Time runs out on Swiss equivalence

Over the weekend, the stock market equivalence granted to Switzerland by the European Commission expired. The limited-period equivalence, which was given in December 2017 and extended to 30 June 2019, has run out.

Despite Swiss beliefs that all the conditions are still met for recognition by the EU, there was no letup in the EU’s resolve to see this privilege revoked. The financial community’s hopes last week of an eleventh-hour extension to maintain the status quo were dashed. Nothing was granted nor promised.

As a result, the Swiss government’s Federal Council activated their plan to protect Swiss stock exchange infrastructure. Under these measures, foreign venues are required to have authorization to trade Swiss shares. Without it, over 300 Swiss shares have been removed from trading on EU venues from 01 July. These Swiss stocks are no longer in scope of the MiFIR trading obligation, and EU trading firms can trade directly in Switzerland or via brokers with access.

The impact on market structure will no doubt play out in the coming days. How markets respond is likely to set a precedent as the clock runs down towards Brexit, whatever form it might eventually take.