New money market platform goes live The new electronic money market trading platform for repo transactions began operating at the end of February and has completely replaced the old system. The new trading platform’s name, CO:RE, is short for “Collateral & Repo”. The technical changeover to the new system went smoothly for all parties involved. The new trading platform gives more than 160 national and international participants a single access point for procuring and investing Swiss franc liquidity as well as managing collateral (i.e. pledged securities). It also enables the SNB to carry out its open market operations on the money market. After more than 15 years of service, the system which CO:RE has replaced was no longer able to meet the needs and technical requirements of market participants. As you know, the SNB is currently implementing its monetary policy using exceptional measures – negative interest on sight deposits and foreign exchange market interventions. In these circumstances, standard money market instruments – repo transactions and SNB Bills – are not being deployed. It is nonetheless important that counterparties are in a position to carry out these transactions seamlessly. The SNB therefore conducts small-volume tests. When a series of tests conducted in autumn 2014 revealed that some market participants were no longer sufficiently familiar with operational implementation, a second round of tests was launched in May 2016. This exercise will be concluded at the end of July. These kinds of test operations, which help ensure counterparties’ operational readiness, are greatly appreciated by market participants.

Money and capital market interest rates have fallen by over 60 basis points since the introduction of negative interest (slide 4). Interest rates on bank loans have reacted much less strongly to negative interest, however. The SNB does not charge negative interest on all sight deposits, but grants banks and other financial market participants exemption thresholds, so that the banking system does not have to carry the full burden resulting from the high level of sight deposits. Due to the significant expansion of liquidity, most banks have now completely exhausted these exemption thresholds. If the SNB supplies the system with additional Swiss franc liquidity – notably, by selling Swiss francs in exchange for other currencies on the foreign exchange market – the banks’ interest rate burden increases. This makes holding additional Swiss franc liquidity even less attractive. Innovations affecting financial market infrastructure I now come to my final topic – innovations affecting financial market infrastructure that is relevant to the fulfilment of the SNB’s mandate. The changes relate to the new trading platform for repo transactions and the next-generation Swiss Interbank Clearing (SIC) payment system – both key components of Switzerland’s financial market infrastructure operated by SIX and its subsidiaries. Both Switzerland’s finance industry and the SNB depend on a reliable, secure and efficient financial market infrastructure. It is an important prerequisite for the SNB to be able to fulfil its statutory duties – providing the money market with liquidity as well as facilitating and securing cashless payments.