On December 21, 2017, the European Commission (EC) adopted an Implementing Decision on the equivalence of the legal and supervisory framework applicable to Swiss stock exchanges in accordance with the revised Markets in Financial Instruments Directive (MiFID II). The Implementing Decision together with an Annex was then published in the Official Journal of the EU on December 23, 2017.
The equivalence procedure set out under MiFID II aims to allow investment firms to undertake, on third-country trading venues recognized as equivalent, trades in shares subject to the trading obligation under MiFID II and the Markets in Financial Instruments Regulation (MiFIR). The EC has to assess whether the legal and supervisory framework of a third country ensures that a trading venue authorized in that third country complies with requirements that are equivalent to provisions under the Market Abuse Regulation, MiFID II, MiFIR and the Transparency Directive, and also subject to effective supervision and enforcements in that third country.
The recitals to the Implementing Decision explain that the EC has assessed the equivalence of the requirements that are applicable to Swiss stock exchanges established and authorized in Switzerland, and under the supervision of the Swiss Financial Market Supervisory Authority (FINMA).
Under the Implementation Decision, the EC recognizes the following share trading venues in Switzerland as eligible for compliance with the trading obligation for shares in MiFID II and MIFIR: SIX Swiss Exchange AG and BX Swiss AG.
In a related press release, the EC states that the Implementing Decision ensures that businesses and markets can continue to operate smoothly, without any market disruptions after MiFIR and MiFID II become applicable from January 3. The EC also explains that for Switzerland, unlike for other jurisdictions that have been granted equivalence such as the United States, the scope of the Implementing Decision is much greater, given that the trading of Swiss shares in the EU and vice versa is more widespread than in other jurisdictions that have recently been granted equivalence. There are also far closer commercial ties that bind the EU and Switzerland, and therefore require a special framework, according to the press release.
The Implementing Decision is limited to one year, expiring on December 31, and became effective on December 24, 2017. The EC will monitor closely the impact of the Implementing Decision and consider the broader political context, namely the progress made in negotiating an institutional agreement with Switzerland.
A copy of the Implementing Decision is available here.
A copy of the press release is available here.