SWITZERLAND Trends and Developments Contributed by: Ansgar Schott and Matthias Courvoisier, Baker McKenzie Switzerland
Despite such comprehensive regulations, various challenges have arisen in practice. One of the major weaknesses of the previous system was the report - ing obligation, which was intended to increase mar - ket transparency and contribute to the stability of the financial system by enabling systematic monitoring of derivatives transactions. However, in practice, it was found that the quality of the reported data was often inadequate. This was mainly due to a lack of harmo - nisation of the data to be reported and the fragmenta - tion of the data reported to various trade repositories. In addition, the access of foreign supervisory authori - ties to Swiss trade repositories was severely restrict - ed, which hindered international co-operation and impaired the efficiency of supervision. Further, the complex calculation of the thresholds for classifying counterparties as large or small led to a high admin - istrative burden, especially for smaller non-financial counterparties. This caused unnecessary costs. The revision of the FinMIA therefore aims to eliminate these weaknesses and improve derivatives trading for both domestic and international market participants. Adaptation to international standards and EU law The existing regulations in the area of derivatives trad - ing are primarily based on EU law. Since the introduc - tion of the FinMIA in 2016, EU law has evolved, par - ticularly through the revision of the EMIR Regulation (EMIR Refit) in 2019. This revision aimed to simplify the regulation of derivatives trading and make it more proportionate, especially for small market participants. Against this backdrop, it was necessary to adapt the FinMIA to the new EU regulations to maintain the com - petitiveness of the Swiss financial centre and ensure consistency with international standards. Key changes Reporting obligation Current issues The reporting obligation for derivatives transactions to a trade repository is a central element of the FinMIA. It aims to ensure that all relevant derivatives transac - tions can be recorded and monitored to identify sys - temic risks early and increase market transparency.
However, this reporting obligation currently faces vari - ous challenges. One of the biggest challenges is the inadequate quality of the reported data. This is mainly due to insufficient harmonisation of the data to be reported, making it inconsistent and incomparable. These inconsistencies make it difficult to analyse the data and identify poten - tial risks. In addition, the fragmentation of the data reported to different trade repositories further dimin - ishes the data quality. As a result, risks associated with derivatives transactions by Swiss counterparties have so far only been systematically monitored to a limited extent based on the data reported to trade repositories. Another issue is that access for foreign supervisory authorities to Swiss trade repositories is severely restricted, hindering international co-operation and making it more challenging to monitor cross-border risks in the derivatives market. Adjustments As part of the revision of the FinMIA, the reporting obligation will be fundamentally revised to address these weaknesses. One of the key changes is the alignment of the reporting content with international standards. In future, the reported data should cor - respond to international identification systems, such as the LEI, the UTI and the UPI. These identifiers were developed to ensure uniform and standardised recording of derivatives transactions worldwide. The introduction of these global standards is expect - ed to significantly improve the quality of the reported data. The use of uniform identifiers will ensure that the data is consistent and comparable, facilitating the analysis and monitoring of derivatives markets. Aligning with international standards also helps Swit - zerland to better co-ordinate its regulatory practices with other major financial centres, thereby strengthen - ing the competitiveness of the Swiss financial centre. Another important innovation is the facilitation of access for foreign supervisory authorities to Swiss trade repos - itories. According to the new regulation (new Article 78, paragraph 1, letters a–c of the FinMIA), trade reposi - tories must grant foreign financial market superviso - ry authorities free access to the data they require to
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