The UK will bring trading in Swiss shares back to London in the coming weeks, marking the first significant split from EU policy on financial services since the end of the Brexit transition period.
British officials will launch legislation in parliament as soon as next week to reverse a previous EU ban on the practice, the Treasury said.
Trading in EU shares fled London this week, with about €6.5bn in trades a day shifting to Paris, Amsterdam and elsewhere after the UK dropped out of the EU single market — the first of what is likely to be a series of Brexit blows to the City.
The EU has so far refused to recognise most of the UK’s regulatory systems as “equivalent” to its own, a stance that Andrew Bailey, governor of the Bank of England, said earlier this week was unlikely to change soon.
The Swiss plans represent the clearest sign yet that the UK has opted to eschew EU standards in favour of opportunities elsewhere.
“From a UK government point of view, the ability to diverge on financial services regulation is fundamental to Brexit and they are prepared to forgo the benefits of equivalence in order to preserve the right to diverge,” said Jonathan Master, partner in the financial service group at Eversheds Sutherland in London.
Brussels revoked its recognition of Swiss stock exchanges in 2019 in a dispute over stalled trade negotiations, sucking €1.2bn in daily trades away from the City. As an EU member at the time, the UK had to comply with the stance, leading to the loss of trading in hundreds of Swiss stocks, including Nestlé and Roche — two of the five most actively traded shares in Europe last year.
Tighter links with Switzerland will not fully make up for the loss of EU share trading, but the UK and Switzerland last year agreed to deepen their links on financial services after full Brexit.
The legislation to rekindle reciprocal links, with UK shares also changing hands in Zurich, is set to be laid in parliament next week. It will be passed by statutory instrument, which allows the rules to come into effect three weeks later. Switzerland has indicated it would reciprocate quickly with legislation on its side, allowing trading of Swiss shares in London to resume by mid-February.
SIX Group, which operates the Swiss exchange, told members on Wednesday it expected UK-based trading venues to offer trading in Swiss securities again “soon”.
In preparation it will restart a service that aims to match the best price available on European markets for investors buying and selling shares. It will begin testing on January 18. SIX declined to comment further.
Re-establishing the link is likely to help London share trading venues such as Cboe Europe, Turquoise and Aquis. All three lost business that would have taken place in London when the EU withdrew its “equivalent” status from both the UK and Switzerland.
“Aquis Exchange is monitoring developments closely and intends to resume trading in Swiss stocks once regulatory and legal permission is granted,” a spokesperson said.