Under the agreement, Tradepoint will be renamed Virt-X and SWX will transfer trading in all its blue-chip shares to Virt-X.
Virt-X will use the Swiss market's trading platform, and companies from Europe's leading stock market indexes will be traded on the platform.
The two expect to finalise the deal during the third quarter of this year. The new market will be based in London.
The pan-European share dealing platform adds 230 European blue chip stocks to its range of 2,000 UK equities.
Tradepoint's move is the first in a rush of rival bourses trying to offer true pan-European trading.
Euronext (Paris, Brussels and Amsterdam stock exchange), iX (London and Frankfurt), Easdaq and Jiway all have promised to offer trading in European shares.
Tradepoint is the first to deliver.
Euro drive
Europe's single currency is the driving force behind the quest for a pan-European stock exchange.
The euro allows companies to tap a huge capital market, while a string of cross-border mergers has made the concept of national exchanges and nationally listed stocks irrelevant.
Now Tradepoint is the first exchange to offer investors a one-stop shop to invest in European companies.
A few days ago the exchange got another boost, when the US Securities and Exchange Commission allowed American investors to trade directly in European shares through Tradepoint. There are still limits on trading volume, but no other market can offer this access.
No deal for private investors
Private investors, however, cannot enjoy the benefits directly. The trading platform is open only to Tradepoint's 250 members - big banks and stockbrokers across Europe and in the United States.
Retail investors will have to go through them to make use of the facility.
Trading - to take place between 0700 and 1730 UK time - will be limited to shares listed on major European indices, like the FTSE Eurotop 300, the Dow Jones Stoxx 50 and Euro Stoxx 50, Frankfurt's Dax 30, Paris' Cac 40 and Milan's Mib 30.
Other stocks are to be added later.
Trading will be done anonymously, through London Clearing House, using the euro for eurozone shares and domestic currencies for all others.
Gauge for success
The success of Tradepoint's European blue chip exchange will depend on whether it can attract enough trading volume.
Without enough supply and demand in key stocks, prices will be volatile and scare away investors.
But Tradepoint has an in-built advantage.
Among its share holders are banking giants like Deutsche Bank, Merrill Lynch and ABN Amro. If they decide to channel their in-house trading through Tradepoint, the exchange may have enough liquidity to attract other investors.
And to attract other investors, trading fees have been cut.
Alan Hodson of UBS Warburg, a Tradepoint shareholder, said: "We can only trade on Tradepoint if it's offering the best price at the time."
But there are doubts about the commitment of Tradepoint's shareholders. They may be reluctant to be guinea pigs for what is in effect an unproven business model.
Furthermore, it will take only a few more months before competitors will offer rival trading platforms.
Tradepoint is regulated by the British Financial Services Authority.
Its shareholders are ABN Amro, American Century, Archipelago, Credit Suisse First Boston, Deutsche Bank, Dresdner Kleinwort Benson, Instinet, JP Morgan, Merrill Lynch, Morgan Stanley and UBS Warburg.