Swiss Stock Exchange Access to Key EU Market Hangs by Thread

(Bloomberg) -- Swiss diplomats will have to mount a last-ditch effort to secure market access for the nation’s stock exchanges within the European Union beyond the end of the month.

The European Commission will probably hold off deciding whether to extend regulatory recognition of trading venues in Switzerland at a meeting on Tuesday, as the final outcome is ultimately contingent on a stalled broader political accord between the two sides. More work is still needed in the coming days for the current level of access to be continued, according to people familiar with the discussions, who asked not to be identified discussing the private talks.

At issue is an agreement that’s meant to replace the 120 bilateral treaties currently governing relations between the EU and Switzerland. The commission made any regulatory extension for the exchange under its MiFID II regulations contingent on progress on the accord, which was agreed in November but hasn’t yet been confirmed by the Swiss government. The recognition for venues led by SIX Swiss Exchange AG expires at the end of June.

A commission spokeswoman told reporters in Brussels that she didn’t expect any decision at Tuesday’s meeting but added a lot can change in a short amount of time. A separate official said the meeting will aim to provide political guidance on the next steps to be taken, should Swiss authorities succeed to give a precise timeline for the ratification of the agreement in the coming days.

The government in Bern said this month that while it is “broadly positive” on the agreement, it wants clarification on matters relating to wage protection, state subsidies and immigration before ratifying it. Commission President Jean-Claude Juncker then urged that these clarifications be finalized within days, in time for Tuesday’s meeting by the EU executive.

Swiss Doubts

On Monday afternoon, the goal of having a joint declaration removing any Swiss doubts had not been reached, the people said. Progress in the coming days could still push officials to extend the so-called equivalence regime, but a negative decision was also a real possibility, one of the people said.

Should the exchange access expire, EU-based investors in Swiss stocks would probably have to realign their workflows and trade shares issued by companies such as Nestle SA and Roche Holding AG within the 28-nation bloc. The Swiss government has prepared a contingency plan that would effectively prohibit trading in Swiss shares outside its borders, but this solution remains untested.

Reuters earlier reported that as things stand, the commission will probably not extend the recognition. Both Zurich stock-market operator SIX and the Swiss finance ministry declined to comment on the report.

©2019 Bloomberg L.P.

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