SMM News: trading in large Swiss blue chips in London and other major financial centres could soon be banned as political disputes between Switzerland and the European Union could spread to the market.
Switzerland and the European Union have been at odds with each other over the reform of the complex agreements that have guided their relations for decades. If no agreement is reached by the EU's Sunday deadline, EU-based trading platforms will be restricted from trading in Swiss shares. The ability of some investors to trade Swiss blue chips, including Nestl é (Nestle SA) and Novartis (92.37,-0.43,-0.46 per cent) pharmaceutical company (Novartis AG), could be affected by the dispute.
The two sides still have a few days to reach an agreement to avoid losing market access. Or the EU could extend the deadline again, as it did at the end of 2018. However, the positions of the two sides seem to have become stronger, and the hope of a last-minute agreement has become slim.
If a deal is not reached, investors are likely to face upheaval. By market value, Swiss companies account for 1/5 of the Stoxx 500 index. About 70 per cent of Switzerland's 30 largest blue chips are traded on Swiss exchanges, mainly the SIX exchange in Zurich. Another 30 per cent of deals take place in Europe, mainly in London.
Although Switzerland is not a member of the European Union, it has the right to participate fully in the common market. Switzerland's booming economy and low unemployment appear to be an example of a boom outside the European Union. As a result, since the Brexit referendum, the "Swiss model" has been widely discussed as one of the options for Britain to leave the European Union.
But the truth is not as perfect as it was supposed to be.
Switzerland and the EU have been negotiating an institutional framework agreement since 2014, and about 120 separate agreements have been signed between Switzerland and the EU. The proposed framework agreement was announced in December 2018. The framework agreement under discussion between Switzerland and the European Union covers five broader areas: free movement of people, mutual recognition of industrial standards assessment, agricultural products, air and land transport.
The European Union has demanded that Switzerland sign a comprehensive agreement in order to gain more access to the EU market. The Government of Switzerland stated that three issues needed to be identified prior to the formal signing of the agreement, including the protection of Swiss wages, the regulation of State assistance and the clarification of civil rights.
However, the problem of paying European workers in accordance with local standards for cheap jobs in Switzerland remains difficult to crack. This has been the main point of dispute between the two sides over the years. In a more complicated situation this year, when the Swiss parliament is due to hold elections on October 20th, mainstream political parties are reluctant to hand over the framework agreement to the anti-EU Swiss people's Party (SVP), which they fear will be used by the Swiss people's Party against three other members of the ruling coalition.
If the two sides fail to reach an agreement, analysts say, it could seriously affect Switzerland's relations with the European Union and further disrupt commercial and cross-border stock trading. The Swiss Federal Council said on December 7 that rejecting the agreement could have a series of negative consequences, such as Switzerland's inability to enter the EU electricity market, or raising issues in Switzerland ranging from public health to food safety to the equivalence of the securities market.
Scan QR code and apply to join SMM metal exchange group, please indicate company + name + main business