The Power of Law: Wiener Börse CEO Christoph Boschan

In 1771, Maria Theresa, the Archduchess of Austria, established Europe’s first financial marketplace in Vienna. Wiener Börse signalled the birth of European capitalism as we know it today; over 2,000 people would meet on the exchange floor daily to trade bonds and foreign currencies.

But after nearly two-and-a-half centuries in existence, the exchange felt that it needed to dust off its cobwebs, and it had the perfect man for the job: Christoph Boschan.

In 2016, the 39-year-old former East Berliner took over the reins of the exchange and within a year, the Börse found itself eclipsing a number of its competitors in the mid-size arena. Its competitive advantage was, of course, Boschan himself. 

Double Identity

Boschan’s personal and professional background goes some way to explaining why Wiener Börse has been taking giant steps lately. He is a man always on the move between law and finance, a firm believer in the interconnection between local and global, and an innovation seeker surrounded by an abundance of legacy technologies.  

But above all, he is a man born to be a market participant. The son of an industrial designer and a shop owner, Boschan’s family had nothing to do with the financial markets, and yet he bought his first financial instrument at the age of 15.

“I guess I was fascinated by the financial markets,” he recalls. “It happened during the currency movement. I saw these exchange rates fluctuating and I thought it would make sense to buy a certain currency, then wait and back a certain tendency, and maybe I could make money out of it.”

Boschan got his first job as a trader on the floor of the Berlin Stock Exchange and went on to study economics in recently unified Berlin in the late 90s. “That was a time when the German market was developing and the financial industry was in desperate need of exchange traders,” he says.

It wasn’t long before he realized that a full-time job and studies in economics aren’t happy bedfellows and had to switch to law if he wanted to remain a trader. “No lawyer is ever going to admit this, but studying law at a German university gives you the freedom not to physically attend lectures, so it was rather convenient,” Boschan says. 

This oscillation between finance and law has characterized his entire career. “After that switch, I changed from market-making to market surveillance in the Berlin Exchange. I admit that this was difficult because I had to inspect my former colleagues,” he says. 

But when he was appointed managing director of the regulatory body of the Stuttgart Stock Exchange in 2010, he shifted to market operations within two years. This double identity proved to be beneficial at the time when the global financial system teetered on the brink of total collapse.

“The day that Lehman Brothers died, the whole industry faced a tremendous regulatory tsunami, which was a great advantage for me,” he says. “I was both an experienced trader and a fully qualified lawyer, and this was exactly the combination that was needed at that time to deal with the changing landscape in the financial sector.” 

Mifid II

Boschan’s background also helped during his first days behind the wheel of Wiener Börse. Mifid II is a vast and complex piece of regulation and Boschan was critical of the way certain aspects of it were designed from a legal perspective.

But being a man of law, he put the exchange on an implementation path as soon as he assumed the CEO role—he wanted to ensure that the exchange would fulfill all of its regulatory obligations.

“The law is the law, and it should be respected,” he says. “We are fully prepared and we are already on course for implementing the vast majority of the new regulations.” 

He admits, however, that the process was not without its challenges. “The directive is hundreds of pages long. This is a tsunami that’s really hard to handle if you’re a mid-sized exchange like us,” he says.

For Boschan, the problem is not only the enormous financial burden Mifid II imposes on all European capital markets firms, but also the level of sophistication the technical standards have reached that makes it nearly impossible to keep up with the regulation. Plus, when help is needed, the central authorities are nowhere to be found. 

“Most of the time when you address the European Securities and Markets Authority (Esma) or the European Commission, you don’t receive a clear answer,” he says. “Yes, there is an interaction organized by Esma to review the material and pay attention to comments, but it is a slow one and plenty of questions remain unanswered.”

That’s why he says the national authorities should play a more pivotal role in the directive’s implementation. “What I would expect from a national authority is to act as a kind of interpreter,” Boschan says. “I would like to see a more prominent and active role from the national regulators in terms of bridging European markets and helping to interpret the rules, and of course, standing up for the interests of the national markets.”

Blame the OTCs

The original Mifid (Mifid I) regulation, introduced in April 2004 and implemented in November 2007, is a regulation Boschan knows intimately. “I was heavily involved in the development of the first directive,” he says. As managing director of Stuttgart’s regulatory body, he participated in all the EC hearings.

He says Mifid I was a much-needed regulatory framework that established the foundations of investor protection. What he doesn’t understand, however, is why the Commission had to apply Mifid II’s regulatory requirements to exchanges.

“It was not us, the regulated part of the market, that was responsible for increasing riskiness and intensifying the crisis,” he says. “Exchanges remained operational and accessible during the course of the crisis, offering a haven for market infrastructure. I don’t see functional flaws or any other room for improvement.” 

He says that this is one of the biggest ironies in the financial markets’ history: Those entities that contributed the most to the market stability during times of uncertainty, have suffered the most from regulation.

Instead, he says, the over-the-counter (OTC) space, “with those fancy, unregulated instruments,” caused all the trouble. “The OTC systems just went off when financial institutions interrupted their services,” he says. “The G20 summit in 2008 decided that volumes had to move back to regulated markets, but this was not reflected in Mifid II regulations. OTC volumes have increased over the past 10 years and remain at a very high level.”

Boschan is also perplexed as to why Esma is introducing the OTC problem to a network of complicated platforms. He believes the solution should be straightforward. “Why doesn’t the regulator just decide to bring the order flow on-exchange?” he wonders. “Why do we need alternative platforms? Just route it back to the exchanges, full stop.”

He also has a clear message for the European Commission and his former colleagues at Esma, which he asked Waters to deliver verbatim: “Bring regulation to a halt for at least a couple of years. Let us all take some breathing space and consider the impact of regulations so far before coming up with any new ideas. That would be very helpful!”

The Old New 

The second change that Boschan introduced as Wiener Börse’s CEO was to reintroduce a more traditional way of doing business by way of communicating more frequently with clients. While he is no stranger to technology innovation—he was, after all, the mastermind behind the creation of Equiduct, the pan-European exchange operated by the Berlin Stock Exchange—he knows better than to be overly reliant on new technologies.

He says it is clear that Wiener Börse is not going to be a technology leader. “We will diligently take care of how and when we should use it to lower our costs and to make some efficiency gains on our operational side,” he says. 

Boschan would rather address the exchange’s clients’ needs individually than fall into the “massive technology trap” of rolling out innovative solutions that might not be relevant to everyone and adding no value to the operational side of the exchange. He is also skeptical of the value offered by distributed-ledger technologies and artificial intelligence. 

“I don’t see blockchain, for example, as this socialist technology as it is usually portrayed these days,” he says.  “We went through the same discussion with Linux 20 years ago; everyone was saying that Microsoft won’t be relevant anymore because we have free access to a system. But it turned out that it was not free because with all technologies, you need an infrastructure to maintain them, you need interfaces to be standardized, and you need service development.”

He argues that instead, communication must be at the forefront of the exchange’s advancements. “What is really disruptive is the interaction with the client,” he says. “The direct client interface is something that is developing as a form of communication with the end-customer.”

Curiously, Boschan has thrown his weight behind promoting a technology that has been around for more than a century: a radio station. “This has proven to be a rather modern way to communicate with investors,” he smiles. “They can now visit our website and listen to insights provided by the executive management of our top domestic companies.” 

Knowing Vienna

Also on Boschan’s agenda is his ongoing mission to correct the industry’s perceptions about Wiener Börse. It is an arduous task, he says, since the Vienna market is perceived by many Austrian and European participants as being too expensive, too illiquid, and on the whole, irrelevant.

“I usually approach these issues simply by looking at the numbers, and in this case, I found some really surprising facts,” he says. “This exchange captures 75 percent of the overall trading volume of domestic shares. That’s market dominance that no other national exchange can boast.” 

That didn’t happen by coincidence, he says, but by very clear leadership on best-execution policies. “Wiener Börse has by far the best execution prices, the lowest spreads and the highest liquidity, which allows us to offer price quality,” he adds. 

Boschan’s strategy was to establish a process whereby the firm evaluated its services and how it could further develop and upgrade them, and, secondly, how it might go about surfacing new business ideas. He also organized the exchange along similar principles to those of other financial services providers.

“You have the side of the company that takes care of all the P&L-relevant issues, it communicates with the market and interacts with clients. And then you have the back office, which covers the usual things like IT production, internal revision and compliance, etc.,” he explains. “We shifted the marketing responsibilities to me and the back office to the CIO and COO.”

The final prong of Boschan’s strategy was to ensure that Wiener Börse was in a position to offer international instruments to Austrian investors, who, up until 2016, were forced to trade on the Frankfurt or Stuttgart exchanges.

“From day one we started pilot projects, such as the introduction of foreign stocks. It was apparent that the exchange was in desperate need of diversifying its revenue streams,” he says. “We brought in the Nasdaq 100 and the DAX [indexes] and made them available for trading on our exchange, and we will definitely continue to expand on this.” 

The 30s

It is clear that Christoph Boschan will not rest until Wiener Börse is in the position he and his team have striven for—at the top of the European national exchange pecking order. And he aims to achieve all of the above while still in his 30s. “The board of directors knew my age when they hired me,” he jokes. “But it wasn’t an issue for the team or for me.” 

He says that being a good CEO is not about age but rather about experience and the ability to create something from the ground up. 

“I started out as a trader, I am a lawyer, I worked in market surveillance, I contributed to building a trading system, I worked on the regulatory side as well as operations, I was the managing director of the Stuttgart Stock Exchange, and I was even a member of the board of a listed financial services provider,” he says. “I have been in this business for over 20 years, so I think I might even qualify as an oldie now.”