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Switzerland

FBC to ease requirements for market makers

The Federal Banking Commission (FBC) has recently changed its practice of treating all securities dealers alike, irrespective of whether they intend to act as brokers, dealers, underwriters, derivatives houses or market makers. Based on the view that mere market making does not put investors' interests at risk and that a market maker's organization and infrastructure is lean and limited to trading for its own account in order to provide market liquidity, market makers need no longer strictly separate management, supervisory functions and ownership (vertical separation). In other words, a shareholder may act as a director and officer at the same time. The required horizontal separation between trading, asset management and settlement may be achieved by implementing a risk management independent of trading and by outsourcing settlement activities to an external clearing member. Market makers may also apply for a waiver of the requirement to install an internal audit Pision, provided the chosen structures are clear and simple.

The licence granted to a securities dealer taking advantage of these relaxed rules is, however, expressly limited to market making and does not include the activities of a broker, dealer, underwriter or derivative house.

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