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Banks and fund managers based in the EU were forced to change the way they bought and sold Swiss stocks in early July after a breakdown in political negotiations resulted in a ban on trading hundreds of such shares in the bloc.
Virtu Financial, one of the world’s largest market-makers, analysed $36bn of trades in the eight months to August, covering about 120,000 orders for Swiss stocks and more than 100 institutions — across all types of shares and trading venues including bank-operated private electronic marketplaces.
The loss of regulatory “equivalence” for Swiss stocks reduced investment choices and introduced friction into the market, Virtu said in a paper seen by the Financial Times. It increased costs for buying and selling companies with a small or medium-sized market capitalisation.
“While the impact to end investors from ending equivalence of Swiss stocks is not fully understood yet, we do observe increases in trading costs . . . with small and mid-cap Swiss stocks becoming 20 per cent more expensive.” [...]
Virtu found that institutional investors shifted business to the main Swiss exchange from dark pools and rivals such as UK exchanges CBOE Europe and Aquis Exchange. Average five-day spreads for Swiss stocks widened, particularly in small-cap stocks. [...]
Full article on Financial Times (subscription required)