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Switzerland Prepares New Financial Sector Regulation Law

by Ulrika Lomas, Lowtax.net, Brussels
09 September, 2014

The Swiss Federal Council has approved legislation that will overhaul the regulation of financial markets, and derivatives trading in particular, to place Swiss legislation in line with international standards and to respond to market developments.

According to the Council, the Financial Market Infrastructure Act (FIMA) will strengthen the stability and competitiveness of Switzerland's financial center. It will consolidate provisions that are currently contained within numerous laws as well as add new provisions. The FIMA contains the Stock Exchange Act's provisions on the disclosure of shareholdings, public offerings, insider trading, and market manipulation, along with new regulations for derivatives trading.

Most Swiss derivatives trading is cross-border and therefore the new derivatives regulations are primarily based on EU law. In future, derivatives transactions must be cleared through a central counterparty, must be reported to a trade repository, and appropriate risk mitigation must be demonstrated.

The FIMA gives a corresponding legal basis for the obligation to conduct derivatives transactions via a stock exchange or other trading facility. However, this requirement will not be enforced until Switzerland's partner states have introduced comparable rules. The Act also replaces the vague definition "institution which is similar to a stock exchange" with the terms "multilateral trading facility" and "organized trading facility." Multilateral trading facilities are to be subject to regulations that are similar to those for stock exchanges, but organized trading facilities are not considered to be independent financial market infrastructures. The operator of an organized trading facility must comply with specific transparency requirements.

A general listing requirement will be introduced for central counterparties, central depositaries, trade repositories, and payment systems. Each of these will be subject to tailored licensing conditions and obligations, the Swiss Government said.

Lastly, the FIMA provides a uniform set of regulations on administrative assistance. Consistent with the Tax Administrative Act, the FIMA makes it possible to respond to a requesting authority's request for administrative assistance prior to the notification of the client, if notifying the client in advance would compromise the objective of the authority in requesting that information.

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