In a situation which has parallels with that faced by the UK – and the City of London – as Brexit approaches, the Swiss are locked in a showdown with Brussels which could see EU investment firms being blocked from trading on Swiss stock exchanges by the end of the year.
Brussels is said to making its decision on the stock exchange equivalence based on cooperation in other areas, like state aid and free movement of people, with Switzerland – which is not an EU member – reluctant to come to an agreement.
The Swiss daily Newspaper Luzernerzeitung reported European Commission president Jean-Claude Juncker has set a deadline of October 15 for the Swiss to demonstrate progress on the issue – with nothing substantial forthcoming.
The newspaper explained: “Trade unions are reluctant to adapt measures to protect the domestic labour market, which had been decided in advance of the introduction of the free movement of persons in 2002.
“A new round of negotiations is currently not planned in Brussels, diplomatic circles in Switzerland are saying. Even though it’s urgent.”
The resulting provisional recognition for one year expires at the end of December – with the prospects of it being renewed looking doubtful.
Withdrawal of equivalence of the Swiss stock exchange, would force European banks and traders to trade Swiss shares in Paris, Frankfurt or London, but not in Switzerland.
Such an move would spell “drastic losses” for the Swiss financial market and stock market infrastructure operator SIX, Luzernerzeitung reports.
Shares worth roughly 1,300 billion Swiss Francs (CHF), equivalent to more than £1000billion, were sold on the Swiss stock exchange in 2017, with more than half the turnover generated by traders from the EU.
As a result, Bern has developed a contingency plan aimed at protecting Switzerland’s stock exchange infrastructure if stock market equivalence is not extended, aiming to avert such a crisis with tough measures of its own.
A statement issued by Switzerland’s Federal Council earlier this year stated: “The contingency measure adopted aims to protect the functioning of the Swiss stock exchange infrastructure if necessary and to continue to enable EU market participants to access Swiss stock exchanges.
“If the European Commission does not extend Switzerland’s stock market equivalence in time, an ordinance will introduce a new Swiss recognition obligation for foreign trading venues that admit Swiss shares to trading.
“In that case, EU trading venues would not receive this recognition.”
Analysts believe the Swiss plan has a good chance of working because it would force EU banks and securities traders would have to settle their transactions on the Swiss stock exchange – the precise opposite of what Brussels wants.
The Luzernerzeitung article concluded: “It is true that EU stock exchanges and their participants could be tempted to ignore the Swiss ordinance, especially since legal measures taken in the enforcement of laws are, according to experience, not very effective.
“It would be more effective if the Swiss could access the fallible banks in order to hinder them, for example, in dealing with Swiss equities.
“That is a realistic option, one hears from diplomatic circles.
“If, in anticipation of such a threat, the banks remain loyal to the Swiss market, this could even boost the stock market business in Switzerland.
“Because stock market transactions tend to focus on those places where trading is greatest.
“Most of the foreign business with Swiss equities is taking place via London, and from there a lot of business could come back to Switzerland despite Brexit.”
Additional reporting by Monika Pallenberg.
Source : EXPRESS