Dialogue on the EU-Switzerland Framework Agreement recommenced on Friday 07 June with a letter from the Swiss Federal Council to European Commission President Jean-Claude Juncker . This is the first public correspondence since negotiations reached a stalemate in December 2018. Negotiations on an inter-institutional agreement, which would usually be of little importance to equity markets, are now being watched closely as the European Commission has linked the conclusion of the agreement with the continuation of the temporary decision on the equivalence of Swiss trading venues for the purposes of the Article 23 MiFIR share trading obligation (STO). The most recent equivalence decision is set to expire on 30 June 2019.

Over the last six months the Swiss Federal Council has conducted a stakeholder consultation to inform its negotiating position, in line with its system of direct democracy. On the basis of the responses, the Federal Council has written to the Commission requesting clarifications on three matters relating to state aid, freedom of movement and wage protections. Moreover, the Federal Council requested a further temporary extension of the STO equivalence pending resolution on these three matters. President Juncker was quick to respond with a letter acknowledging these points and setting a deadline of 18 June for agreement to be reached – the date of the next meeting of the College of Commissioners. Most notably Juncker made no reference to the STO equivalence decision. This may be considered as a sign that the Commission is willing to depoliticise the agreement, but it is more likely that the Commission is simply not showing its hand so as to maintain the pressure on the Swiss.

The negotiations have now recommenced in Brussels. Whilst the 18 June deadline for agreement is highly ambitious and possibly unrealistic, it may serve as the date on which the Commission will take stock of progress and make a final decision on whether to prolong the equivalence decision permanently, temporarily or not at all. The Commission’s use of the Swiss trading equivalence as a political pawn has been highly criticised by industry and politicians. The EU equivalence framework is likely to be reviewed by the incoming Commission and the politicisation of, what are supposed to be objective, equivalence decisions will most definitely be subject to scrutiny.