Lets do business on the new infrastructure

“How do we respond to international competition? By being reactive or proactive? By cutting costs or by investing? Waiting or preparing? At VP, we have decided to invest in the future, and we see this internationalisation of the infrastructure as a potential game changer. We want to stay relevant and avoid becoming redundant to the customers we serve,” said CEO Niels Olsen from VP Securities at the Market Advisory Group (MAG) meeting held in Copenhagen on 27 September 2018.

After VP obtained the CSDR licence in early 2018, compliance with the related international regulation has also had an impact on the level of communication with customers. VP has furthermore used this opportunity to re-think the formal governance structure involving stakeholders and customers. As a supplement to the User Committee, T2S governance and the Tech Forum, VP has therefore hosted its first MAG meeting.

Big MAG

MAG is an open group for all market participants and stakeholders that are willing to engage in dialogue concerning the business and technology aspects of the CSD infrastructure. Already nicknamed “Big MAG”, the new forum is focused on dialogue. MAG replaces the Customer Forum (Kundeforum), and the intention is to have three annual meetings. The first meeting had strong representation from both Danish and Nordic market participants, with 50 guests at VP listening to presentations by Anna Kulik, the Secretary General of the European Central Securities Depositories Association, and by VP’s management.

“Our goal is to become the preferred CSD,” said Niels Olsen. “VP has continuously invested in the future and our more recent investments concern international compliance, new services, customer experience and technology. Our intention is to become truly Nordic, supporting both EUR and all Nordic currencies in central bank money. We already have an account with Sveriges Riksbank and we’re scheduling the launch of a link to Euroclear Sweden in early 2019. We’re also planning to provide services in NOK and to settle in central bank money.”

Business opportunities

VP’s CCO Birger Schmidt discussed potential business benefits. “Being prepared technically and business-wise is necessary, in order to seek out opportunities in a more international post-trade infrastructure. Over the last five years, we’ve invested 25 to 30 per cent of our revenue in developing our core platform. This huge investment will benefit both our customers and the financial market going forward.”

“The business potential lies in bringing Nordic asset classes to T2S, harmonising settlement flows and Corporate Actions in the Nordics, and bringing business from T2S markets to the Nordics.”

Birger Schmidt also presented and elaborated on pricing and price models for VP and, by comparison, for the European CSD community concluding that VP’s existing price level was very competitive benchmarked to other peers.

T2S on track

The Danish financial community is very close to go-live with DKK on T2S and the MAG meeting therefore also featured a presentation by VP Product Manager Kristoffer Kjelsø Sønderlev on the current status. He highlighted the project’s complexity and the huge effort made by customers and VP to achieve this goal on time.

“The Business Day test is currently progressing positively. We see only few open issues and there are no showstoppers. We still have some tasks ahead of us, but we’re on track for go-live on 29 October,” he said, before briefing the participants on VP’s hypercare period after the migration weekend.

Let’s do business

VP’s key message was to make the market participants aware of the new opportunities provided by a CSDR-licenced CSD with a Nordic approach, and with DKK on T2S.

“We’ve naturally focused strongly, both at VP and at our customers, on getting ready for DKK as the first non-EUR currency on T2S. But bear in mind that it’s an infrastructure and not an IT project. The business case is about getting value from these investments. We’re ready to discuss potential partnerships and how to achieve business benefits,” said Niels Olsen.

All presenters were welcomed by a keenly interested audience, who had questions and remarks. The next meeting of the Market Advisory Group will be held on 28 February 2019. If you would like to attend future MAG meetings please send us an e-mail at vp@vp.dk.