Based on the experience gained from the financial market crisis, international bodies revised the existing standards for financial market infrastructures (stock exchanges and other trading facilities, central counterparties, central securities depositories and trade repositories). The Swiss regulation of financial market infrastructures no longer met these requirements in many areas. In addition, Switzerland did not have specifications for derivatives trading that took account of the G20 obligations and the recommendations of the Financial Stability Board. This adversely affected the stability and competitiveness of Switzerland's financial centre. Moreover, the level of protection for investors was lower than in other financial centres.
Content of the Act
The FinMIA governs the organisation and operation of financial market infrastructures. The provisions that were dispersed in the Stock Exchange Act, the Banking Act and the National Bank Act have been transferred into a single act that takes account of the changed market conditions and international standards.
More precisely defined trading venues and new transparency requirements
The regulation of stock exchanges generally corresponds to the former regulations in the Stock Exchange Act. In particular, the principle of self-regulation, which has proved its worth in this area, has been maintained. The very vague term "institution which is similar to a stock exchange", which is outdated by international standards, is replaced by the precisely defined and more easily distinguishable terms of "multilateral trading facility" and "organised trading facility". Multilateral trading facilities are subject to rules that are similar to those for stock exchanges. The operation of organised trading facilities remains reserved for banks, securities dealers, stock exchanges and multilateral trading facilities.
Operators of an organised trading facility have certain duties, particularly regarding organisation and trading transparency. The transparency requirements for multilateral and organised trading facilities also address the problem of dark pools, i.e. trading venues that have lacked transparency until now. Moreover, the FinMIA establishes the basis for regulating high-frequency trading, and restricting it if necessary. In the area of financial market infrastructures, an authorisation duty exists for central counterparties, central securities depositories, trade repositories and payment systems, as do authorisation conditions and duties which are specifically tailored to these financial market infrastructures.
Regulation of derivatives trading
Aside from the supervisory law requirements for financial market infrastructures, the FinMIA contains all of the regulations that apply in relation to securities and derivatives trading for all financial market participants (market rules of conduct). These include the provisions on the disclosure of shareholdings, public takeover offers, insider trading and market manipulation which were formerly enshrined in the Stock Exchange Act, as well as the new regulations for derivatives trading, which are in line with international standards.
The vast majority of Swiss derivatives trading is currently cross-border and largely takes place with the EU. The regulations are thus based primarily on EU law. This means the three key duties for derivatives trading also apply in Switzerland: clearing via a central counterparty, reporting to a trade repository and risk mitigation. Unlike in the EU, however, exceptions exist for smaller contracting parties in the financial sector for reasons of proportionality and with reference to the corresponding US regulations. In terms of the duty to conduct derivatives transactions via a stock exchange or another trading facility, the Act sets out the corresponding legal basis.
The FinMIA came into force on 1 January 2016 together with the Federal Council's implementing ordinance (FinMIO). The FinMIO will be supplemented by the National Bank Ordinance and the new FINMA Financial Market Infrastructure Ordinance-FINMA.
The Federal Council adjusted the FinMIO on 29 June 2016. In line with developments in the EU, the transitional periods for financial market infrastructures to fulfil various new duties were extended by one year to 1 January 2018.
Another amendment to the FinMIO entered into force on 1 August 2017. The provisions on the exchange of collateral for OTC derivatives transactions that are not cleared via a central counterparty were brought intoin line with the corresponding EU regulations. This ensures that there are no competitive disadvantages for Swiss market participants.
On 14 September 2018, the Federal Council furthermore decided to bring the derivate transactions reporting duty for small non-financial counterparties to trade repositories into effect on 1 January 2024 and to extend the corresponding transitional period. The corresponding amendment to the FinMIO took place in the context of the imminent review of the FinMIA.