Vontobel Investment Bank – We are ready in case the exchange equivalence status expires on June 30, 2019.

Insights, Technology

28.06.2019 Reading time: 2 minute(s)

According to the latest signals from the European Commission, we must assume that stock market equivalence will not be extended. As a result, trading venues in the EU will lose recognition under Article 1(3) of the regulation.

Introduction and facts:

On December 21, 2017, the EU Commission ('EC') issued an implementing decision granting Switzerland equivalence and formally confirming that the requirements to achieve this status had been fully and unequivocally met. However, the decision on Switzerland was limited to a period of 1 year and expired on December 31, 2018. It was then further extended until June 30, 2019.
The EU has stated multiple times that they are making the equivalence status dependent on the general framework agreement between the EU and Switzerland. This agreement is currently under negotiation.
On June 24, 2019, the Federal Department of Finance (FDF) announced that it will activate the Swiss Federal Council’s Ordinance from November 30, 2018 on safeguarding the interests and strengthening the functioning of the Swiss capital market as of July 1, 2019 in case the EU Commission has not announced by then that it would extend Switzerland’s exchange equivalence in good time. Accordingly, Vontobel is prepared for the eventuality that the activation of the ordinance will be advanced.

Market participants are preparing for a scenario without equivalency as there are no signs of a further extension; this means that Switzerland will implement the emergency law as stated in the press release (see link below):

According to the ordinance, foreign trading venues will no longer be allowed to trade Swiss shares after June 30, 2019. The Swiss Exchange will remain the main liquidity pool for Swiss equities. SIs are not affected by the Federal Council's ordinance, i. e. Swiss stocks can still be traded OTC and on SIs in Europe.

What has Vontobel done to protect the interests of our clients and to obey the rules?

We have taken all necessary steps to protect the interests of our clients in case equivalence is withdrawn. Vontobel continues to route orders in Swiss shares and shares whose primary liquidity is on SIX exchange venues. We will stop using MTFs like Aquis, BATS, Turquise including Lit, Darks and periodic auctions in line with the new regulation. Vontobel has connected a variety of SIs to ensure liquidity and best execution. ESMA & FCA are expected to release a statement this week. We will keep you informed when we receive more information from the regulator.

Where can we help?

Especially European banks and brokers without SIX membership may have an issue. Vontobel is able to connect them fast via Bloomberg EMSX at competitive rates.

Your contacts at Vontobel will be happy to answer any questions you may have.