VP Securities recently entered into a sponsored partnership with Copenhagen Fintech, a Copenhagen-based FinTech Hub that connects technology start-ups in the financial sector with established industry players. This sponsored partnership is the latest in a series of initiatives supporting VP’s new strategic direction, which includes the CSD introducing a new data-services business area.

Maria Hjorth, Deputy CEO at VP Securities, highlights the advantages of this sponsored partnership in helping VP reach its strategic objectives. “It’s very impressive how Copenhagen Fintech has created an ecosystem that gathers mature organisations together with Danish and international Fintech start-ups. That combination, where established players meet new market entrants, is where the magic happens.” The ‘magic’ from VP’s perspective, can be an acceleration of the company’s newest business area, data services.

“We can help to accelerate the growth of some of these start-ups, and they can help accelerate our innovation, with a particular focus on our business growth and data. As a CSD, we have large amounts of data at our disposal, yet we don’t have a lot of experience in commercializing that data, identifying ways of packaging it and offering it as services that would benefit our customers. Some of the fintech start-ups can help us with that.”

According to Thomas Krogh Jensen, Copenhagen FinTech CEO, VP is the ideal type of partner for the organisation. “Back in the early days, VP was one of the first financial institutions in the world to digitalize the securities infrastructure and flow. They are one of the original financial technology frontrunners, and are essentially a Fintech company themselves. If anyone understands technology, digital transformation and how these impact the financial sector, it’s them.”

A mutually beneficial partnership

As a part of the sponsored partnership, VP gains access to 50 start-ups in the Fintech Lab, 250 Fintech start-ups in Denmark and a global network of over 1,000 start-ups working on different solutions and technologies. This unique access is already generating benefits for both parties. “We’re getting more of an opportunity to meet both Danish and international start-ups working in this space, invite them to our offices and learn from their experiences and business models. We gain a fascinating perspective, and we can learn a lot from how they work, how they scale and the tempo with which they’re able to launch new products and services,” Maria Hjorth comments. “As the only CSD participating in this ecosystem, we are also in a unique position to bolster this network with our business model and data services.”

The start-ups also benefit from VP’s longstanding experience in the Fintech world. “With VP, our start-ups get a partner who can understand their world and where they’re coming from,” states Thomas Krogh Jensen. “It’s really an ideal fit, because what we do is a form of technology matchmaking, where we take emerging technologies and place them in the hands of more mature organisations that are in the market for innovative solutions.”

Hackathon planned for the fall

One of the concrete initiatives that will come out of this partnership is a hackathon, which VP will host together with Copenhagen Fintech later this year. Participants will work together to develop services based on selected data VP has available. “This hackathon is an excellent example of creating a new partnership and using that cooperation to create new services and products across organisations,” states Maria Hjorth. “This is a space where we’re not competing; we’re working together to create something new and innovative.”

Thomas Krogh Jensen agrees. “A hackathon is a very powerful idea generation tool. It’s about gathering lots of different people with different backgrounds together, giving them the freedom and space to brainstorm and think creatively, and then seeing the innovative, new ideas that come about as a result. It’s a wonderfully open playing field, where we get to brainstorm new, data-driven revenue streams. That’s just the type of challenge that interests us.”

In addition to sponsoring events like the hackathon, Maria Hjorth points out that the partnership also helps VP to keep pace with the latest innovations within the Fintech space. “One of the interesting areas we’re following is tokenisation of securities. It represents new and potentially disruptive business models covering the value chain of securities from issuance to custody and settlement.”

Accelerating new product development, staying abreast of new technologies and mentoring new start-ups, the benefits of this partnership are manifold. And at the end of the day, it’s also about giving back. “We believe it’s part of our social responsibility to help start-ups. And personally, I’m excited to see the innovative solutions we can develop together,” concludes Maria Hjorth.

“Big Data”. It’s a term many of us have become familiar with in recent years. It refers to the massive amounts of data that can be analysed in order to reveal patterns, trends and associations in human behaviour and interactions. Practically every industry, commercial and non-profit alike, is using big data to gain a deeper understanding of customer and business partner behaviour, habits and preferences.

The financial industry is no exception. For example, financial institutions have to report significant amounts of transaction-related data to authorities in the Nordic region and the EU. To generate these reports, financial institutions need prompt access to reliable data. As in other industries, financial institutions also need to understand changing consumer and market needs. This understanding requires data and insights on the trends driving and influencing market and consumer demand.

New data information services offering

At VP Securities, we are in a unique position to help financial institutions access reliable data about their operations and the market. “As a CSD, we operate at the intersection of many financial institutions and transactions,” comments Bjørn Stendorph Crepaz, Head of Issuer Products at VP. “We have a data foundation consisting of instrument and investor information that can be quite valuable for our customer base. The very nature of our business means we can offer confidential, secure access to data of the highest quality.”

As a part of a new strategic direction, VP recently announced the introduction of a new business area, Data Services, headed by Bjørn Crepaz. “By developing a data services offering, we’re able to meet our customers’ need for reliable data, and offer them a wide range of data-based products that can help them meet compliance requirements and work more effectively,” Bjørn Crepaz states.

Helping Nykredit meet regulatory requirements

One customer that has benefited from this new service is Nykredit. “As a depositary we are required to monitor and control subscriptions and redemptions,” explains Mikkel Larsen, head of Depositary Services at Nykredit. “To perform this control we would normally access this information via vp.ONLINE, but this required manual processing on our side. We approached VP to see if we could automate the report generation process.”



Nykredit now receives a daily report with the data they need to satisfy their reporting requirements. “The automated report that we receive saves us the time we spent before on manually compiling the information. It gives us peace of mind, as we know we can trust the data we receive, and it makes it easier for us to comply with regulations.”

Benchmarking and trend reports on the horizon

According to Bjørn Crepaz, the potential for data services goes far beyond providing reports for regulatory compliance. “With the wide range of data we have at our disposal, we can offer our customers benchmarking and trend reports that can give them insight into investor behaviour.”



Nino Ziino, Data Scientist, Issuer Products at VP agrees. “For example, we can analyse our data to determine which stocks are most popular amongst investors of a particular age group or gender. We can see the geographical distribution of international investors who invest in Danish stocks. It’s also possible to look at the composition of investors for a particular asset class, to determine the split between private, institutional and international investment groups. These are just a few examples of how we can leverage our data to give our customers insight into market trends. Using this information, our customers will be able to react more quickly to changing market conditions and more effectively address investor needs.”



More information on the trend and benchmarking reports will be made available later on this year. To find out more about the data reports available, contact Bjørn Crepaz.

Earlier this year, we discussed how understanding data and insights can help financial institutions capitalize on and address changing investor behaviour and market trends. In this article, we look at a very specific trend, namely the marked increase in Danish private investing during the pandemic, and how VP Securities Data Services business area can help shed light on what’s driving this trend.

A counter-intuitive market reaction

The financial markets don’t always react as we think they should. During the past six months, the world has faced a global pandemic, which has closed businesses, borders and countries on practically every continent. Daily news has been filled with images of empty airports, financial districts and shopping malls. Countries’ GDPs have fallen and many economies are on the edge of a recession, the likes of which hasn’t been seen in over a decade. And yet, in the midst of all of this economic gloom, the stock market has enjoyed a period of absolute prosperity. In March, the month that many countries shutdown in order to stop the spread of COVID-19, there was a 163% increase in Danish private investor trading[1] in comparison with 2019 levels. From March to August, the monthly average trading activity has increased by 89%, when compared to the 2019 full-year average.



VP’s Data Services decided to take a closer look at the data behind this trend. They wanted to find out:

• What’s the nature of the increased trading activity, i.e. are Danish private investors buying more, selling more or both?
• Which industries are driving this trend for private investors, i.e. what are Danish private investors buying and selling?
• How does the increased trading activity break down across gender?

Increased activity driven by buying … and selling

“If we look at the period from March to August 2020, we can see that there has been a shift in overall market activity amongst Danish private investors. In the months of March and April, trading activity was driven primarily by share purchases, whereas from May to July, it was driven by share sales,” comments Nino Ziino, Data Scientist, Issuer Products at VP.

Utilities a sought-after portfolio addition

“The most popular industries during the period from March to August have been Utilities, such as Ørsted, Finance, which includes banks and insurance companies, and Consumer Staples,” Nino Ziino observes. “Utilities is the only industry with a monthly net buying activity during the entire six-month period, whereas Finance had a net buy in every month except July.”



Utilities also accounts for the largest increase amongst female investors, who have increased their holdings by 9%. For male investors, the financial sector constituted the largest increase, with investors purchasing what corresponds to 6% of their holdings, where the percentage refers to the average monthly market value held by investors in the specific industry.

Energy and Health Care popular divestments

“The industries with the most shares sold during this period include Energy, Consumer Discretionary, which includes companies like Matas and Tivoli, and Health Care,” Nino Ziino says. For all Danish private investors, the largest selling activity has been in the Energy sector, where female investors have sold for what corresponds to 6% of their holdings, and male investors have sold 11%. Again, the percentages refer to the average monthly market value held by the investors in the specific industry.



“In Health Care, the percentage-wise decrease (0.5% for female and 1.5% for male) is lower compared to Energy, for example. However, this is mainly due to the large volume investors hold, which is on average between 50-60% of the total equity holdings,” Nino Ziino explains. "Yet when you look at it in terms of absolute net selling, the Health Care sector has been the main net selling contributor from March to June, for both male and female investors.”



A more detailed breakdown of the trading activity can be seen in the graphs below:

Giving financial institutions insight into market trends

According to Bjørn Crepaz, Head of Issuer Products at VP, it’s these types of insights that make data such an interesting commodity for financial institutions. “Financial institutions typically only have their own picture of which industries and sectors interest private investors. At VP, however, we have a more complete overview of the Danish market distribution across a wide range of demographics, such as age and geography. This enables us to, for example, create customised benchmarks for these institutions, which might shed light on their market position and performance in relation to the overall investor landscape.”



To find out more about this and similar trend reports available to VP customers, contact Bjørn Crepaz.

Read also “Meeting our customers’ needs for trustworthy data” published earlier this year.

 

Notes:

1. The terms “trade/trading” have been used in this article for simplicity. VP processes trade settlements, which correspond to the underlying trades. However, several trades might be “bundled” before VP receives them and hence some degree of detail might be lost. However, in the case of Danish private investors, this loss of detail is expected to play a rather insignificant role.
   
   The term “trading activity” is defined as the average between the number of buying and selling settlement instructions processed at VP.
2. This analysis is based solely on Danish private investors, and only includes investments in shares registered within VP Securities. The primary focus of the analysis is shares traded on NASDAQ, as their categorisation forms the basis for the sector categories used in the analysis.

Sparinvest partners with Euronext Securities Copenhagen to launch retail investment solution.

Investeringskonto FRI, Sparinvest’s retail investment platform, enables financial institutions of all sizes to offer their customers an easy, flexible investment solution.

Based on Euronext Securities FundHub platform, Investeringskonto FRI offers private investors a new type of investment account, where they can deposit and withdraw money in the same way as they would with a regular investment account.

Meeting demands for a retail investment platform

According to Jacob Snedker, Head of Sparinvest Services, there was a real appetite in the market for a simple, transparent way for retail customers to invest in the capital markets. “We launched a pension investment platform in the spring of 2016. And already by the fall, we were bombarded with requests for a similar solution for retail investments.”



Sparinvest spent the next three years trying to identify the right solution for meeting this market demand. “Building this type of system from the ground up is incredibly complicated,” says Lars Højberg, who was project manager and the platform’s co-inventor. “By the time we contacted Euronext Securities Copenhagen, we knew how we wanted to handle the retail investment side, but we needed a CSD to handle the order routing, issuance and payment settlement part of the process.”

Using the existing market infrastructure reduces costs and risk

In January 2020, Sparinvest met with Euronext Securities Copenhagen to see if they could provide the platform Sparinvest was looking for. “The main question Sparinvest needed to answer was whether to use the existing infrastructure for routing and payment settlement, or to build a process that ran independent of the existing infrastructure,” says Bjørn Crepaz, Head of Issuance & Issuer Services at Euronext Securities. “Reusing the existing infrastructure provides two concrete advantages. First, you reduce marginal costs, and second, you take a considerable amount of risk out of the project, because you’re integrated with the existing infrastructure.”

Creating a process to support retail transactions

Through a series of workshops, Sparinvest and Euronext Securities Copenhagen identified ways they could adapt the existing FundHub platform to match Sparinvest’s specific needs. Together, they designed a model where Sparinvest places a daily bulk order encompassing each financial institutions’ orders for that day in the system, thus minimising transaction costs. And as FundHub supports six decimal places instead of the usual five common in normal clearing systems, the system can be used for investment orders in cash amounts instead of only full units and still accurately give the investor the number of units corresponding to the invested amount with no cash remainders.



Both parties name flexibility and thinking outside the box as key success factors. “Sparinvest was really good at thinking creatively and in that way, they were able to find a model that works well,” Bjørn Crepaz says. Lars Højberg adds, “Even though some of the changes might have seemed infeasible at the outset, Euronext Securities Copenhagen was really responsive and willing to adjust their processes, so they could make the changes we needed quickly and securely.”

Empowering local financial institutions to offer a retail investment solution

After several hectic months of building up processes and onboarding financial institutions, Investeringskonto FRI went live with the first transaction on 8 June 2021. One of the first local banks to offer the Investeringskonto FRI solution to its customers was Andelskassen. “It’s been a good, exciting process to be one of the first to participate in the development of an entirely new way of investing – one which our customers have really embraced,” says Robert Krogh Lauridsen, Director of Wealth and Investment.



And it’s not just customers who’ve benefitted from the retail investment solution. The platform has given Andelkassen’s financial advisors confidence as well. “It’s been a bit of a gamechanger for us in the investment arena. Before, investment banking could be a bit intimidating for advisors because the advising aspect covers so many areas, and it can be challenging to convey those to customers. Investeringskonto FRI gives our advisors peace of mind, and the solution is built in a way that it’s easy and flexible for both our customers and advisors via the data centre infrastructure we have in place.”



Creating a solution like Investeringskonto FRI means that local and regional banks can offer their customers a retail investment solution, despite their relatively small size. “We would never have been able to develop this type of product on our own, which is why we’re happy that Sparinvest has an innovative approach and wants to be the preferred partner for financial institutions like us,” Robert Krogh Lauridsen says.



Jacob Snedker also highlights how this platform benefits the parties involved, and the market. “Clearly, this underpins our ambition to deliver top-notch, scalable investment solutions to our partners in Denmark. Investeringskonto FRI enables them to stay at the forefront by offering an easily understandable and easily accessible investment concept to their clients. In that respect, it’s significant that we can deliver a solution to local banks, which enables them to activate capital that was previously dormant.”

A platform with tremendous potential

Fast forward one year and Investeringskonto FRI has been quite a success, and Jacob Snedker sees ample evidence that the trend will continue. “We currently have 10,500 accounts, and we haven’t even on-boarded the largest banks yet. So, we’re only just beginning to realise this platform’s potential.” He believes that the potential will be unlocked, even though the current investment climate is not the same as it was a year ago. “When we first launched the platform, most financial institutions had instituted negative interest rates to the detriment of their clients. But even now, despite rising interest rates, we continue to see retail investors depositing substantial funds as the solution is transparent for them and free of transaction costs,” comments Jacob Snedker.



Sparinvest also plans to do their part to ensure the platform’s continued success. “In the future, we’d like to expand the service to other types of capital, for example company funds. And we’d like to digitise the solution to a greater extent, so it can be even more attractive for retail customers,” Jacob Snedker says. Robert Krogh Lauridsen is also optimistic about the platform’s prospects. “Thanks to the determination and cooperation of everyone involved, we’ve developed a platform that I believe will be one of the future winners within the investment universe.”

The issuance of Structured Investment Products from Swiss family-controlled Bank Vontobel on the Danish market also marks the introduction of Handelsbanken as Issuer & Paying Agent in Denmark for its custody business. Handelsbanken uses the VP Securities solution for automated issuance of these SIPs and the partnership’s multi-currency potential has Nordic perspectives.

Just recently, Vontobel, one of Europe’s leading issuers of structured products, introduced a series of Structured Investment Products (SIPs) in DKK on the Danish market. Vontobel specialises in wealth management, active asset management and investment solutions on a global scale, and the SIPs in Denmark were issued by Handelsbanken through its Nordic Custody Solution.

Vontobel’s initial product offering will be extended continuously, according to market development and client demand – enabling private and institutional investors in Denmark to execute individual trading strategies in accordance with their individual risk profiles. Leverage products are suitable for rising or falling markets and can also be used for portfolio hedging. These financial instruments enable investors to trade actively in a wide range of markets, in both bull and bear scenarios.

Developing and selling structured products is at the heart of Vontobel’s DNA. We have 30 years’ experience in this sector. Investors can rely on our strong know-how, successful platform strategy and market-making experience within structured retail products, as well as our well-known agility and fast-growing expansion in various European markets. The integrated trading environment, as well as cost-efficient processes and innovative platforms, are key factors behind our European success,

says Head of Vontobel Investment Banking Roger Studer, who also serves as a Vice President of the European Structured Investment Products Association (EUSIPA).

Handelsbanken offers a variety of account operator models and, with its Nordic approach, is experiencing a surge in interest from clients wanting to go directly to the Nordics. Handelsbanken’s introduction as Issuer & Paying Agent in Denmark is part of a Nordic strategy, and Handelsbanken, as custodian bank, uses automation and multi-currency solutions to cover all Nordic markets.

“We’re proud to support the truly Nordic business model from Handelsbanken, which keeps all processes within the Nordic region. The partnership between Handelsbanken and VP Securities concerning the Danish market holds promising perspectives, in terms of both automation and pan-Nordic solutions. VP will offer issuance as one process and one CSD relation, reaching out to all Norwegians, Danes, Swedes and Finns. This will naturally appeal to international clients, as they will no longer require individual processes for each Nordic country.”

says Henrik Ohlsen, Customers & Communications Director at VP.

Issuance of SIPs in Denmark by Handelsbanken is handled by VP as a solution designed to meet the requirements of customers issuing Nordic SIP instruments such as warrants, certificates and mini-futures.

From my dialogue with Handelsbanken it is obvious that the bank is a strong advocate of harmonisation and standardised solutions in the Nordics – we are basically travelling that same route. By aiming for an automated pan-Nordic solution and combining it with support for a range of account operator models, Handelsbanken has an interesting Nordic offering. Clients are looking for reduced complexity, greater transparency and lower costs. We support these objectives for all the Nordic markets.

says Product Manager Morten Skanning from VP.

For 20 years, Handelsbanken has offered pan-Nordic custody services, and the aim is to be the strongest partner in terms of generating value and customer satisfaction.

For more information please contact VP or Jonas Modigh, Vice President Head of Sales, Securities Services, Handelsbanken.