The Swiss stock exchanges (including the SIX Swiss Exchange) currently benefit from a temporary equivalence status for the purposes of Art. 23 MiFIR that will expire at the end of 2018.
Unless the EU either extends such temporary equivalence or grants an unlimited equivalence to the Swiss exchanges, EU investment firms will, from 1 January 2019, no longer be permitted to trade on Swiss exchanges any shares which are (i) admitted to trading on a regulated market or other trading venue in the EU and (ii) traded on such EU trading venues in a way that is not ad-hoc, irregular and infrequent. Such prohibition would affect the trading volumes of the SIX Swiss Exchange.
As a counter-measure, the Swiss Federal Council enacted on 30 November 2018 an Ordinance (the Share Trading Venue Recognition Ordinance) which:
- obliges foreign trading venues (i.e. stock exchanges and multilateral trading facilities) to seek FINMA's approval where (i) shares of issuers incorporated in Switzerland are admitted to trading on such foreign trading venues and (ii) such shares are also admitted to trading on a stock exchange or multilateral trading facility in Switzerland;
- specifies that such authorisation will not be granted to a foreign trading venue incorporated in a jurisdiction that limits the trading activities on Swiss trading venues in shares of issuers incorporated in Switzerland, provided that the Federal Department of Finances publishes a list of such jurisdictions including currently only the EU with the result that such authorisation will not be granted to EU trading venues; and
- exempts foreign stock exchanges from the authorisation requirement where the shares were listed in a secondary listing with the approval of the issuer on such foreign exchange prior to 30 November 2018.
The intended effect of these measures is that trading in shares of Swiss issuers which are listed on a Swiss exchange will - with the exception of the pre-existing secondary listings on a foreign stock exchange with the consent of the issuer - no longer occur on an EU trading venue after 1 January 2019. The share trading obligation of Art. 23 MiFIR would therefore no longer apply to EU investment firms and they could continue to trade the shares of the Swiss issuers on the Swiss trading venues without breaching EU laws.
The FINMA share trading authorisation requirement will apply from 1 January 2019. FINMA has already published a list of foreign trading venues that are recognised for these purposes. To the extent that a non-EU trading venue is not included on such list, FINMA should be contacted prior to 1 January 2019 with a request for inclusion on such list. Note that such process is separate from the FINMA recognition of the foreign trading venue for the purposes of onboarding Swiss participants.
If the EU were to extend the temporary equivalence or grant equivalence for the purposes of Art. 23 MiFIR to the Swiss exchanges, the Swiss authorities would immediately remove the EU from the list of non-eligible jurisdictions. As a result, these measures would not enter into effect.
Where an EU trading venue fails to comply with the Share Trading Venue Recognition Ordinance, the criminal sanctions of the Swiss Financial Market Supervision Act would apply to the responsible executives of the EU trading venue. Also, it would be conceivable that FINMA would start enforcement actions against a FINMA regulated participant in such EU trading venue.