FMIA Switzerland – Swiss Financial Market Infrastructure Act
FMIA (Financial Markets Infrastructure Act), also known as FinfraG (Finanzmarktinfrastrukturgesetz) Switzerland is the financial market infrastructure act regulating derivatives trading which is effective as of beginning 2016. FinfraG regulates the trading on trading venues as well the bilateral transactions, and is the equivalent to Dodd-Frank in the US and EMIR in the EU and is implementing the Pittsburgh G20 summit procedures for regulating derivatives trading.
Important notification as of 3rd of April 2017 FINMA approves SIX as a trade repository and recognises the european REGIS-TR. The recognition and approval of these two trade repositories triggers the date of the FMIA reporting obligation for the reporting derivative transactions to a transaction register as of 1 October 2017 earliest:
– from 1st of October 2017 if the counterparty which is required to report is a central counterparty (CCP) or a financial counterparty (FC) which is not small; (CCP/FC+)
– from 1st of January 2018 if the counterparty which is required to report is a small financial counterparty (FC-) or a non-financial counterparty (NFC) which is not small; (FC-/NFC+)
– from 1st of April 2018 in all other cases. However, transactions between two small non-financial counterparties (NFC-) do not have to be reported.
FMIA Consultation – preliminary consultation of FMIA during 2014-2015
Mar 20, 2015: Discussion during the national council’s spring session in 2015
June 2, 2015: Finalization on items such as the position limits for commodity derivatives
June, 19th 2015: FMIA was adopted in the final vote
August 20th, 2015: FMIO – Financial markets ordinance was released
FINMA has also published Regulation FinfraV-FINMA as part of the FinfraV hearing. Key points of FinfraV-FINMA include the reporting requirement on trading venues for securities trading by FinfraG Art. 39, the criteria for OTC derivatives to be settled according to Art. 101 and the disclosure and takeover law.
November 25th, 2015 FMIA will be in force as of Jan 1st, 2016:
April 18th, 2016 Further details on SIMM:
Jun 5th, 2016: Asessment: How is Brexit affecting FinfraG and MiFID II?
7. Juni 2016: FINMA Next Steps: FINMA-Guidance 01/2016
FinfraG Start Date / FinfraG Timetable
FinfraG is expected to come into force in early 2016, with gradually increasing obligations. For the start of the transaction reporting obligation, the entry into force is laid down in Art 127 FinfraG ordinance: after the recognition of the first trade repository by FINMA, within
- 6 months, all open transactions need to be reported: transactions between a large financial counterparty as well centrally cleared transactions
- 9 months, all open transactions are open at this time need to reported: transactions between a small financial counterparty and between a large non-financial counterparty
- 12 months: all remaining transactions have to be reported
This implies that the transaction reporting obligation will come into effect during mid 2016. For transactions concluded over an OTF or a trading venue, these deadlines are extended by additional 6 months.
Overview of the Obligations in FinfraG
How are you affected:
FMIA/FinfraG Switzerland: counterparty classifications and thresholds
The FMIA differs between 4 counterparty classifications (EMIR between 3). In comparison with the EU regulation, an additional category has been introduced which is small financial counterparties. This exempts smaller financial counterparties from connecting to a central counterparty. This is similar to the end user exception of Dodd Frank regulation in the United States. Also, intra-group transactions will not be subject to authorization. The non-financial counterparties are not supervised by any authority. The control takes place with the auditors.
The thresholds for counterparty classifications are not known yet. It is expected however, that the thresholds will be similar to the Dodd Frank and EMIR.
Overview of obligations for different counterparty types:
FMIA Switzerland: changes in detail
The following requirements are mandatory for all market participants:
Reporting all derivative trades to a trade repository.
Foreign trade repositories can be approved under certain circumstances. In Switzerland, SIX has recently announced that they will provide a TR-service. According to current knowledge, from mid-towards the end of 2015, all types of derivatives will be reported. Cash and spot transactions are excluded from FMIA. Derivatives contracts under FMIA are defined as trades where the value is derived from one or more underlying assets and the delivery takes place later than 2 days or the generally accepted delivery time of each spot transaction in the market.
Risk mitigation measurments, which include:
- timely confirmation of trades (Terms and Conditions). ISDA Trade Confirmations can be used, in case the asset class has ISDA templates.
- Adequate procedures for portfolio reconciliation and portfolio compression
- Processes and procedures for the early detection and resolution of disagreements
Additional requirements are only required for certain counterparties, from small financial counterparties:
- Exchange of collateral
The following measures are necessary for financial counterparties and to large, non-financial, counterparties:
- centralized clearing through a CCP (Central counterparty). Currency swaps, Futures and Forwards (=Termingeschäfte), are excluded from the clearing obligation, in case they are settled payment vs. payment.
- Valuation of open positions
- Use of electronic trading platforms