Do you want to know everything about the European markets? In your inbox for the open, every day. Register here.
The UK plans to undo a ban on trading in Swiss equities after exiting the European Union.
The Treasury plans to propose legislation to lawmakers in the coming days to take effect three weeks later, if approved, a spokesman said. The story was the first reported by the Financial Times.
“Once in effect, the Swiss Secretariat of State for International Financial Affairs has indicated they will be reciprocal by lifting restrictions on UK trading platforms,” said the spokesman.
The move is expected. In September, the UK confirmed that it would enact the legislation once the equivalence powers took effect. Exchange operator Cboe Europe has said it plans to re-introduce Swiss listed securities in the UK once the UK and Swiss mutual recognition is implemented.
The UK allowing Swiss stocks to trade will do little to overcome the post-Brexit exodus of EU stocks. The three largest locations in London handling European equities saw nearly all of these activities shift to the EU on the first day of trading after the UK completed its exit from the bloc on December 31.
Read more: Brexit pushes most European equity trading from prime UK locations
Aquis Exchange Plc Chief Executive Officer Alasdair Haynes told Bloomberg TV on Jan. 4 that 99.6% of its European equity trading moved to its parallel location in Paris. Cboe Europe saw a 90% shift to its Amsterdam location, while 92% of such trades on London Stock Exchange Group Plc’s Turquoise platforms were within the block at 3:00 pm in London on January 4, the first trading day after Brexit. The moves represent approximately EUR 4.6 billion ($ 5.6 billion) in transactions, according to data from Cboe Global Markets Inc.
Brexit shortage
More than $ 5 billion in European stocks left London for EU locations on January 4
Source: Cboe Global Markets
A political unrest led to the Swiss Stock Exchange lost EU recognition in 2019, a move the UK had to comply with while still a member of the bloc. Brexit has now freed it from those restrictions.
London’s dominance as a hub for investment management is also uncertain. The European Commission is investigating whether rules should be tightened on how EU funds delegate portfolio management to investors outside the bloc. While delegation is unlikely to be banned, Brussels could make it more expensive to manage funds from third countries such as the UK by increasing compliance and governance obligations.
Britain and the EU have agreed to draft a Memorandum of Understanding on Financial Market Regulation by March, an agreement that will complement the broader trade deal on Christmas Eve, but will not be as legally binding. An agreement would still help create a framework for equal access to each other’s markets, with predictable rules and good consultation on any decision to withdraw access.
– With the assistance of Tom Metcalf
(Updates with FT reported earlier story in second paragraph.)