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Talking Points:

  • The EU still plans to not extend its equivalence with Switzerland as talks about a bilateral agreement have stalled
  • Swiss shares could suffer further drops if they are delisted from London exchanges from July 1
  • CHF was trading softer against major currencies

SWITZERLAND BANKS SWISS STOCK TRADING IN EU - UPDATE

According to a report from Bloomberg News, Switzerland will ban trading in Swiss shares in the EU starting on July 1. The impact to EUR/CHF has been minimal, with the pair holding near 1.1110/20 in the minutes following the news. See below for more information on why the EU-Swiss exchange battle has implications beyond the Swiss Franc

Background on EU-Swiss Exchange Battle

Swiss stock exchanges are prepared to retaliate against the EU’s decision to end its stock market equivalence with Switzerland after frustrated talks to achieve a long-term agreement to replace its many accords currently in place.

The Swiss Government has said it is ready to ban swiss shares from trading on EU exchanges from July 1 unless the EU grants Swiss exchanges an extension to their equivalence which expires at the end of June. The equivalence extension is the only leverage the EU has against Switzerland to achieve an agreement on governing policies, but the Swiss Government has reiterated in many occasions that they are open for discussion but will not be rushed into signing an agreement. If Swiss shares are no longer traded on European exchanges, then Swiss exchanges will be creating a monopoly which will eventually lead to an increase in trading costs and disruption.

And its effect on financial markets has started to show as London-based stock exchanges have been the first to announce they will stop listing Swiss shares by the end of the week if the relationship between the EU and Swiss Government continues to deteriorate. More than half of the traded volume of Swiss shares comes from European investors and large Swiss companies like UBS and Novartis could suffer a hit if no agreement is reached by July 1, continuing the losses they have suffered since the dispute began.

PRICE CHART: UBS SHARE PRICE, HOURLY TIME-FRAME (March 2019 – June 2019)

EU-Swiss Exchange Battle Continues: London Prepares to Delist Swiss Shares

The swiss franc was trading softer against all major currencies as the possibility of losing EU venues for Swiss shares becomes and increasing possibility. The franc was down half of a percent against the safe-haven Japanese yen with CHFJPY trading around 109.80 going into the afternoon session. CHF also slid 0.76% against the NZD and 0.29% against the USD.

DAILY CHART: CHF SLIDES ON JUNE 25

EU-Swiss Exchange Battle Continues: London Prepares to Delist Swiss Shares

Recommended Reading

Eurozone Debt Crisis: How to Trade Future Disasters – Martin Essex, MSTA, Analyst and Editor

KEY TRADING RESOURCES:

--- Written by Daniela Sabin Hathorn, Junior Analyst

To contact Daniela, email her at Daniela.Sabin@ig.com

Follow Daniela on Twitter @HathornSabin