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28 June 1999

RECOGNITION OF EUREX ZURICH AS AN OVERSEAS INVESTMENT EXCHANGE

 

London's position in the world as a leading financial centre for investment is underlined by the recognition of Eurex Zurich Ltd as an overseas investment exchange, Economic Secretary Patricia Hewitt said today.

Announcing recognition by HM Treasury of Eurex Zurich Ltd as an overseas investment exchange under sections 37 and 40 of the Financial Services Act 1986, Ms Hewitt said:

"I welcome the recognition of Eurex Zurich as an overseas investment exchange, having satisfied the conditions laid down in the Financial Services Act. This brings the number of such exchanges trading in the City to eight. 

"As a result, markets and investors should benefit from the convenience and increased choice of being able to trade on the exchange using its screens in London. More overseas exchanges do business in the UK than in any other country. The City is now established as an attractive base for them to operate from, with the wide range of choice for internationally mobile financial services firms on offer here."

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NOTES FOR EDITORS

 

1. Recognition as an overseas investment exchange under sections 37 and 40 of the Financial Services Act 1986 enables the exchange to carry out investment business in the UK.

2. Recognition of Eurex Zurich as an additional overseas investment exchange will promote greater efficiency and innovation to the benefit of all, including consumers and the UK financial services industry. Recognition should provide UK investors with greater choice and lower transactions costs, and should provide the marketplace with greater liquidity and depth.

3. Other currently UK-recognised overseas investment exchanges are :

NASDAQ

Sydney Futures Exchange

Chicago Mercantile Exchange

Chicago Board of Trade

New York Mercantile Exchange

Delta*

Swiss Exchange

Cantor Financial Futures Exchange

* Delta has now ceased trading (see HMT press notice 26/99)

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4. Criteria for the recognition of overseas exchanges outside the EU are laid down in sections 40 and 119 of the Financial Services Act 1986. The main criteria are:

  • that the exchange is subject to supervision in its home country, which, together with its own rules and practices, affords UK investors protection at least as good as that provided by UK regulatory arrangements relating to UK exchanges;
  • the exchange is able and willing to cooperate by sharing information and otherwise with the UK authorities, and adequate arrangements for such cooperation exist between the relevant national authorities;
  • that none of the rules, guidance and clearing arrangements have significantly anti-competitive effects, or if they do, that these effects are no greater than is necessary to protect investors. The Director-General of Fair Trading advises HM Treasury on this point.

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5. Eurex Zurich applied for recognition on 6 January 1999 The report of the Director-General of Fair Trading was received on 23 June 1999.

6. Overseas exchanges are regulated primarily by their home state regulatory authorities. Eurex Zurich is regulated by the Swiss Federal Banking Commission. Regulatory authorities in the UK and Switzerland have confirmed that they are willing and able to exchange regulatory information.

7. UK investors are protected by scrutiny against a range of criteria under the Financial Services Act. To be recognised, exchanges must, amongst others:

  • have financial resources sufficient for the proper performance of its functions
  • have rules and practices which ensure that business is conducted in an orderly manner
  • limit dealings to investments where there is an orderly market
  • provide proper information to market participants to ensure that prices are fair
  • have clearing arrangements which guarantee transactions in the event of default
  • have adequate arrangements and resources to ensure compliance with its rules.

The Treasury must be satisfied that the exchange's rules do not allow for any anti-competitive practices. In addition, effective cooperation must be in place between the exchanges, its home-state regulator, and the UK's regulatory authorities.

8. EU investment exchanges (except commodity exchanges) do not need formal recognition to carry out investment business in the UK under the terms of the EU Investment Services Directive.

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Press Notices 1999 January to June index