Game Of Nordics

We were even involved in training nearly 1/5 of staff at the bank we then worked for, although we are not sure we would be picked as trainers today (even if we still know most of the four-letter action codes used!). In the era of Blockchain and the like, we would be more than happy to share memories from the old days.

To define a future model for CSDs that supports efficient post trade activities for banks and other participants is of course very important in all the Nordic countries. The Nordic countries have to consider sustainable models in a harmonizing European landscape.

In many ways the situation in the Nordics during the last couple of years has been comparable to a drama series. In this article we will try to explain a bit of what has happened. The perception of a region with stability, predictability, a by no means negligible degree of boredom and complete transparency is now under siege - and we recognize the responsibility resting on the shoulders of agent banks and infrastructures alike to restore - and with some urgency. The discussion on Danish withholding tax will be addressed in a different forum.

The CCP area is also quite busy, with EuroCCP, SIX and LCH competing in the cash equity space. The most recent development was the acceptance of EuroCCP by Oslo Børs after years of discussion. A fortress of bilateral settlement fell as Sweden will start to CCPclear also Small Cap in June. Competition in the CCP area is healthy but the question is if three might be too many; this Game, too, will continue

All countries have CSDs with fairly old IT systems and models with segregated account structures, and the CSDs also have advanced services both for Investors and Issuers. Furthermore, all CSDs have clear ambitions to grow in various areas and also to compete crossborder in the Nordic markets (and possibly even beyond).

The decision by Euroclear to not use the same system in both Sweden and Finland did not result in many tears amongst the market participants. The market participants in Finland have been struggling with the developments in Euroclear for many years and as many of you know we have seen numerous delays in launching the new platform. Most readers have also been affected by a number of efficiency incidents. We can now see an end to the work of implementing the new platform, but a lot of work still remains. CSDR has had a substantial impact on plans in all markets, and it is now likely that Finland will not be able to join T2S before 2022. The authors are sceptical about T2S in non-euro markets but strongly support the need for universal connectivity for all euro-denominated markets. The delay is slightly unfortunate, but has not, as we have witnessed, had any negative implications for the Finnish capital market. Incidentally, if any reader has a good business case or any ideas at all for the non-Euro markets we are all ears.

There is also an ongoing discussion in Norway on the future model; VPS in Norway have gone down the same route as Sweden in maintaining the platform that was originally launched in the 1980s. All credit to VPS for having the backbone to choose that route.

Nasdaq is the dominant exchange with presence in all countries except Norway: we are currently waiting for the outcome of the bidding war between Euronext and Nasdaq for Oslo Børs. Nasdaq is the preferred choice of the Board and Management of Oslo Børs and the two largest shareholders, while Euronext has pre-acceptances exceeding 50%. Is this a done deal? Not quite. The FSA has approved both and the final recommendation is with the Ministry of Finance. We will face a situation where Nasdaq might become the Exchange for all Nordic Markets, all Baltic countries and Iceland, or Norway sticking out as a continental Europe owned market. The process will be lengthy, we think, and what is sure for now is that the Game will continue.

During recent years the CSDs in the Nordics have been driving various initiatives. There has been very limited harmonization on the CSD side, and the four Nordic CSDs are very much driven by their own individual strategies (with varying degrees of success one might add.)

Sweden spent many years on evaluating a new platform, the TCS Banc system that is being implemented in Finland. The Swedish project ran under the name of Euroclear Safe, while the brother nation of Finland called their version Infinity. Eventually it was decided to continue to maintain and develop functionality on the platform that was launched for the first time in 1989. The authors of this piece are of course very happy that a system that they were involved in developing in the end of the eighties will still be used.

VP and the larger participants are now reviewing and looking to address challenges in the present set up. ALL involved (Central Bank, CSD and Agent Banks) have a huge responsibility to contribute constructively to successfully restoring international confidence and to do so in an unbiased fashion.

Ulf Noren, Custody Sales, SEB

Goran Fors, Deputy Head of Investor Services, SEB

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