Based on the experience gained from the financial market crisis, international bodies revised the 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 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, as well as market conduct in securities and derivatives trading. With the FinMIA, 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 The very vague term "institution which is similar to a stock exchange", which is outdated by international standards, is replaced by the precisely defined and more easily distinguishable terms of "multilateral trading facility" and "organised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 fundamentally reserved for banks, securities firms, 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 – trading venues that had previously lacked transparency. Moreover, the FinMIA establishes a 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 FinMIA's new regulations on derivatives trading.
The vast majority of Swiss derivatives trading is currently cross-border and largely takes place with market participants in the EU. The Swiss regulations are thus based primarily on EU law. This means the three key duties for derivatives trading also apply in Switzerland: clearing of derivatives transactions via a central counterparty, reporting of derivatives transactions to a trade repository and the mitigation of risks arising out of derivatives transactions. Unlike in the EU, however, exceptions exist for smaller contracting parties for reasons of proportionality and by analogy with the corresponding US regulations. In terms of the duty to conduct derivatives transactions via a stock exchange or another trading facility, the FinMIA 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 is supplemented by the National Bank Ordinance and the FINMA Financial Market Infrastructure Ordinance. Since then, a number of amendments have been made to the FinMIO:
On 29 June 2016, in the light of developments in the EU, the Federal Council extended the transitional periods for financial market infrastructures to fulfil various new duties 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 into 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 decided that the duty for small non-financial counterparties to report derivatives transactions to trade repositories must be fulfilled from 1 January 2024 at the latest; in this regard, it extended the corresponding transitional period. The corresponding amendment to the FinMIO took place in the context of an imminent review of the FinMIA (see Federal Council press release of 14 September 2018).
On 28 June 2019, the transitional period for occupational pension schemes and investment foundations concerning the settlement of certain derivatives transactions was extended to 30 September 2020.
Finally, on 6 November 2019, the Financial Institutions Ordinance (FinIO) introduced further amendments to the FinMIO, including the extension of certain transitional periods relating to the exchange of collateral in derivatives transactions, in line with international developments.