Swiss-EU dual listings: Switzerland lifts protective measures

On January 29, 2025, the Swiss Federal Council announced its decision to remove the European Union (EU) from the list of jurisdictions affected by the protective measures for Swiss stock exchange infrastructure. The protective measures will be lifted effective May 1, 2025.

Background: The Protective Measures and their Purpose

In 2019 Switzerland introduced protective measures to safeguard its stock exchange infrastructure from the effects of the EU's decision to revoke equivalence status to Swiss stock exchange rules. Without the equivalence status, EU-based securities firms would have been restricted from trading Swiss equity securities on Swiss exchanges. The Swiss protective measures were enacted to mitigate disruptions in trading and liquidity, ensuring continued trading of Swiss-listed equities by EU securities firms.

The protective measures provided for a special recognition regime for non-Swiss trading venues that admit to trading securities of Swiss companies that are also listed in Switzerland (dual listings). Under the special recognition regime, recognition was denied if the trading venue was located in a jurisdiction that restricts its market participants in trading Swiss equity securities on Swiss exchanges and thereby significantly adversely affects the trading in such equity securities on Swiss trading venues. Following the revocation of stock exchange equivalence, trading venues in the EU could no longer meet the criteria for this special recognition.

However, a side effect of the protective measures was that Swiss-EU dual listings were no longer possible.

Changes in EU Regulation Open the Door for Switzerland to Lift Its Protective Measures

In spring 2024, the EU amended its legal framework, removing the above-mentioned restrictions on EU-based securities firms trading in Swiss equities. This change significantly reduced the need for the Swiss protective measures. The Swiss Federal Council conducted a review of the situation and concluded that, given the positive shift in the EU's position, the protective measures were no longer necessary. At the same time, the Swiss Federal Council also recognized that the protective measures had an adverse impact on Swiss companies wishing to pursue a dual listing in the EU.

Key Impact: Enabling Dual Listings in Switzerland and the EU

One of the key consequences of the Federal Council's decision to lift the protective measures is the potential for Swiss issuers to once again pursue dual listings in Switzerland and the EU. While Swiss-EU dual listings may for most companies be of limited use, e.g. because of similar investor base and analyst coverage as well as comparable liquidity, they can be desirable, or even required, in a number of situations, such as:

• Strong ties to a particular jurisdiction: Dual listings are sometimes desired when a Swiss company has significant operations or historical roots in another jurisdiction. For example, a company that began operations outside Switzerland and later moved its headquarters to Switzerland may seek a dual listing to maintain its connection to the original jurisdiction.
• Regulatory requirements: Certain regulated industries may require companies to be listed in specific jurisdictions. Dual listings allow Swiss companies to comply with such requirements in jurisdictions where they have operations or subsidiaries.
• Facilitating cross-border transactions: Non-Swiss jurisdictions may provide for requirements to have shares also listed on a trading venue for example when offering such shares as consideration in a cross-border M&A transaction. Even in the absence of formal requirements, a dual listing can facilitate political acceptance of large cross-border transactions.
• Applicability of public takeover rules: A Swiss company may seek a dual listing to ensure it falls within the scope of Swiss public takeover rules and its mandatory bid regime and minority shareholder protections, even when the company primarily seeks a listing outside Switzerland.

What's Next?

The protective measures will be lifted effective as of May 1, 2025. In addition, the Swiss regulator FINMA will have to grant the required special recognition to the relevant EU trading venues. FINMA can do this either upon specific request from individual trading venues or more broadly for all EU trading venues.

The Federal Council's decision to lift the protective measures can also be seen in the broader context of the ongoing dialogue between Switzerland and the EU. As the Federal Council has stated, it will continue to seek recognition of equivalence and improved EU market access for Swiss financial service providers in the context of the ongoing regulatory dialogue with the EU.

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Legal Note: The information contained in this Smart Insight newsletter is of general nature and does not constitute legal advice.