggeman: 10:30 Well, we started a little bit of a year ago with some AMCs and most of them are wiki folios at our end. have because of a market maker, Lange & Schwarz, is making market in these products. And that has just started. So we have no way that we can compare it to the year or month before. So maybe ask me this question, say, in six or 12 months from now. But I believe it's already quite a lot of them. There are like all the two and a half thousand Wikifolio which are admitted for trading in Switzerland are in our exchange. And we have them here. Yeah, but there's one, maybe one difference because the Wikifolios in Germany and Switzerland are very, very successful because of the nature of the product. And I think it will take a little bit more time yet also to make sure that people understand that the Wikifolio is an actively managed certificate. Okay. And then the second part is there is one, like the original thought about a Wikifolio was that you have a manager, which could also be a non-professional. And in Germany, Switzerland, the market is much more social. So following a certain person and tracking their performance and able to invest in a certificate which track the performance of it is great. In Switzerland, there is much more professional retail. So they like and prefer the investment manager, which is professional. And therefore you need AMs, extended external asset managers. And that's something we want to build up in Switzerland.

Stefan Wagner: 12:05 You mentioned it, I mean, obviously in Switzerland has been a big growing market for actively managed deficit. Why do you think that actually became so popular in Switzerland?

Lucas Bruggeman: 12:14 Why it became so popular? Because I think it is popular because it's an ideal tool for the independent asset manager, as I said, to manage money at different banks. But having it in one or two or three different products. So it's much easier to sell in the end. And it's much easier for the asset manager, when it's a small asset manager, to be able to manage the money efficiently.

Stefan Wagner: 12:46 You mentioned market surveillance. Can you a little bit elaborate on what is involved in this and what kinds of things you can notice, if you can share?

Lucas Bruggeman: 12:57 Well, there is of course a tool which is making sure and checking all the transactions which are made. And we can track basically in hindsight, we can do post-trade analysis. For example, Wirecard would be a good example. When you see that two weeks before the actual news, there is a number of trades coming from a participant, which are, you know, suspect. Then you can go deeper into the system and check actually who was behind it. You can check whether the price movement was a normal one. you can put the story together. And we monitor all those movements and all those different alerts are monitored by the HUST, by the Handelsüberwachung, the trade civilians. And they are using these modern tools to make sure that there is no market manipulation. Exactly. 99,99% of the case, there is no market manipulation. But you want to be able to find that one little case or the few cases and then you want to.

Stefan Wagner: 14:14 You want to protect all the other investors.

Lucas Bruggeman: 14:16 That's what you do. Yeah. And of course, then when we have such a situation, then we send it to the FINMA and then it goes to the next level. Well, I came four months ago into this dream job, because in a way, it's a dream job, because my background is 10 years trading, 10 years structured products, three years in the executive board of a private bank, and then seven years, startup Fintech data. And all that is now combined in the stock exchange. And BX is, of course, there's only two stock exchanges in Switzerland. People just don't know that. And I'm the little David against the Goliath in the market. And it is not a comparison. But we have quite some room to maneuver and to find a niche to provide value. And in my view, the biggest value is the investor itself. So my focus primarily is on the end investor. And the investor, of course, in the ecosystem or community uses banks and brokers, etc. So there's a community I have to look for. And I came here also to build that community, to make sure that the quality content we can provide, you know, to get people on your platform, you need to deliver stories and content. And it has to be changing. You can't just put it into your… A good website is not enough. No. And you have to do weekly posting on LinkedIn. You have to tell a story. You have to interview people. What you're doing, the podcast, is a phenomenon. And we started with our own podcast recently. David Koons, our chief operating officer, is a big fan of BXTV. It was his invention, so to say, and he brought it from Stuttgart. The whole team is doing it with lots of enthusiasm. So you have Georg in market control, who's doing twice a week a market update. Fantastic. Coming from the exchange that gives neutrality. It gives a good story. Five minute update. What's going on with what's going on? And maybe it's not the highest quality, you know, it's not the best visual effect, but it's all about what he says. And to me, what you're doing with podcasts, I can only admire that because, you know, people nowadays, when they go jogging or go making doing sports, they listen to the podcast. It's a great way of getting information to you because television, with all due respect, is too political correct these days.

Stefan Wagner: 16:52 The question I always ask anybody at this end is, what are your favorite up to three? You only can tell me one, but I need to know why finance movies. The finance movies.

Lucas Bruggeman: 17:07 Well, you know, I grew up with Wall Street. So number one, Gordon Gekko, Buddy Fox. And this famous quote of greed is good. Of course, perversion itself, the movie in a certain time, although it It's a funny movie in the end, but also quite philosophical, but I think it's a little stone movie. That's my, I would say my all time favorite. And then you have Margin Call with Kevin Spacey. More recent, but very good. That is amazing. I've seen that movie several times and it shows the greed also, the leverage, how leverage can destroy a planet. So if you don't put boundaries on the level of leverage that you have in your society, you're doomed. And that's a conflict because I like leveraged products. But you have to use them to go, you know, maybe hatch your portfolio and not only use it opportunistically to over-leverage yourself and think that you can make more money by tripling, by qualifying your bets. You know, it's not betting, you know. My industry is everything but betting. So I think margin call is showing that level of where it's not supposed to go. Yeah, no, I agree. And then you have the film about Warren Buffett. But you know, if you want another one, the big short.

Stefan Wagner: 18:46 Yes. Thank you very much.

Lucas Bruggeman: 18:49 The big short with this comedian, Steve Carell was also there and he played a magnificent role. So that movie I've seen also multiple times because the dialogues are one in a million and it's this documentary voiceover, which is great of Ryan Rosling. I think he's doing the voiceover and explaining the public what people do and think and how crazy this whole situation was.

Excellent.