By Josephine Mason

LONDON (Reuters) – Swiss stock volumes have soared this month to their highest in years as a ban on trading on euro zone platforms forced market participants onto the domestic exchange, upending trade flows in Europe while a row between Brussels and Bern rumbles on.

Investors in the European Union and Switzerland lost direct access to each others’ stock exchanges from July 1 as the two sides squabbled over a partnership treaty that has stalled after years of talks.

The fall-out from the dispute is being closely watched in Britain as a test case for how EU shares may be traded in London after the country leaves the European Union.

Total volumes on SIX, the Swiss stock exchange, breached 2.5 billion shares in the 21 trading days to July 30, up 45% from a year ago and the highest for the month of July in at least five years, according to an analysis of Refinitiv data.

That marks an 18% rise from June. On an average daily basis, activity has jumped 6.6% from June and as much as 52% from July last year, according to Reuters analysis of the data.

Final data is likely to show monthly activity amongst the highest of the last year, illustrating how the prolonged row has upset equity trade flows in the first month after the Swiss government blocked trading of Swiss shares on EU exchanges.

The Refinitiv data covers all asset classes, but the bulk of SIX business is in equities.

(GRAPHIC – Swiss volumes 2:

A spokesman for SIX said the exchange has seen a roughly 20% jump in turnover, which is measured in Swiss francs, this month compared with June.

Brussels blocked EU-based investors from trading on Swiss bourses as the row escalated over the treaty, which would see non-EU member Switzerland routinely adopt EU single market rules. The Swiss then retaliated by banning EU venues from hosting Swiss stock trading.

There is little sign that the political impasse, which has soured ties with Switzerland’s biggest trading partner, will be broken anytime soon.

Other factors may have contributed to the rise in activity this month. The European and U.S. central banks have grown increasingly dovish, the damaging trade row between the United States and China has rumbled on and the second-quarter earnings season kicked off.

But the data suggests disruption so far has been limited, with investors shifting to trade directly on the domestic bourse. The frenzied activity has also defied the normal slowdown seen in the summer months.

“We are satisfied that from a technical perspective it went smoothly and that there is trading going on”, even though activity usually drops in July, the SIX spokesman said.

He said getting a deal with Brussels remains a top priority for the exchange and Switzerland as a financial center.

(GRAPHIC – Swiss volumes jump:

An analysis of how trading was carried out shows a pronounced shift to on-exchange trading, known as “lit exchange” volume, accounted for most of the jump in overall activity, offsetting a drop in over-the-counter (OTC) trading.

(GRAPHIC – Swiss stocks pie chart:

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