Under the self-regulatory regime provided for by the Stock Exchange Act, the SWX Swiss Exchange is continually adding new provisions to its listing regulations, which issuers are required to comply with. How exactly do these regulations function?

Pursuant to art. 4 of the Federal Act on Stock Exchanges and Securities Trading (SESTA) the SWX Swiss Exchange must have an organizational structure for its operations, administration and supervision that is appropriate to its activities.

Pursuant to art. 8 SESTA the SWX must issue regulations regarding the admission of securities to listing. The Listing Rules of the SWX comply with this statutory requirement. According to the statutory requirements of art. 8 para. 3 SESTA the Listing Rules of the SWX must satisfy internationally recognized standards. This primarily refers to the related directives of the European Union, which were adopted, with minor individual adjustments, in the partial amendment of the Listing Rules in 2000. Since then the Listing Rules have been developed on an ongoing basis and adapted in line with international standards and the requirements of market participants.

The Admission Board is the body of the SWX responsible for setting the regulations that relate to listings and issuers (art. 16 of the SWX articles of association). Any alteration or addition to the Listing Rules must be decided by resolution of the Admission Board and approved by the Swiss Federal Banking Commission (SFBC, art. 34 SESTA) as the supervisory authority for the SWX.

Is the system of self-regulation not obsolete and inadequate to the task?

The classical purpose of financial market regulation has its origins in the objectives of security, stability and trustworthiness of the financial system. One of the aims of financial market regulation is to establish a level playing field among the competing providers of financial services and the various financial centres as well as to protect investors. In order to keep pace with the rapid evolution of today's financial markets the concept of self-regulation is an invaluable asset. Our regulations are drawn up by experienced financial market experts who can also assess the practical consequences of any innovation. In addition, the self-regulatory process enables us to introduce innovations on a continuous basis and to implement them much more rapidly than would be possible through governmental regulatory channels.

What are the limits to the self-regulation of the stock markets?

Financial market regulation in Switzerland today is determined to a large extent by international minimum standards such as the recommendations of the International Organisation of Securities Commissions (IOSCO). Our financial markets are closely meshed with other international markets and we have a large percentage of foreign clients. As such Switzerland cannot avoid incorporating the leading international minimum standards in its national regulatory provisions. Even more important than the benefits of harmonized regulation in ensuring a level playing field and facilitating cross-border business activities is the reputational risk that would arise from our non-compliance with international standards. A small country like Switzerland has limited political influence and the success of its financial centre exposes it very much to the critical gaze of its competitors. It therefore cannot risk losing its reputation.

The self-regulation of the Swiss stock exchange is thus limited on the one hand by mandatory Swiss legislation and on the other by international standards.

The SWX recently adopted new rules for the disclosure of management transactions. What exactly do these rules say?

The SWX has a duty to ensure transparency and the equal treatment of investors alongside the efficient operation of the securities markets. To this end the Listing Rules must specify the information investors need in order to evaluate the characteristics of securities and the quality of their issuers. They must also take account of internationally recognized standards (art. 8 paras. 2 and 3 SESTA). According to art. 1, the Listing Rules must ensure investors are provided with appropriate information about the securities traded on the exchange and their issuers. These requirements empower the SWX to promulgate regulations for the disclosure of management transactions in the Listing Rules and to issue directives to this effect which are based on these.

The disclosure of management transactions is designed to promote better information for investors to the extent that information about the purchase or sale of securities rights of an issuer by its management can permit certain conclusions to be drawn about the future performance of the company's stock price.

The obligation to report management transactions applies to members of a company's board of directors and executive board. Both the purchase and sale by management of their own company's equity rights, convertible and purchase rights, or any other financial instruments whose price is largely influenced by the company's own equity securities, must be reported. Any person subject to this reporting obligation must inform its company about the transaction concerned no later than two stock exchange trading days after the relevant transaction has been concluded. If the total value of all transactions concluded by such person exceeds the designated limit of CHF 100,000.- in the course of a calendar month, the issuer must inform the SWX within two trading day stating the person's name. The SWX will then publish this report but only indicating the person's function (executive director, member of the executive board or non-executive director) and without giving the person's name. If the per-person threshold amount is not exceeded in a given calendar month by an individual who is subject to the reporting obligation, the issuer must report the transactions effected to SWX within four trading days of the end of the calendar month in the form of a collective report.

How does the SWX ensure that the reporting obligation cannot be evaded if transactions are conducted by family members of a person subject to the disclosure obligation?

Family members of the individual liable to the reporting obligation are not subject to the regulations of the SWX because there is no legal relationship between them and the SWX and the SWX has no legal authority to regulate such persons. In order to prevent the management directive being evaded the principle of the reporting obligation has been broadly formulated: "An individual is subject to the reporting obligation if the transaction directly or indirectly affects that person's assets or is significantly motivated by that person's volition." There is thus the possibility that such evasive transactions may also be made subject to the reporting obligation.