The Swiss-EU bilateral relationship has seen better days. In the wake of EU regulatory reforms, SIX Swiss Exchange will now be getting a temporary market access to the European bloc, which allows European securities traders to trade Swiss equities on the Swiss domestic market for a temporary period of one year.“We are indeed proposing to recognize equivalence for a limited period of time, until the end of 2018. It can be extended if there is sufficient progress in creating an institutional framework agreement between the EU and Switzerland,” EU Commissioner Valdis Dombrovskis told SRF. Switzerland is being pressured to contribute an extra 1.3 billion Swiss francs ($1.32 billion) in development funds for newer EU members.
These limitations are considered unacceptable by the Swiss representatives. “Switzerland fulfils the conditions for recognition of stock market equivalence every bit as much as the other third countries that have been granted indefinite recognition,” said Swiss President Doris Leuthard. “Switzerland therefore considers this limited recognition to be a clear case of discrimination. Linking this technical dossier with institutional issues is extraneous and unacceptable”, she added.
As Swiss President Doris Leuthard accused the EU of trying to undermine Switzerland as a financial centre, the finance ministry is now considering retaliation by making Swiss exchanges more attractive with measures such as halting collection of stamp duty on transactions.
SIX Swiss Exchange made efforts during recent months to take the necessary steps to ensure the exchange would attain the status of an equivalent third-country trading venue. As the EU Commission recognizes in principle the equivalence of the Swiss legal framework, SIX Swiss Exchange announced it will be working on the assumption that equal value will be definitively recognized at a later date.
The EU Commission decided to recognize the equivalence of the Swiss legal and supervisory framework for trading venues with that of the EU, allowing European securities traders access to the Swiss market even after the new European financial market rules enter into force in January 2018.
As the European Markets in Financial Instruments Directive (MiFID II) and its related regulation MiFIR enter into force on 3 January 2018, article 23 MiFIR requires European investment firms to trade shares on a trading venue within the EU or a third-country trading venue assessed as equivalent. This requirement applies to all shares admitted to trading in the EU, which affects the majority of Swiss equities traded on the SIX Swiss Exchange.
