A stock exchange dispute between Switzerland and the European Union could be a sign of things to come for the U.K., according to the CEO of Switzerland's biggest exchange.
European traders were banned from trading stock in hundreds of Swiss companies at the beginning of July, in response to the EU allowing the recognized equivalence status of the Swiss stock exchange to lapse.
Post-Brexit, the U.K. will have to pursue a similar "equivalence" relationship for the City of London with the EU based on the existing alignment of the two regulatory systems.
Brussels and Bern have been in a lengthy ongoing standoff over a host of bilateral treaties governing Switzerland's political relationship with the bloc.
Jos Dijsselhof, CEO of SIX Group, which runs the SIX Swiss Stock Exchange, told CNBC Thursday that the EU's tactics during the ongoing disagreement indicated that Brussels was getting tougher with third party countries.
"Switzerland is technically equivalent, the EU has just used this as a political means to hold the Swiss hostage to talk about the overall framework agreement," Dijsselhof told CNBC's "Squawk Box Europe".
"You do see that the stance of the EU against third party countries is hardening more and more, and we in Switzerland have seen that, and you see that also in the EU-U.K. discussion also, so it is an example of how hard it can be."
The Financial Services Bill
The U.K.'s former Prime Minister Theresa May aimed to build an "equivalence plus" regime with the EU, the details of which would have been negotiated had her "Withdrawal Agreement" passed through parliament.
In the event of a no-deal Brexit, the 2017 Financial Services Bill would have enabled the equivalent functioning of the City to continue for two years after Brexit.
But the government shelved the Financial Services Bill in March in anticipation of a defeat in the House of Commons over a taxation amendment. It has yet to schedule the remaining stages of the bill.
Moritz Kraemer, chief economic advisor at Acreditus, told CNBC that the bill was crucial in allowing Brussels and London to implement current equivalent EU rules on financial services for the next two years.
"Now with parliament prorogued, there is going to be no time to pass this bill before October 31, so it is critical for the functioning and the continued equivalence for the City of London that either they squeeze somehow the end to parliament, to pass it before October 31, or the extension of Article 50 happens," Kraemer said.
"Otherwise, the City of London could actually end up operating in a limbo vis-a-vis the EU - that would be hugely detrimental and disruptive for both sides."
Bad for capital markets
In the short term, Dijsselhof said the ban on Swiss-listed stocks being traded inside the EU has had a positive impact, since the 30% of trading in Swiss-listed shares which took place in the bloc has now been transferred into Switzerland.
The Swiss government preemptively implemented measures to protect the country's markets in the event that the EU withdrew its equivalence, meaning the transition has been relatively seamless.
However, Dijsselhof added that in the long run, the cessation of equivalence arrangements would not be good for capital markets.
"It is better if there are open, transparent markets, if you can trade shares on different platforms in different jurisdictions, and that is not the case now," he said.
"So short term - okay, it looks good in terms of volume - but in the long term I think it's not good for capital markets. It needs to be free and accessible for every investor and every issuer."