2020: A year in review
In many ways, 2020 has been an exceptional year. In this article, we take a look at the asset classes covered by our Issuance Services: Bonds, Investment Funds, Structured Investment Products and Shares, and examine how each asset class has been affected by this year’s unprecedented circumstances.
VP Securities supports the Danish mortgage market with efficient settlement and can handle large settlement volumes, as the graph demonstrates. We didn’t see a significant change in mortgage bond activity during 2020, except for the dip and quick return by the end of Q1, when COVID-19 introduced a bit of uncertainty into the market. The housing market has, however, increased and shown resilience despite the pandemic. Thus, there hasn’t been a significant change in the volumes settled. VP is very focused on supporting the Danish mortgage bond market going forward and is currently looking into the new CMH standards together with the sector. The new standards will be introduced in 2023.
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I think one of the reasons you see that VP has such a large presence in the Danish investment fund market is that we support the full range of investment fund services, including issuance, transaction settlement and Corporate Actions. We also offer an effective model for reinvesting returns, and a platform that can automatically handle the order flow from distribution to issuance. If you look at the six-year trend, VP has seen an increasing number of investment funds register with us due to a streamlined and cost-effective issuance process. Finally, VP has been working on a new feature that can specifically help Danish issuers reclaim dividend tax from Switzerland. We have continuously been working with Danish fund issuers throughout the year, so we could develop value-creating functionality that makes it easier for fund managers to distribute dividends and communicate with investors.
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The SIP-related activity throughout the year is of particular interest to us. In recent years, one of our main focus areas has been how we can make it easier for financial institutions to introduce new SIPs to the market, thereby enabling Danish investors to participate in a broader range of international markets and instruments. Our focus on these instruments was supplemented with a significant price reduction at the beginning of the year to further support market growth. As the numbers show, the SIP market has grown significantly over the past six years, and the recent market volatility has further amplified this growth.
There’s always a lot of settlement activity when market volatility is high, and this year was no exception. While settlement activity over the past few years has been relatively stable at around 600-700,000 settlements per month, this year, we’ve seen an average of above 900,000 settlements per month.
In times of market turmoil every infrastructure gets tested on its stability and we are happy to see that VP Securities has proven to be robust and that we are able to support the unusual market needs in such an extraordinary year as 2020. Looking ahead, we can see the demand rising for solutions that can support cross-border issuance, be it in the Funds industry, the fast-growing market of Structured Investment Products or in the important Bonds market. With an ever-growing network of CSDs within the Euronext Group, we will continue to create simple, unified issuance processes that bring together the European Capital markets and to increase the number of currencies we support – all for the benefit of issuers and investors alike,
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Bjørn Stendorph Crepaz
Head of Issuance & Issuer Services at Euronext Securities+45 2969 2815
Data Scientist+45 4358 8888