2015 - A year with many changes and increasing activity
There was a sustained increase in activity in the financial markets in 2015, which gave an increase in revenue from VP's core activities. Settlement of securities trades increased by 11 per cent, and the market value of the completed trades rose by 21 per cent. During the year, VP undertook a large number of activities in order to prepare for the ongoing European liberalisation and harmonisation within VP's business areas. The liberalisation will entail a significant increase in competition in the coming years. An important element of VP's adjustment to the new market conditions is connection to the pan-European settlement platform, TARGET2-Securities (T2S), in September 2016.
Increasing trading activity
The number of securities transactions continued to increase in 2015. A total of 16.7 million securities transactions were settled via VP, which was an increase of 11 per cent compared to 2014. The breakdown of the transactions was 8.3 million share transactions (an increase of 4 per cent), 0.9 million bond transactions (an increase of 10 per cent) and 7.5 million unit trust transactions (an increase of 19 per cent).
The market value of the securities traded in 2015 increased by 21 per cent, amounting to DKK 53,349 billion. The increase is due to a continuation of the positive development in the financial markets, but primarily in the first half of 2015.
The total market value of securities book-entered at VP was DKK 7,783 billion at the end of 2015, which is an increase of 7 per cent from the previous year.
Higher revenue at VP
The increasing trade activity in 2015 led to an increase in VP's net revenue by 3 per cent to DKK 411 million.
Costs also increased, due to a number of costs for strategic work, and costs of optimising the organisation. The total cost base thus increased by 4 per cent from 2014.
The operating profit in 2015 amounted to DKK 160 million, which is DKK 79 million higher than in 2015, and the profit for the year was DKK 123 million, which is DKK 60 million higher than in 2014. The significant increase in the result can be attributed to the capitalisation of IT development costs regarding the T2S project.
Adjustment to future market conditions
During the coming years there will be significant changes in the framework for VP's activities. This is primarily due to a number of ongoing initiatives at European level, including the implementation of the pan-European legislation in the CSD Regulation and the development of the T2S settlement platform. These initiatives will provide the basis for the future liberalisation of the market for services related to the book entry, issuance and clearing of securities trades, which today constitute VP's core business. As from 2017, VP will be regulated by the new pan-European legislation, and before the end of 2016 must submit an application for a licence under the CSD Regulation, which sets out the joint EU regulations for the securities settlement market and central securities depositories.
Niels Olsen, CEO of VP states: "In 2015, we have taken a number of important steps in the preparations for these major changes, which entail greater competition, increased focus on customers' digitisation, European harmonisation of services, and implementation of the T2S settlement platform. The new legislation makes many new requirements of VP, but a number of new opportunities to service customers throughout Europe are also being created, and these are opportunities which we are investigating actively. We are in continued direct dialogue with our customers, both in Denmark and abroad, and we have strong focus on how we can achieve even greater insights into and understanding of their business and requirements – in order to offer attractive and competitive services to customers across Europe's borders."
VP's connection to the new T2S settlement platform is an important step in ensuring an attractive future market position for VP. The project is being implemented in several "waves", of which "wave 1" went into production in June 2015. VP will go into production in "wave 3" in September 2016 with regard to settlement in euro and in 2018 with regard to settlement in Danish kroner.
"After working on the T2S project for several years, we are now approaching the planned connection to the T2S platform. The project has required a considerable effort to keep to the plan, and VP is now working closely with customers to prepare for testing of the new functionalities. We are looking forward to taking the vital production step later this year, so that in future we will be able to offer even better services to our customers – both in Denmark and abroad," Niels Olsen concludes.
VP SECURITIES A/S (VP) is the central depository for Danish securities. VP's primary business areas are CSD & Securities Services and Issuer Services. VP's core activity is CSD Services, supporting both the financial sector and its customers' need for secure securities issuance, clearing and custody services. VP also ensures the effective intermediation of interest, repayments and dividend to investors. Issuer Services comprises the Issuing Agent Services and Investor Services activities, of which VP is the leading Danish provider. The services include issuance services, handling of Corporate Actions, shareholder register, annual general meeting and meeting services, investor relations services, investor analyses and compliance and corporate governance services.