The removal of “equivalence” between Swiss and EU markets has increased costs for buying and selling small or medium-sized companies on Swiss exchanges, new research has found.

In June, the EU removed the special equivalence status given to Switzerland’s financial markets, meaning that Swiss stocks can no longer be traded from an EU country and vice-versa.

The move was in response to the Bern’s refusal to sign a single framework to replace the current 120 separate bilateral agreements which currently manage Switzerland’s relations with the EU.

But to date, the effect of disruption has not been known. However, a study by Virtu Financial, one of the world’s largest market-makers, seen by the Financial Times, shows the effect the equivalence removal has had on Swiss trading.

The price of trading shares in small and mid-cap companies has increased by a fifth, according to the study which analysed $36bn of trades in the eight months to August. Average five-day spreads for Swiss stocks widened, particularly in small-cap stocks.

Costs of Swiss equivalence

Few HNWIs banking with Swiss private banks will have been affected by the disruption, however. Most major Swiss banks have opened or bought subsidiaries in Luxembourg or elsewhere within the EU, which allow uninterrupted trading on European markets.

Even those without direct EU access might be unaffected. “While the impact to end investors from ending equivalence of Swiss stocks is not fully understood yet, we do observe increases in trading costs”, says the Virtu Financial paper according to the FT.

Meanwhile, since June the SIX, Switzerland’s blue-chip stock market index, has been largely stable, while several of its largest companies, including Roche and Nestle, have seen their share prices increase.

This will reassure investors who see the tussle over Swiss equivalence as a template for a hard Brexit on October 31. Equivalence is the gift of the European Commission to third-party nations, and many fear it will not be granted if the UK Brexits on unfriendly terms.