SWITZERLAND Trends and Developments Contributed by: Ansgar Schott and Matthias Courvoisier, Baker McKenzie Switzerland
perform their tasks, provided there is a co-operation agreement between the Swiss and foreign supervisory authorities, in which the foreign supervisory authority confirms that it is subject to a statutory confidential - ity obligation. This amendment facilitates international co-operation and contributes to better monitoring of cross-border risks in the derivatives market. Relief for small non-financial counterparties Current issues Under the existing FinMIA, small non-financial coun - terparties are also required to report their deriva - tives transactions to a trade repository. However, this reporting obligation leads to a considerable adminis - trative burden and high costs for such counterparties. Many of these small non-financial counterparties only carry out a few derivatives transactions per year, and the benefit of their reports was considered minimal. Nevertheless, in principle, they are required to meet the same complex reporting requirements as large financial institutions. Further, the existing calculation method for determining whether a non-financial counterparty is classified as small or large is not effective. It is based on calculat - ing the average gross position over 30 working days, which poses a significant administrative burden for many small companies. This method requires constant monitoring and calculation of positions, which is par - ticularly challenging for smaller companies that do not have the same resources as large financial institutions. Adjustments As part of the revision of the FinMIA, various measures have been taken to ease the regulatory requirements for small non-financial counterparties. One of the key changes is the complete exemption of these small counterparties from the reporting obligation (new Arti - cle 104, paragraph 3 of the FinMIA). This exemption applies to transactions between small non-financial counterparties, as well as transactions between a small non-financial counterparty and a financial coun - terparty that is not domiciled in Switzerland. Such change aims to reduce the administrative burden for small companies without jeopardising the stability of the financial system.
In addition, the method for calculating the thresholds used for classification as a small or large counterparty has been simplified. Instead of calculating the aver - age gross position over 30 working days, the aver - age of the aggregated gross month-end positions for the preceding 12 months in the relevant outstanding OTC derivatives transactions per derivatives category will be calculated in future (new Article 98 of the Fin - MIA). The new calculation method is less complex and only needs to be performed once a year, significantly reducing the administrative burden for small counter - parties. The calculation method for defining whether a non-financial counterparty is classified as small is now based on the EU calculation method (EMIR Refit). Furthermore, this new calculation method will also be applied to small financial counterparties, creating a uniform and coherent regulation for all small counter - parties (new Article 99 of the FinMIA). This simplifica - tion helps to increase the consistency and transpar - ency of regulation while minimising the burden on the companies concerned. Cross-border derivatives transactions Current issues Cross-border derivatives trading is subject to com - plex regulatory requirements, making it difficult for market participants to fulfil their obligations. Under the existing FinMIA, market participants engaging in cross-border derivatives transactions first have to determine whether the foreign law is recognised as equivalent by theFINMA, and whether the obligations under the FinMIA also apply to the foreign counter - parties. This review was associated with significant costs and uncertainties, as market participants often have difficulties in practice assessing the obligations of their foreign counterparties correctly. Additionally, market participants must categorise their foreign counterparties (in accordance with Article 93 of the FinMIA), which further increases the administrative load. This complexity and the associated costs were a significant burden, especially for smaller companies. Adjustments The revision of the FinMIA aims to simplify cross-bor - der derivatives trading and increase legal certainty for market participants. One of the most important
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