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In an industry undergoing consolidation, privately-owned Swiss exchange SIX sees potential takeover targets in Iberia and central Europe and has itself been approached by potential buyers, Chief Executive Officer Jos Dijsselhof told Reuters in an interview.

SIX, which runs Swiss franc clearing and post-trade services alongside its stock exchange, is in the process of selling its cards payments business and generated 1.9 billion Swiss francs ($1.92 billion) of revenue in 2017.

Dijsselhof expects a decision will be made in the second quarter on the payments business, which Reuters reported this week had three bidders including a consortium of French bank Natixis (CNAT.PA) and buyout fund Warburg Pincus WP.UL.

On potential acquisition targets, Dijsselhof said he was not considering anything large but was looking at independent exchanges and financial data firms in Europe, including Iberia, and not ruling out acquisitions in central Europe.

“I think there are many targets out there,” Dijsselhof said.

He said SIX itself has been approached by bigger players looking for acquisitions.

The industry is in the process of widespread consolidation. Exchange operator CME Group (CME.O) agreed to buy Britain’s NEX Group (NXGN.L) for $5.5 billion last month.

Dealmaking was not showing any signs of slowing, despite adaptation to new European market regulations MiFID II taking a chunk out of exchanges’ profitability, said Dijsselhof, who took the helm at SIX in January.

Cross-Atlantic M&A may be coming back to the fore, he said, especially as big European mergers are more difficult due to competition rules.

Last year a planned merger between the London Stock Exchange and Deutsche Boerse fell through due to regulatory concerns.

MIFID II COSTLY, BREXIT CAUSES HEADACHE
Adapting to the European Union’s Markets in Financial Instruments Directive II (MiFID II), a sweeping regulatory change implemented at the start of this year, has been costly for many firms, said Dijsselhof.

“Everybody has spent a lot of money on this, it has impacted profitability left right and centre. Even we have over-invested in projects in IT because of the regulation,” he said.

But the increased need for investment into technology and systems to deal with reporting requirements could be an opportunity for SIX, he added, saying the exchange had seen a high take-up of MiFID reporting services.

The CEO said regulations have not always had the desired impact, noting some trading post-MiFID II has shifted from dark pools to bank-run systematic internalisers – dealing platforms which reveal much less information about impending transactions – instead of onto transparent exchanges.

“Overly regulated markets are not good,” he said. “It needs to be contained to the core of where you want to protect the integrity and safety of the markets.”

Ongoing negotiations between Britain and the European Union have led to another headache. The bloc has taken a more aggressive stance towards non-EU member Switzerland, and made the issue of equivalence – the bloc’s approval of different regulatory regimes – more contentious, Dijsselhof said.

He called the EU’s decision in December to grant SIX equivalence only on a one-year horizon “totally inappropriate”, saying it creates unease among listed companies and hampers the free flow of capital.

Dijsselhof said he thought the EU was likely to try and impose a similar one-year limit on equivalence for UK companies, using it as a bargaining chip in negotiations, but he was confident the market would eventually win full equivalence.

“There’s no way the EU will not make the UK equivalent. It will hurt them too much,” he said.