UK Recognises Swiss OTC Derivatives Framework: The OTC Derivatives Risk Mitigation and Central Counterparties (Equivalence) (Switzerland) Regulations 2025
London, UK – July 21, 2025 – The United Kingdom has today published new legislation recognising the equivalence of Switzerland’s regulatory framework for over-the-counter (OTC) derivatives and central counterparties (CCPs). This development, marked by the introduction of “The OTC Derivatives Risk Mitigation and Central Counterparties (Equivalence) (Switzerland) Regulations 2025,” signals a positive step towards maintaining robust and efficient financial markets post-Brexit.
The Statutory Instrument, which came into effect upon its publication, formally designates Switzerland’s regulatory regime as equivalent for the purposes of specific provisions within UK financial services legislation. This recognition is crucial for firms operating within the UK’s derivatives market, particularly those with exposure to or dealings with Swiss entities.
Key Aspects of the Regulations:
The core of these Regulations lies in granting an equivalence decision for Switzerland. This typically means that certain requirements imposed on UK firms when dealing with non-UK entities are disapplied or modified when the counterparty is based in Switzerland, provided that Switzerland’s own regulatory framework meets stringent standards. Specifically, this equivalence is likely to cover two primary areas:
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OTC Derivatives Risk Mitigation: This refers to the rules designed to reduce the risks associated with uncleared OTC derivatives. These rules often mandate measures such as exchange of collateral and robust documentation. The equivalence decision suggests that the UK considers Switzerland’s own measures in this area to be sufficiently rigorous and to achieve comparable risk reduction outcomes. This allows UK firms to continue to efficiently manage their OTC derivative exposures with Swiss counterparties without being subject to duplicative or overly burdensome regulations.
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Central Counterparties (CCPs): CCPs play a vital role in financial stability by acting as intermediaries in derivative transactions, guaranteeing trades and mitigating counterparty risk. The equivalence for CCPs signifies that the UK regulators have assessed the oversight and prudential regulation of Swiss CCPs and found them to be sufficiently robust. This allows UK financial market participants to continue to clear relevant derivatives through Swiss CCPs, fostering market liquidity and efficiency.
Benefits and Implications:
The granting of this equivalence is a welcome development for the City of London and the broader UK financial sector. It aims to:
- Enhance Market Efficiency: By aligning regulatory expectations, these regulations can streamline cross-border transactions, reducing operational burdens and costs for financial institutions.
- Promote Financial Stability: Recognising robust regulatory frameworks in key financial centres like Switzerland contributes to a more stable and interconnected global financial system. It ensures that risk mitigation standards remain high, even in cross-border dealings.
- Maintain Competitiveness: The UK seeks to maintain its position as a leading global financial centre. Equivalence decisions are a key tool in ensuring that UK firms can compete effectively internationally by having access to a wider range of markets and counterparties.
- Facilitate Trade: For businesses that use OTC derivatives for hedging and risk management purposes, this recognition ensures continued access to Swiss markets and counterparties, supporting international trade and investment.
This legislative act underscores the UK’s commitment to maintaining open and well-functioning financial markets by forging pragmatic regulatory relationships with key international partners. The detailed assessment undertaken before granting such equivalence demonstrates a considered approach to ensuring both market access and financial stability.
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UK New Legislation published ‘The OTC Derivatives Risk Mitigation and Central Counterparties (Equivalence) (Switzerland) Regulations 2025’ at 2025-07-21 16:18. Please write a detailed article about this news in a polite tone with relevant information. Please reply in English with the article only.