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NCSD – Nordea, SEB, Svenska Handelsbanken and Swedbank – holding more than 99% of NCSD’s shares, have signed a ‘Memorandum of Understanding’ whereby the shares in NCSD are to be acquired by Euroclear. As a result, the benefits of further post-trade infrastructure consolidation are to be shared among more users of central securities depositories (CSDs) in Europe.
NCSD, which comprises the Finnish and Swedish CSDs, Suomen Arvopaperikeskus Oy (APK) and VPC AB (VPC), respectively, is expected to merge with the Euroclear group in the fourth quarter 2008, subject to obtaining regulatory approvals and signing the final agreement. The Euroclear group CSDs, serving seven European markets, will represent approximately 65% of the Eurotop 300 equity markets. When including Euroclear Bank, the international CSD, the new Euroclear group will represent approximately 50% of all European domestic debt outstanding.
NCSD intends to transfer its Swedish and Finnish transaction-processing activities to Euroclear’s Single Platform immediately after completion of the new platform, planned for 2011. All Euroclear group clients will settle trades and process corporate actions and related transactions on a single, multicurrency, multi-jurisdictional platform. Euroclear Bank will also use the same Single Platform.
Clients of the combined NCSD/Euroclear organisation can expect to save more than EUR 350 million per year in back-office and operational costs. This is half of the estimated EUR 700-800 million in annual savings achievable through CSD platform consolidation and market-practice harmonisation across Europe.
Sir Nigel Wicks, Chairman of Euroclear SA/NV, said: “We look forward to working with the NCSD team to share together with the Finnish and Swedish markets the benefits of a common settlement-infrastructure model that is strongly supported by the user community and is already in delivery mode. Our shared goal is to reduce end-user costs for domestic and crossborder transactions based on harmonised market practices on a single processing platform. The agreement with NCSD demonstrates continued user- and market-led momentum for infrastructure reform that aims to achieve a more efficient, low-cost settlement environment in Europe.”
Commenting further, Pierre Francotte, Chief Executive Officer of Euroclear SA/NV, added: “This merger with NCSD adds breadth and depth to the Euroclear group. The Nordic markets are dynamic and vibrant markets; the Finnish and Swedish markets, in particular, are taking the opportunity to participate actively in shaping a pan-European platform to meet the capital market’s post-trade needs. This agreement also demonstrates the value for NCSD users in leveraging investments being made by Euroclear. We hope other markets will also use the Single Platform through mergers or otherwise, giving their clients a pan-European solution at particularly low cost.”
Tom Ruud, Chairman of NCSD, stated: “With NCSD becoming part of a group of like-minded CSDs that will provide a seamless post-trade environment between markets, we believe that the Nordic market will become even stronger. Issuers and investors within, and external to, our market will have access to deeper pools of liquidity and broadened counterparty reach with use of this new single settlement infrastructure covering more of Europe’s market capitalisation than any alternative.”
Kjell Arvidsson, Chief Executive Officer of NCSD, continued: “After extensive market consultation and work on platform consolidation for the Finnish and Swedish markets onto a single platform for settlement, corporate-action processing and safekeeping, we have reached the conclusion that Euroclear’s Single Platform is ideally suited to provide the features and functions that our clients require, without having to create a totally new platform ourselves. Moreover, Euroclear’s vision and approach to reducing costs for clients, as well as its user-governance and userownership structure, are consistent with those of NCSD. We look forward to contributing Nordic business to Euroclear’s Single Platform via the Nordic account structure, where end investors will retain their current account structure choices. Furthermore, the new relationship will make it possible to enhance services and functionalities for Nordic issuers.”
Via the Single Platform, NCSD’s clients will be able to settle cross-border transactions as if they were domestic transactions with counterparties in seven, rather than only two European markets, and at domestic-market settlement prices. APK and VPC will continue to serve as the central securities depositories for Finland and Sweden, respectively. Moreover, NCSD clients in Finland and Sweden will continue to have their assets protected under local laws, as today. It is not planned for NCSD’s tariff structure to be harmonised with other Euroclear group CSDs, but the goal is to continue to reduce them when the benefits of scaled economies allow.
