# = pounds sterling
HM Treasury News Release
211/98 17 December 1998
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SWISS EXCHANGE GETS RECOGNITION
The Swiss Exchange will be able to provide direct access to UK
firms to its screen-based trading system following its
recognition as an Overseas Investment Exchange by the Treasury,
the Economic Secretary Patricia Hewitt announced today.
The Exchange has satisfied the conditions under Sections 37 and
40 of the Financial Services Act 1986 to be recognised as an
Overseas Investment Exchange. UK firms, through remote
membership, will be able to access the exchange directly through
the use of terminals here in London.
Announcing the decision Ms Hewitt said:
"Dealing in Swiss securities will become more convenient,
and more business should be routed through London. UK
investors should benefit from greater choice and lower
transactions costs, while both the markets and investors
will benefit from increased competition through improved
efficiency and innovation, and a strengthening of the UK's
financial services industry. Greater liquidity and depth
will also reinforce London's position as one of the world's
top international financial centres.
"More overseas exchanges do business in the UK than in any
other country. London offers a wide range of choice for
internationally mobile financial services firms, making it
extremely attractive for them to base their operations
here."
NOTES TO EDITORS
1. Recognition as an "overseas investment exchange" under
sections 37 and 40 of the Financial Services Act 1986 means
that the exchange may carry out investment business in the
UK. As far as the Swiss Exchange is concerned, this will
involve installing screen-based trading terminals giving
UK firms access to the exchange, and establishing a
physical presence in the UK. Remote members of the Swiss
Exchange based in London will have access to trading
terminals in their offices. The Swiss Exchange intends to
have screens in place by the spring of next year.
2. Recognition allows overseas exchanges to compete on equal
terms with domestic exchanges, promoting greater efficiency
and innovation to the benefit of all, including consumers
and the UK's financial services industry. Recognition
should lead to more trade in Swiss securities taking place
in London, should provide UK investors with greater choice
and lower transactions costs, and should provide the
marketplace with greater liquidity and depth. This will
reinforce London's position as one of the world's top
financial centres.
3. The Chicago Mercantile Exchange, the Chicago Board of
Trade, the NASDAQ, the New York Mercantile Exchange, Delta
and the Sydney Futures Exchange. Under the EU Investment
Services Directive, all investment exchanges in the EU
(except commodity exchanges) do not need to be recognised
in order to carry out investment business in the UK. There
are now more overseas exchanges doing investment business
in the UK than in any other country. London offers a wide
range of choice for internationally mobile financial
services firms, making it extremely attractive for them to
base their operations here.
4. Criteria for the recognition of overseas exchanges are laid
down in sections 40 and 119 of the Financial Services Act
1986. In summary, the main criteria are:
- that the Exchange is subject to regulation and
supervision in its home country, which, together with
its own rules and practices, affords UK investors
protection at least as good as that provided by UK
regulatory arrangements relating to UK exchanges;
- the Exchange is able and willing to cooperate by
sharing information and otherwise with the UK
authorities, and that adequate arrangements for such
cooperation exist between the relevant national
authorities;
- that none of the rules, guidance and clearing
arrangements have significantly anti-competitive
effects, or if they do, that these effects are no
greater than is necessary to protect investors. The
Director General of the Office of Fair trading advises
HM Treasury on this point.
5. The Swiss Exchange applied for recognition on 11 May 1998.
The report of the Director-General of Fair Trading was
received on 10 December 1998.
6. Overseas exchanges are regulated primarily by their home
state regulatory authorities. The Swiss Exchange is
regulated by the Swiss Federal Banking Commission (SFBC).
In addition, the Swiss Exchange has its own internal
surveillance, monitoring, and regulatory systems. Before
being recognised, the Treasury must be satisfied that an
applicant exchange is subject to supervision, which together
with its rules and practices, protects investors to the same
standards as those provided in the UK by domestic exchanges.
Once recognised, an exchange is required to provide the
Treasury with regular information on changes to its rules
and practices so that the Treasury and Office of Fair
Trading remain satisfied that the recognition criteria
continue to be met. The Treasury and Swiss regulatory
authorities have confirmed that they are willing and able
to exchange regulatory information.
7. A wide range of criteria are examined to determine whether
investor protection is satisfactory, as set out in the 1986
Financial Services Act. The exchange must have financial
resources sufficient for the proper performance of its
functions. The rules and practices of the exchange must
ensure that business is conducted in an orderly manner. The
exchange must limit dealings to investments where there is
an orderly market. Proper information must be provided to
market participants to ensure that prices are fair. Clearing
arrangements must guarantee transactions in the event of
default. Transactions must be recorded, and the exchange
must have adequate arrangements and resources to ensure
compliance with its rules. We must be satisfied that these
rules do not allow for any anti-competitive practices. In
addition, the Swiss authorities will regulate the activities
of the exchange, and arrangements are in place to provide
for the exchange of information between the Swiss and UK
authorities.
8. If you have access to the Internet, you can find this news
release and other Treasury information on http://www.hm-
treasury.gov.uk