About 30 per cent of trading in Swiss blue-chips takes place in London. Photo / Bloomberg
About 30 per cent of trading in Swiss blue-chips takes place in London. Photo / Bloomberg
London-based exchanges are preparing to delist Swiss stocks this week after financial markets became entangled in a deteriorating row between Switzerland and Brussels over their relationship.
CBOE Europe, the EU's largest share trading venue, said late on Monday that it would stop offering trading in more than 230 Swiss companiesincluding UBS and Novartis from July 1, unless one side conceded in a dispute over a new economic relationship covering everything from financial markets and jobs to the movement of people.
Aquis Exchange, which handles about 5 per cent of trading in Swiss blue-chips, said it would make a similar move if notified by the Swiss government in coming days.
Share trading has become a flashpoint in a long process for the EU's efforts to upgrade its messy relationship with non-member Switzerland, in which Brussels is seeking to switch about 120 bilateral treaties into an "institutional framework" that would require the Swiss to automatically to adopt some EU laws — a prospect Switzerland rejects.
With little progress in the talks, the EU is poised to let a temporary permit that allows Swiss shares to be easily traded in the bloc to expire on June 30. "Everyone has accepted it will happen," said a diplomat from a major EU member state.
About 30 per cent of trading in Swiss blue-chips takes place in London.
The dispute stirs up complications for Swiss companies and could even damage the Alpine country's economy, say analysts. It also offers an insight into the potential pitfalls ahead for the UK's post-Brexit relationship with the EU in financial markets.
CBOE Europe said it would stop offering trading in more than 230 Swiss companies from July 1, unless one side conceded in a dispute between Brussels and Switzerland. Photo / AP
Drawing up a new framework for Swiss-EU relations has dragged on after the Swiss authorities launched a six-month "public consultation" on the treaty at the end of last year. The EU's stance on Switzerland has hardened in the light of the Brexit negotiations.
Officials are wary of setting a precedent, where Swiss foot-dragging over its EU framework is not punished with the loss of access for parts of its financial markets.
Johannes Hahn, EU commissioner for enlargement, has warned Swiss authorities that there will be no "watering down of internal market rules, especially in what is probably the decisive phase regarding Brexit".
A diplomat said: "We're not going to treat the Brits any worse than Switzerland."
In a sign that Bern was prepared to dig in, the finance ministry said it would activate countermeasures that would ban Swiss shares from being traded in the EU, to protect its domestic financial market. SIX, owner of the Swiss exchange, told customers that so-called equivalent status, in which each side recognises each other's standards, "will most probably" not be granted.
Losing equivalence would mean that EU investors would have to trade Swiss shares in Zurich, through local brokers. Switzerland's retaliatory measures mean EU trading venues could not offer shares in the biggest Swiss companies.
Charlotte de Montpellier, an economist at ING, said Switzerland's loss of stock market equivalence would be compensated by the protective measures. "However, the risk is that difficult negotiations between Switzerland and the EU and threats from both sides could leave long-term traces on the relationship between the two entities and on Switzerland's economic performance. A deterioration of relations and a greater difficulty of trade with the EU, its main partner, would therefore be extremely damaging for the Swiss economy," she said.
Last week the EU-Swiss framework was discussed by the EU's College of Commissioners, which noted the lack of progress on discussions. "The College saw no need to take any decisions," a spokesperson said. "There has been no change since then."
