Background

With the implementation of MiFID II / MiFIR in January 2018, the EU introduced a share trading requirement, mandating that European investment firms trade shares only on EU trading venues or on recognized equivalent third-country trading venues. While the European Commission initially granted Switzerland temporary stock exchange equivalence in December 2017, this status was extended only until June 30, 2019. Following that, the European Commission chose not to prolong Switzerland’s stock exchange equivalence.

In response, the Swiss Federal Council adopted a contingency measure to safeguard its financial market infrastructure. This measure, introduced in November 2018 and later incorporated into the Swiss Financial Market Infrastructure Act (FinMIA), established a requirement for the recognition of foreign trading venues where shares of Swiss companies listed on a Swiss stock exchange (the Swiss Shares) are traded. Recognition is granted only if the regulations of the foreign market do not contain any restrictive measures that impair the trading of Swiss Shares on Swiss trading venues. The Swiss Federal Council maintains a list of jurisdictions whose laws restrict their market participants from trading in Swiss Shares on Swiss trading venues (the Stock Exchange Protection List); to date, only the European Union (including all its member states) has been included on the Stock Exchange Protection List.

As a result of this regime, since July 1, 2019, trading venues in the EU have been prohibited from dual listing Swiss Shares under Swiss law.

Recent Developments

The EU amended its legal framework in spring 2024, lifting the restrictions on European investment firms trading in Swiss Shares on Swiss trading venues. As a result, trading in Swiss Shares on Swiss stock exchanges is no longer adversely affected by EU law. Following these events and an overall assessment, the Swiss Federal Council has decided to remove the EU (including all its member states) from the Stock Exchange Protection List with effect from May 1, 2025.

Relevance for Stock-for-Stock Takeovers

EU takeover law requires that shares offered as consideration without a cash alternative in a stock-for-stock takeover be listed on a regulated market; Swiss stock exchanges are not considered a ‘regulated market’. As a result, Swiss Shares could not be offered as consideration without a cash alternative in a crossborder public takeover to the shareholders of a target company whose shares were listed on a trading venue the EU unless they were dual listed on a ‘regulated market’.

With the EU’s removal from the Stock Exchange Protection List effective May 1, 2025, EU trading venues will once again be able to admit Swiss Shares to trading. This opens the door for Swiss companies to dual list their Swiss Shares on an EU trading venue, making it possible to offer their Swiss Shares as consideration in crossborder public takeovers without having to offer a cash alternative and thus unlocking new opportunities for crossborder M&A.