credit-suisse.com Financial Market Infrastructure Act (FMIA) / Finanzmarktinfrastrukturgesetz (FinfraG)

Financial Market Infrastructure Act (FMIA) / Finanzmarktinfrastrukturgesetz (FinfraG)

Organized Trading Facility (Art. 42 – 46)

The Swiss Financial Markets Infrastructure Act (FMIA) extends the regulatory supervision of financial markets by introducing requirements for organized trading facilities. Defining an additional trading facility with transparent rules besides stock exchanges and multilateral trading facilities aims to improve market transparency while providing an alternative to regulated trading venues. Organized trading facilities can be set up as multilateral or bilateral (on own account) trading facilities and may have some discretion when executing clients’ orders.

As of January 1, 2018, Credit Suisse (Switzerland) Ltd. and as of September 1, 2018, Credit Suisse AG each operate an Internal Market Making facility (“IMM”) as bilateral organized trading facilities according to FMIA. Trading on IMM is subject to the Rulebooks (linked on this page).

Key aspects of IMM include the following:

  • Credit Suisse Market Making: IMM is a bilateral organized trading facility offering liquidity on the secondary market. Credit Suisse becomes the counterparty to all transactions.
  • Equal treatment of Users: All transactions are subject to the Rulebooks.
  • Transparency: Any prices published for IMM financial instruments on external platforms or provided upon request are non-binding indicative prices. However, all trades executed on IMM are published via Thomson Reuters.

Asset classes admitted to trading on IMM:

Officially admitted asset classes for trading on the IMM Market according to section 2 “Instruments” of the Rulebooks

  • Over the Counter (OTC) structured products issued by entities from Credit Suisse Group for which Credit Suisse pursues an OTC secondary market making function.
  • Units in OTC real estate funds issued by the entities from Credit Suisse Group for which Credit Suisse pursues an OTC secondary market making function.

Credit Suisse reserves the right to add or remove financial instruments and/or asset classes.

Trading hours:

Official trading hours for specific market segments and financial instruments according to section 4.1 “Trading days and trading time” of the Rulebook

Trading hours (Swiss time)
Real-Estate-Funds 9:00 – 17:30
Tracker Certificates 9:00 – 17:30
Structured Products Secondary Market 9:15 – 17:15
FX Certificates / Mini-Futures 9:15 – 17:15

Derivatives Trading (Art. 93 – 115)

In the aftermath of the 2008 financial crisis, G20 leaders agreed that all standard over-the-counter (OTC) derivatives contracts should be cleared through central counterparties and that derivative contracts should be reported to trade repositories. G20 leaders have implemented strong measures to improve transparency and regulatory oversight of OTC derivatives.

FMIA (Financial Market Infrastructure Act), in German: FinfraG (Finanzmarktinfrastrukturgesetz), is the respective Swiss Regulation that is in force since January 2016. The objective of FinfraG is to regulate (i) the organization and the operation of financial market infrastructures, (ii) the trading of derivatives and (iii) the conduct of business.

FinfraG purports to introduce broad changes to the OTC derivatives market and aims at increasing transparency, reducing counterparty and operational risk in trading as well as enhancing market integrity and oversight.

Key aspects of Derivative Trading include the following:

  • Mandatory central clearing of eligible OTC derivatives
  • Risk mitigation measures for uncleared OTC derivatives such as timely confirmations, daily valuation, portfolio reconciliation, portfolio compression, dispute resolution and the segregated exchange of collateral
  • All in-scope counterparties with outstanding derivative contracts (OTC and Exchange traded) must report details of those contracts and any newly entered contracts to an authorized trade repository (TR)

FMIA sets forth several types of counterparty classifications with regard to the OTC derivatives market, the primary being Financial- and Non-Financial Counterparties (FCs and NFCs). Applicable obligations are then defined depending upon whether the classified counterparty exceeds certain thresholds. Furthermore FinfraG requires the classification of third-country entities, as well as fully- and partially-exempted counterparties. There is no obligation for individuals as there is for other counterparties (exceptions might apply, see also "Reporting").

Since most requirements can only be fulfilled bilaterally, even clients domiciled outside of Switzerland will have to support compliance efforts to facilitate the compliance of Swiss entities, such as Credit Suisse AG.

Clearing:

Central clearing allows market participants to mitigate counterparty risks while transferring the risk to a central counterparty. After a trade has been executed, the claims will be handed over to the central counterparty (a process called novation), which lies between the two original traders and assumes the new legal counterparty position for both the seller and buyer.

Risk Mitigation:

All Financial- and some non-financial counterparties will have to have risk mitigation techniques in place when trading OTC derivatives with Credit Suisse AG. The risk mitigation techniques apply only with regard to OTC derivative contracts that are not cleared through a central counterparty.

Reporting:

Financial and non-financial counterparties shall ensure timely reporting of all relevant information within one business day after the conclusion, modification or termination of any derivative contract (OTC and Exchange traded) to an authorized trade repository.

The determination of the reporting counterparty is primarily based on the counterparty class under FinfraG. There is no obligation for individuals as counterparties (exceptions might apply), but contracts with individuals have to be reported by the financial or non-financial counterparties.

Mandatory Platform Trading

Some derivatives will have to be traded via a trading platform or an exchange that is authorized by FINMA.