SWITZERLAND Law and Practice Contributed by: Olivier Favre and Tarek Houdrouge, Schellenberg Wittmer Ltd
entered into with a bank or securities firm must be documented with a key information document (KID) that complies with the requirements of the FinSA or those of the EU packaged retail and insurance-based investment products (PRIIPs). 1.2 Historical Trends and Looking Forwards As regards the offer of products available in the Swiss market, a key driver is the demand for products requested by the buy-side in the asset management and private banking sectors. In the past 12 months, on the supply side, the disappearance of Credit Suisse has left a gap that was filled on the sell-side by other derivatives dealers. As regards the regulatory environment, Switzerland has, so far, been closely aligned with the regulation of derivatives as it applies in the EU by following the rules of EMIR. The rules of the FinMIA were put in place after those of EMIR and, in some respects, the Swiss rules are more liberal than those of EMIR. This has allowed Swiss derivatives regulation to remain aligned with EMIR after the EMIR Refit. However, in the context of the adoption of EMIR 3.0, the EU rules will diverge from those of the FinMIA in some material respects, particularly as regards the determination of status as a small or large financial or non-financial counterparty. The Swiss Federal Department of Finances (FDF), in consultation with the financial industry, recently prepared a reform package for the FinMIA that was adopted by the Swiss Federal Council and released as a consultation report (the “FinMIA Refit Report”), together with a proposed draft of the revised Fin - MIA, on 19 June 2024. The consultation ran until 11 October 2024. Under such revised rules, the Swiss derivatives regulation for OTC derivatives has been liberalised further, with the key proposals being the following: • The determination of the status of a counterparty as a small or large financial or non-financial coun - terparty will become an annual determination. • To the extent that a jurisdiction is eligible to be applied instead of the FinMIA, on a substituted compliance basis, this will also allow the applica - tion of such rules to determine counterparty status
(ie, the question of the counterparty classification will not remain subject to a Swiss law analysis). • The new rules will provide that small non-financial counterparties will not come into the scope of the reporting obligation at any point in time. • As regards the content of the reporting fields, the financial data feed (FDF) further proposes to amend the content of reports to the trade reposi - tory by harmonising such content with international standards on ordinance level (eg, with regard to the legal entity identifier (LEI), unique transaction identifier (UTI) and other critical data points). In this way, the quality of the reported data will be improved, which should make it possible to deter - mine financial stability risks more easily. As regards substituted compliance, note that Switzer - land signed the Berne Financial Services Agreement (BFSA) with the UK on 21 December 2023 as a bilat - eral treaty regarding the mutual recognition of certain areas of financial services and insurance regulation. As regards the regulation of OTC derivatives, the BFSA also covers the risk mitigation obligations for uncleared OTC derivatives (eg, margin rules, portfolio reconciliation and dispute resolution processes, timely exchange of confirmations, valuation of transactions, and portfolio compression). As a result, between Swit - zerland and the UK, applying the rules of the other jurisdiction by way of substituted compliance will also become possible on the basis of the BFSA when it goes live. However, as regards the application of the rules of the UK EMIR on a substituted compliance basis under Swiss law, this is already possible on the basis of domestic Swiss law. 2. Types of Derivatives 2.1 Futures and Options Futures are traded as ETDs. Options may be traded either as ETDs or as OTC derivatives. As regards the market for ETDs, Switzerland does not have a trading venue for such products. Therefore, the products traded are those available in markets outside Switzerland. In terms of the demand for ETDs, Swiss investors have recently requested ETDs on crypto - currencies as underlyings. These products may also
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