SWITZERLAND Law and Practice Contributed by: Olivier Favre and Tarek Houdrouge, Schellenberg Wittmer Ltd
be sold in Switzerland to retail investors. However, as such ETDs are qualified as “securities” for the purposes of Swiss regulation, any firm offering such products from Switzerland or using a Swiss intermedi - ary to access the Swiss market, may become subject to licensing requirements as a securities firm or may have to obtain the authorisation of a Swiss branch or Swiss representative office of a foreign securities firm. As regards options traded as OTC derivatives, the authors see innovative products used in the Swiss market, for instance, in the context of equity financing transactions. An example of such products are collar transactions, which may be used for the purpose of hedging a long position in an equity investment with a put option by protecting the shareholder against a decline in the share price below a put strike price, while at the same time giving away the upside in the event of a development of the share price above the call strike price. At present, options on single names or baskets of equities as underlyings and equity index options benefit from a temporary exemption from the varia - tion and initial margin requirements that is currently in place until 1 January 2026. In the context of the FinMIA Refit, the temporary exemption is intended to become a permanent one. 2.2 Swaps and Security-Based Swaps Swaps are typically traded as OTC derivatives with the involvement of a swap dealer using an International Swaps and Derivatives Association (ISDA) Master Agreement or a Swiss Master Agreement (SMA) as the relevant documentation. Under Swiss law, no dis - tinction is made between security-based swaps and other swaps. Exemptions from the derivatives regulation apply in respect of physically settled FX swaps (in addition to physically settled FX forwards) and in respect of physically settled OTC derivatives (including swaps) with commodities as underlyings. The exempted FX swaps are only subject to a reporting obligation, but not the other regulatory requirements resulting from the FinMIA. Exempted swaps with commodities as underlyings are not subject to the derivatives regula - tion under the FinMIA at all.
Certain interest-rate swap transactions, as well as certain index-credit default swaps, are subject to a mandatory clearing obligation, except if they are trad - ed with a small financial counterparty or a small non- financial counterparty. Other swap transactions may be subject to a voluntary clearing. Any such clearing occurs with a central counterparty outside Switzer - land. To the extent that the clearing occurs through Swiss clearing brokers as direct participants of such CCPs, the CCPs must be authorised by FINMA to provide such clearing services in Switzerland (CCPs such as Eurex Clearing, ICE Clear, LCH, LME Clear and Cboe Clear have such authorisation). 2.3 Forwards Forwards are traded as OTC derivatives. Forwards may be traded in respect of any asset classes as underlyings. From a Swiss perspective, a derivative is defined as a financial contract: (i) with a value depend - ing on one or more underlying; and (ii) that is not a spot transaction. As long as a forward contract references the value of an underlying asset and it is not settled as a spot transaction (see 2.6 Exemptions, Non-Derivative Products and Spot Transactions ), it will fall within the definition of a derivative for the purposes of Swiss law. This would also include, for instance, FX forward transactions. Exemptions from the derivatives regulation apply in respect of physically settled FX forwards (in addi - tion to physically settled FX swaps) and in respect of physically settled OTC derivatives (including forwards) with commodities as underlyings. The exempted FX forwards are only subject to a reporting obligation, but not the other regulatory requirements resulting from the FinMIA. The exempted forwards with commodi - ties as underlyings are not subject to the derivatives
regulation under the FinMIA at all. 2.4 Listed v Over-the-Counter Listed Derivatives/ETDs
At present, there are no Swiss exchanges where derivatives in the form of exchange-traded derivatives (ETDs) are listed. Any such ETDs are traded on foreign exchanges. Swiss investors are able to access such foreign exchanges through a clearing chain, involving
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