Nordics2018/19 Exclusive data sponsor Lead sponsor We See Opportunities. You Get to Take Them. Explore new ways to optimize your cash and collateral with BNY Mellon Markets. FINANCING | LIQUIDITY | COLLATERAL Products/services are provided in various countries by subsidiaries or joint ventures of The Bank of New York Mellon Corporation (and in some instances by third parties) that are authorised and/or regulated within each jurisdiction, under various brand names, including BNY Mellon. Not all products and services are offered in all locations. The terms of any product or service, including without limitation any administrative, valuation, trade execution or other service, shall be determined by the definitive agreement relating to such product or service and subject to the relevant disclaimer for such product or service. This information is for general reference purposes only and does not constitute legal, tax, accounting or other professional advice nor is it an offer or solicitation of securities or services or an endorsement thereof in any jurisdiction or in any circumstance that is otherwise unlawful or not authorised. Your ability to use these services is subject to a wide variety of applicable regulations and to the oversight of relevant regulators in different territories and/or jurisdictions. You should obtain your own independent professional advice (including financial, tax and legal advice) before agreeing to use the various services referenced herein. ©2016 The Bank of New York Mellon Corporation. All rights reserved. We See Opportunities. You Get to Take Them. Explore new ways to optimize your cash and collateral with BNY Mellon Markets. Publisher: Justin Lawson [email protected] +44 (0)203 750 6028 Editor: Becky Butcher Troubled digestion [email protected] +44 (0)203 750 6019 Securities lending markets have reached their busiest point globally since the financial crisis, however, the Nordics are still having some trouble Junior Reporter: Jenna Lomax digesting an oversupply of lendable stock and bonds. [email protected] +44 (0)203 750 6018 Although the Nordic region is still grappling with declining equity lending revenue and fees, lenders are becoming more flexible on terms and trade Junior Reporter: Maddie Saghir types. In this year’s Nordics Annual, BNY Mellon explores how securities [email protected] finance participants are adjusting to the competitive landscape. +44 (0)203 750 6019 Elsewhere, Northern Trust’s Fiona Mitchell explains how the return of Contributors: Barney Dixon and Ned Holmes volatility to global markets and regulations governing the use of securities data is playing out in the Nordic region. Creative Director: Steven Lafferty [email protected] Data from IHS Markit highlights the key securities finance statistics of +44 (0)7843 811240 FINANCING | LIQUIDITY | COLLATERAL Denmark, Finland, Norway and Sweden, while Lago Kapital and SEB provide an update on the securities lending market in Sweden, Finland, www.securitieslendingtimes.com Products/services are provided in various countries by subsidiaries or joint ventures of The Bank of New York Mellon Corporation (and in and Norway. Twitter: @SLTimes_ some instances by third parties) that are authorised and/or regulated within each jurisdiction, under various brand names, including BNY Mellon. Not all products and services are offered in all locations. The terms of any product or service, including without limitation any administrative, valuation, trade execution or other service, shall be determined by the definitive agreement relating to such product or As ever, if you have any feedback, don’t hesitate to get in touch with us. Office fax: +44 (0)20 8711 5985 service and subject to the relevant disclaimer for such product or service. This information is for general reference purposes only and does Published by Black Knight Media Ltd not constitute legal, tax, accounting or other professional advice nor is it an offer or solicitation of securities or services or an endorsement thereof in any jurisdiction or in any circumstance that is otherwise unlawful or not authorised. Your ability to use these services is subject Becky Butcher Copyright © 2018 All rights reserved to a wide variety of applicable regulations and to the oversight of relevant regulators in different territories and/or jurisdictions. You should Editor obtain your own independent professional advice (including financial, tax and legal advice) before agreeing to use the various services referenced herein. ©2016 The Bank of New York Mellon Corporation. All rights reserved. Contents Market Update Nordics Special Fiona Mitchell of Northern Trust explains how the return of BNY Mellon explores how securities finance participants volatility to global markets and regulations governing the are adjusting to the competitive landscape use of securities data are playing out in the Nordics page 6 page 10 SFTR Insight Data Snapshots Ed Oliver of eSecLending explains what the Securities IHS Markit highlights the key securities finance statistics Financing Transaction Regulation is and what is expected of Denmark, Finland, Norway and Sweden from firms page 16 page 22 Finland Outlook Sweden Insight Jarkko Järvitalo, CEO of Lago Kapital, discusses Finland’s Christoffer Danielsson of SEB explores how Sweden is securities lending market as well as the future growth of leading Scandinavia’s growth outlook for this year the company page 30 page 34 4 Nordics Annual 2018 www.securitieslendingtimes.com The Nordics: focused, flexible and distinctive This year has seen the return of volatility to global markets and regulations governing the use of securities data. Fiona Mitchell of Northern Trust explains how these are playing out in the Nordic region Becky Butcher reports What distinctive activity has 2018 seen in the We see Nordic fixed-income inventory as typically Nordic equity securities lending markets? being best suited to an exclusive or sole-borrower type arrangement. Otherwise, pockets of demand are evident Firstly, we have observed a distinctive shift in activity for general collateral bonds, but ‘special’ activity is muted. around equity ‘specials’. The oil sector and related supply chain companies have seen a reduction in short In terms of collateral, whilst the acceptance of highly- demand as global oil prices recovered and hedge funds rated Nordic sovereign bonds continues to increase, the therefore looked to other opportunities to deploy capital. market is more open to the concept of accepting high Directional demand has moved to the retail sector, quality non-sovereign bonds, for example agency debt particularly for those companies burdened by large and covered bonds. This was highlighted in the release rental costs and less established online capabilities. of the latest International Capital Market Association (ICMA) European Repo Market Survey, published in There continues to be a noticeable shift to move March 2018, with the share of Danish and Swedish- investment away from the high street and into denominated assets used as collateral jumping to 6.3 e-commerce, to meet consumer demand for more percent at the end of 2017, from 2.5 percent during the convenient internet-based retailing. In the financial previous year. sector, increased short interest has developed across debt collecting companies, given concerns regarding overly complex balance sheets and cash flow accounting, coupled with a very crowded market place. In terms of Nordic lending In terms of Nordic lending volumes, an increase in equity market volatility in 2018 has made it more challenging volumes, an increase in for traditional equity long/short hedge funds to find the equity market volatility investment conviction to deploy more capital to the in 2018 has made it short side. In contrast, an increase in trading activity from quantitative strategy funds, which thrive in more more challenging for volatile conditions, has helped support a growth in traditional equity long/ lending volumes across the region relative to 2017. short hedge funds to find The focus on corporate governance is a well-known the investment conviction characteristic of the Nordic markets, and our clients to deploy more capital to often choose to structure their programmes in ways that ensure they retain the exercise of voting rights in their the short side domestic market to some extent. What trends are you seeing in terms of fixed income demand? Financing trades remain a dominant global theme as Going forward, the recently announced tapering and borrower demand for high-quality liquid assets (HQLA) eventual termination of the European Central Bank’s remains strong. Borrowers continue to request greater asset purchase programme is expected to have little collateral flexibility and term trade structures given impact on Nordic fixed income lending markets. Any the focus on operational efficiencies and satisfying subsequent rise in interest rates across the broader regulatory requirements, so those clients who are region may fuel some interest, though at this stage it is comfortable with these parameters will enjoy stronger hard to determine if the motives of demand for Nordic utilisation and returns. assets will alter. Market Update The regulatory environment continues and broker-dealers with underlying principle level detail to evolve. What are the key impacts for for each loan executed, can be operationally challenging securities lending and the Nordics? for