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The European Market Infrastructure Regulation (“ERMIR”) passed by the European Union in 2012 and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank Act”) passed in the United States in 2010 have been enacted as the European and American answers to the need for stricter regulation of over-the-counter (“OTC”) derivatives following the 2008 global financial crisis.

The Swiss answer, namely the Financial Market Infrastructure Act (“FMIA”), entered into force on 1 January 2016. This act aims to adjust the regulation of financial market infrastructures and derivatives trading in line with market developments and international requirements.

The FMIA covers organizational and behaviour rules for all financial market infrastructures and sets out regulations for OTC derivative contracts as well as general requirements on market behaviour rules, while the Financial Services Act (“FinSA”; entered into on 1st January 2016) governs the relationship between financial intermediaries and their clients for financial products.

The FMIA is supplemented by the Financial Market Infrastructure Ordinance (“FMIO”).

In addition, the FMIA delegates regulatory powers directly to the Swiss Financial Market Supervisory Authority (“FINMA”) to define reporting requirements for securities trading and for disclosure and takeover issues. FINMA’s Financial Market Infrastructure Ordinance (“FMIO-FINMA”) has therefore been enacted to also supplement the FMIA.

The FMIO and FMIO-FINMA also entered into force on 1 January 2016.

Understanding the FMIA

The FMIA is applicable to derivative contracts between financial counterparties (“FCP”) as well as non-financial counterparties (“NFCP”) (together herein known as “CP”).

It applies to CPs having its registered office in Switzerland, including branches of Swiss legal entities abroad.

Swiss branches of foreign legal entities are not subject to the regulation, unless they are not subject to an equivalent home country regulation.

The product scope is limited to derivatives transactions. Therefore, the FMIA does not apply to structured products and all other transferable securities and structured deposits nor to sales and repurchase agreements or to securities lending transactions and commodity derivatives which are settled and not traded on an exchange or an organized trading platform.

Regulatory framework

The FMIA requirements on derivative contracts consists of the three following key duties:

  • mandatory clearing via a central counter party (“CCP”) applicable to all standardized OTC derivatives contracts. After a trade has been executed, the position must be established, net obligations calculated and financial instruments and/or cash made available to secure the positions (clearing). The counterparties could fulfil their clearing duty either as direct clearing member of a CCP (direct clearing) or enter into an agreement with a clearing member acting as an intermediary (indirect clearing). In the CCP model, each market participant has a legal relationship with and exposure to the CCP only, regardless of the identity of their CP in the underlying trade;
  • reporting to a FINMA licensed or recognized trade repository (“TR”) for almost all new as well as any modification or termination of OTC derivative contracts and exchange traded derivative contracts (“ETDs”);
  • risk mitigation measures in relation to non-centrally cleared OTC derivative contracts (including collateral margining). CPs measure, monitor and mitigate operational and counterparty risks based on derivative contracts.

The overall purpose of these new regulatory requirements is to reduce systematic risks: the clearing over a CCP and the risk mitigation for non-centrally cleared derivatives aim to reduce counterparty risks, while the reporting to a TR ensures increased transparency.

Companies affected by the FMIA

Besides the traditional financial institutions (referred to in the act as financial counterparties; “FCP”), the act also applies to Swiss companies outside the financial sector, called non-financial counterparties (“NFCP”), to the extent that they are involved in operations regarding derivatives  (one single derivatives transaction can already trigger obligations under the FMIA).

As a general rule, every company registered with the commercial registrar and which conducts derivatives is subject to the provisions of the FMIA. Individuals interacting with derivatives without being registered with the commercial registrar as a company are in principle not subject to FMIA.

The obligations which have to be observed depend on the status of the company, as below.


This notion includes in particular banks (including private bankers), securities dealers, insurance and reinsurance companies, fund management companies, collective investment schemes and asset managers of collective investment schemes, and occupational pension schemes.

Custody banks, representatives of foreign collective investment schemes and fund distributors are not considered FCPs. Asset managers and financial advisors are out of the scope.

Some of FCPs’ obligations are the following:

  • clearing;
  • reporting;
  • risk mitigation;
  • daily valuation; and
  • platform trading.

If the FCP’s open rolling average gross positions of all derivatives contracts over the last 30 days are below a certain threshold, set at CHF 8 billion at the level of the financial group, the FCP is considered as a “small” counterparty (“Small FCP“).

Small FCPs are exempt from certain obligations such as:

  • no clearing obligation if the CP is a Small FCP;
  • no daily valuation required if the CP is a Small FCP; and
  • no platform trading obligation if the CP is a Small FCP.


All other counterparties not falling in the definition of an FCP are considered NFCPs.

If all its open rolling average gross positions of derivatives transactions over the last 30 days are below the thresholds for each derivatives category, a NFCP is also considered as “small” (“Small NFCP”).

Small NFCPs’ thresholds are the following:

  • Credit derivatives: CHF 1.1 billion;
  • Equity derivatives: CHF 1.1 billion;
  • Interest rate derivatives: CHF 3.3 billion;
  • FX derivatives: CHF 3.3 billion;
  • Commodity derivatives: CHF 3.3 billion.

Small NFCP are exempt from certain obligations such as:

  • no clearing obligation if the CP is a Small NFCP;
  • no reporting obligation between two Small NFCP;
  • no daily valuation required if the CP is a Small NFCP; and
  • no platform trading obligation if the CP is a Small NFCP.

Over the above mentioned thresholds, i.e. in case of NFCPs, the same obligations as those of FCPs are applicable.


The FMIA also prescribes certain conditions with respect to auditing.

The external auditors within the meaning of articles 727 and 727a of the Swiss Code of Obligations must assess, as part of their audit procedure, whether the CP complies with its obligations regarding derivative trading. For FCPs, the audit depends upon the financial market acts applicable to the relevant FCP.


Swiss companies outside the financial sector registered with the commercial register and conducting derivatives transactions must comply with the obligations set forth in the FMIA. There are different time limits for doing so depending on the type of obligation, between six and 18 months.

However, most Swiss companies outside the financial sector must comply “only” with the provisions provided for Small NFCP and benefit therefore from reliefs of different types.

Our Experience

lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.

This article is for information purposes only. It does not constitute professional advice or an opinion. Please contact us for any questions

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