On 6 July 2016, FINMA published guidance on the implementation of the Federal Act on Financial Market Infrastructures of 19 June 2015 ("FMIA") and its implementing ordinances, which set out new rules on trading of derivatives (see Bär & Karrer Briefings of March 2016). In this briefing, we outline main developments in further details, which are the provisional recognition of the equivalence of the European regulations under EMIR and an extension of the deadline for the exchange of collateral.
In the wake of the Dodd-Frank Act in the United States and EMIR in the European Union, the FMIA seeks, among others, to regulate market conduct in securities and derivatives trading. In this context, the FMIA provides for following duties:
clearing requirements for OTC derivatives; reporting obligations for OTC and exchange-traded derivatives; and operational risk mitigation obligations, including requirements regarding timely confirmation, portfolio reconciliation, portfolio compression, mark-to-market valuation and obligations to exchange initial and variation margin. Swiss counterparties can, however, meet their derivatives trading obligations for cross-border derivatives transactions and - given a sufficient objective nexus with foreign law as defined in article 81 (3) of the Ordinance on Financial Market Infrastructures of 25 November 2015 (FMIO) - the obligations for some domestic transactions, where appropriate, under foreign law which has been recognized as equivalent by FINMA (article 95 (a) FMIA; article 81 FMIO).
In order to provide financial market participants with sufficient time for technical implementation, FINMA has decided to recognize provisionally EMIR1 that applies in the European Union, as being equivalent to Swiss law within the meaning of article 95 (a) FMIA.
This assessment remains provisional insofar as FINMA reserves its final judgment on this matter for when the European Union will have passed all final regulations for derivatives trading. Since, at the statutory level, both EMIR and FMIA define very similar regulations for the clearing of OTC derivatives transactions through a central counterparty (article 97 (1) FMIA; article 4 EMIR), the reporting of derivatives transactions to a trade repository (article 104 (1) FMIA; article 9 EMIR) and risk mitigation for OTC derivatives transactions (article 107 (1) FMIA; article 11 EMIR), this provisional assessments is very likely to be confirmed in due...