Swiss Trading-Cost Surge Could Show Signs of Brexit Future
Swiss Trading-Cost Surge Could Show Signs of Brexit Future
(Bloomberg) -- Institutional investors are footing the bill for the spat between Switzerland and the European Union that ended free trading in each other’s markets in a preview of the potential fallout from a no-deal Brexit.
Trading costs for Swiss mid- and small-cap equities rose by around 20% after July 1, when the EU let the equivalence of the Swiss stock exchange expire, according to a study by Virtu Financial Inc. The New York-based broker analyzed about 120,000 orders with a total value of $36.5 billion in Swiss stocks from more than 100 institutions.
“The loss of Swiss equivalence reduced investment choices and introduced new frictions,” Virtu said in a research note, adding that it could show the potential implications on British and European securities trading if the U.K. leaves the European Union without a deal.
The end of the EU’s recognition for the Swiss bourse meant that trading EU-listed securities in Switzerland was prohibited, while Switzerland banned trading in Swiss shares on EU venues as a retaliatory measure.
While trading volumes on the SIX Swiss Exchange have climbed, the bourse has recently said regaining equivalence is a priority. It’s also considering buying an EU-based exchange if a ban on trading Swiss stocks in the bloc persists or the situation worsens, according to people familiar with the matter.
--With assistance from Katharina Rosskopf.
To contact the reporter on this story: Leonard Kehnscherper in Zurich at lkehnscherpe@bloomberg.net
To contact the editors responsible for this story: Jan Dahinten at jdahinten@bloomberg.net, Chris Reiter
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