Swiss Stocks to Be Barred From EU Trading as Talks Fail
EU Says It Sees No Reason for Swiss Bourse Extension at Moment
(Bloomberg) -- Swiss stocks will be barred from trading in the European Union from Monday after talks on a political agreement between the two sides ended in deadlock.
The government said Thursday it will block trading of Swiss shares in the EU, an unprecedented step, shortly after the European Commission announced that it saw no reason to extend recognition of Switzerland’s stock exchange beyond the end of this month. The Swiss move is intended to prevent a sudden loss of liquidity.
Bern and Brussels are at odds over a pact that’s been in the works for years and is meant to replace a patchwork of treaties governing areas as diverse as agriculture, immigration and civil aviation. The proposed accord ran into a wall of opposition from both the left and the right in Switzerland, and the EU piled on pressure in 2017 by tying progress on the deal to regulatory recognition of Swiss stock exchanges.
Switzerland’s willingness to gamble on the smooth functioning of its stock market, Europe’s fourth largest, comes as the nation prepares for parliamentary elections in October. Its government says the framework EU deal raises issues such as wage protection and state subsidies that need ironing out before ratification.
About one-third of trading in Swiss shares currently takes place within the EU, and the rest in Switzerland. Most of the activity in Swiss shares on SIX, the nation’s main exchange, is generated by traders in the EU.
Under countermeasures announced by the Swiss government, it would ban trading of Swiss-registered firms in the EU, re-routing flows back to Switzerland. Because of a legal loophole, EU traders would then be allowed to trade Swiss shares in Switzerland again.
“We welcome the contingency measure,” a spokesman for SIX said.
Deutsche Boerse said it stands ready to halt trading in all Swiss stocks on German exchanges Monday if the equivalence status is dropped and the countermeasure goes into force, a spokesman said.
U.K.-based trading venues run by companies including Cboe Global Markets Inc. and London Stock Exchange Group Plc, where most of the EU trading of Swiss shares takes place, told clients that they will exclude securities from Swiss issuers.
While analysts agree the immediate effect of the Swiss move is likely to be manageable, in the longer term it could cause trouble.
“While the long-term consequences are difficult to assess right now, in a general manner this kind of situation would be a negative factor for the attractiveness of the Swiss capital market,” said Fabien Bruegger, a trader at Banque Cantonale Vaudoise.
--With assistance from Jade Cano and Albertina Torsoli.
To contact the reporters on this story: Alexander Weber in Brussels at aweber45@bloomberg.net;Catherine Bosley in Zurich at cbosley1@bloomberg.net;Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.net
To contact the editors responsible for this story: Jan Dahinten at jdahinten@bloomberg.net, Vidya Root, Paul Sillitoe
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