Policy & Regulation

Regulating activities, not companies

 

Commodity trading brings together different activities, each with its own set of regulations. In the context of increasing regulatory burden, the challenge for decision makers is to adopt new regulations suited to the specificities of activities rather than companies.

STSA and its membership actively monitor and advocate in favour of fit-for-purpose policies and regulations that create a level playing field for Swiss operators, both within Switzerland and at international level.

In order to assist policymakers in their task, STSA coordinates a number of specialised committees, working groups and task forces devoted to the key issues shaping the outlook for the sector.

STSA recognises the need for the right balance between soft and hard law. As key stakeholders in the commodity value chain, traders have been actively developing, implementing and promoting industry-specific voluntary codes and best practices covering a range of different commodities.

These complement the existing laws and regulations adopted by governments and public authorities, as well as the international standards enforced at the global level.

STSA is the voice of the commodity trading industry in the public policy arena

 

An important benefit is STSA’s emphasis on keeping members up to date on regulatory and legislative issues affecting the commodity trading industry. STSA monitors issues that have the potential to impact the commodity trading industry and works proactively to engage federal and cantonal decision makers on the outcome of regulations and legislation that affect the sector by communicating its position on issues and providing information about the industry to policymakers.

STSA's commitment to work with all stakeholders

 

STSA is commited to working with all of the commodity trading stakeholders and is proactively engaged in direct and multilateral dialogues with authorities in Switzerland and abroad. The work carried out by the various STSA committees and working groups coordinated by the Secretariat intends to build up the body of knowledge available on the activities of physical commodity trading companies.

Swiss federal policy on commodity trading

Swiss policy on commodities is set at the federal level and involves several federal departments such as the Foreign Affairs Department, the Department for the Economy and the Federal Department of Finance. In 2013, Swiss authorities published an in-depth background report on commodities, setting the roadmap for future regulation of the industry in Switzerland.

Download the 2013 Swiss federal report

Main policy trends shaping the sector

 

Calls for greater transparency and corporate responsibility

International trade has an important role to play in meeting the United Nations new Sustainable Development Goals. This implies the adoption of responsible business practices throughout the commodity value chain and greater disclosure of information, particularly on payments.

A greater role for compliance

Commodity trading companies and banks specialised in trade finance are increasingly required to consider the counterparties/clients they do business with, not only from a balance sheet, market, credit and operational risk perspective but increasingly, also from a reputational, conduct, legal and compliance risks perspective. As a result commodity trading firms are strengtehening compliance departments and their governance and control frameworks. The introduction of strict Know Your Customer (KYC) rules as well as systematic compliance procedures for Politically Exposed Persons (PEP) are part of wider efforts to enforce and document compliance with all applicable rules throughout the physical trading process. With better processes and controls in place, the commodity trading sector can better engage with governments and regulators and assist them in defining best practices.

A changing Swiss corporate tax framework

A new corporate tax framework is being gradually put in place in Switzerland following adoption of the Corporate Tax Reform III package at the Federal level and the end of the tax rulings for multinational companies.

Market Conduct, Transparency and Consumer Protection

Switzerland is adapting the way it handles market conduct, financial trading and consumer protection. It has already incorporated most of the rules in the Swiss Financial Market Infrastructure Act (FMIA) and the upcoming FiniG and FidleG legislative texts will complete the new framework.

These rules are influenced by the EU's market abuse and energy market integrity regulations aimed at reducing insider trading and market manipulation.

Regulation of financial derivatives

The US and EU have adopted regulations covering financial derivatives with the ultimate aim strengtheneing the financial system by enhancing transparency and risk management.

Switzerland has responded to these acts (EMIR for the EU and Dodd-Frank Act for the US) by developing its own Swiss Financial Market Infrastructure Act (FinfraG in German). It regulates new obligation for OTC trades that have to use organized trading facilities, central clearing, central margin and central reporting.

Capital Requirements

The Basel III and upcoming Basel IV rules developed by the Basel Committe for Banking Supervision are directed at financial institutions, limiting the ability to provide balance-sheet loans, including trade finance facilities, and therefore indirectly impacting the trading sector's ability to finance its activities.

STSA's 4 core areas of policy and regulatory activity

Human Rights & Business

STSA actively promotes the dissemination and adoption of voluntary principles for the commodity trading community and is leading the way for the industry .

The Association is working together with the Swiss Federal Department of Foreign Affairs to steer this process to completion.

Sustainability & Transparency

STSA is supportive of transparency initiatives for commodity trading and of advancing the transparency discussion.

Not only does the Association encourage sector-specific sustainability initiatives, but STSA is a member of the EITI's Commodity Trading Working Group since 2015.

Financial Regulation

Financial regulation is a major topic for the trading and shipping industry. Following the 2008 credit crisis, the 2009 G20 Summit in Pittsburgh ushered in a new regulatory landscape for commodity traders.

STSA is deeply involved in political discussions at the Swiss level to safeguard the interests of the industry and works with its members on the implementating the new rules.

Taxation

Taxation policy plays a key role in defining the attractiveness of Switzerland.

STSA monitors negotiations in Switzerland on the Corporate Tax Reform III package and is supporting the introduction of a Swiss tonnage tax for shipping activities. It also follows the implementation of the OECD's 2015 Base Erosion and Profit Sharing Action Plan.