The Swiss parliament passed into law the Federal Act on Financial Market Infrastructures (FMIA) on June 19 2015. Subsequently, the Federal Department of Finance, the Swiss Financial Markets Authority (Finma) and the Swiss National Bank opened a consultation on the ordinances implementing the FMIA. The consultation period is scheduled until October 2 2015. We expect the FMIA, together with its implementing ordinances, to enter into force on January 1 2016 subject to the phasing-in of specific obligations.
The ordinances specify the scope of the new duties relating to derivatives trading (clearing obligations, trade reporting requirements for derivatives, the obligation to trade on an exchange or an organised trading platform and risk management obligations for derivatives that are not centrally cleared) and set the thresholds above which these duties apply. Notably, unlike EMIR (European Market Infrastructure Regulations), not only small non-financial counterparties, but also small financial counterparties are out of scope of the clearing obligations and benefit from certain exemptions.
Due to the global reach of derivatives’ markets, the FMIA will also apply in a cross-border setting. For instance, the clearing obligations will apply to trades by Swiss counterparties with a foreign counterparty if the foreign counterparty would have been subject to the clearing obligations had it been incorporated in Switzerland. The FMIA will therefore have an impact on foreign market participants and global financial groups. Nevertheless, the marginal burden of compliance should be limited, since counterparties will have the possibility to satisfy their duties under the FMIA by applying foreign regulations that are deemed equivalent or, with respect to clearing and reporting obligations, by using recognised foreign financial market intermediaries. Similarly, the ordinances aim to facilitate cross-border compliance by allowing counterparties to exchange information required to comply with the FMIA within a group and to provide information required by Swiss law to foreign trade repositories without seeking prior consent of clients.
In addition to the rules on trading in derivatives, the ordinances also specify how to apply the new framework governing financial market infrastructure, including stock exchanges and organised trading platforms. Among the numerous provisions, a noteworthy innovation are the new rules governing algorithmic traders through enhanced disclosure obligations, as well as the extension of recording and reporting obligations for members of Swiss exchanges and other multilateral trading systems (to include derivatives based on securities admitted to trading in Switzerland).