An electronic display indicating stock market indices is seen at the headquarters of the Swiss Stock Exchange (Boerse) operated by the SIX Group in Zurich on November 29, 2018. – According to a document of the EU Commission, so far, not enough progress has been made in the EU Framework Agreement was concluded for the renewal of the status of “financial equivalence” of the Swiss stock exchange in Europe, the press reported on November 28, 2018.
FABRICE COFFRINI / AFP through Getty Images
The dispute between Switzerland and the EU, which saw Swiss stocks removed from European stock markets, helped the country’s market withstand the pandemic, SIX Swiss Exchange CEO Christian Reuss told CNBC.
The European Union has allowed the recognized equivalence of the Swiss stock market to fall in 2019, following a dispute over a series of bilateral treaties governing Switzerland’s political relationship with the bloc.
The EU grants “equivalence” to countries whose stock markets are considered equivalent to those of its Member States, and the end of the agreement meant that EU shares could no longer be traded on Swiss stock exchanges.
European traders were later banned from trading shares in hundreds of Swiss companies, a move that earned the Swiss stock market a “nearly 100%” market share in stock trading, according to Reuss. In 2019, the SIX Swiss Exchange overtook Euronext Paris to become the third largest primary stock exchange on the continent, behind only the London Stock Exchange and Deutsche Boerse in Germany.
“This has, of course, had some benefits for the market. When all the liquidity is brought together in one place, the spreads remain stable, the available liquidity has increased, of course, and if everything is combined there, you can trade bigger tickets.” , said Reuss.
Trading efficiency also improved with the decrease in the SIX Swiss Exchange ratio, which means that transactions were more likely to be executed.
“Another thing that is actually quite striking when you have all the liquidity in one place becomes more resistant to volatility shocks, as we had in March with Covid-induced volatility,” Reuss told CNBC in a video call on Wednesday. past, adding that investors have benefited from increased market resilience.
“What we saw was that our spreads widened as much as other markets and came back faster, so there’s probably something you could say that the concentration of liquidity helped.”
The Swiss-British equivalence was restored after Brexit
As Britain left the EU’s orbit on January 1, a renewed equivalence agreement between Britain and Switzerland saw Swiss shares resume trading on the London Stock Exchange last week, a development Reuss said “helps a lot in competition”.
“There are two angles in this regard. First, if liquidity is brought together in one place, it has tangible benefits for price formation,” he said.
“On the other hand, fragmentation also has its advantages, because it brings competition and this ensures that you stay close to your customers, that you develop innovative capabilities and compete.
Alasdair Haynes, CEO of the London Aquis Exchange, told CNBC last week that the exchange agreement between the Swiss and British governments was crucial, adding that on January 4 there was a “massive overnight change in liquidity” of shares in London. the 27 EU Member States away from London.
“We’ve seen 95% of business move literally overnight, which is kind of embarrassing for the UK, but it’s clearly a big win for the EU-27,” Haynes said.
“What this shows is that London and the UK need to do something very positive and constructive to maintain their position as an important financial center in Europe, and of course that means we need to negotiate with people like Switzerland, we need to achieve equivalence and means that London needs to be incredibly innovative to maintain its position. “