Cost structure for settlement transactions

Transcription

1 Cost structure for settlement transactions Comparison of different alternatives, Finland as an example Nordic-Baltic T2S NUG Meeting Copenhagen 3 March 2009 Janne Palvalin

2 Example Trade Sell 100 shs Buy 100 shs Investor A1 Investor A2 Investor B1 Buy 20 shs Investor B2 Buy 30 shs Investor B3 Buy 50 shs - has two client orders to sell total 100 shares - has three client orders to buy total 100 shares -Both Brokers A and B execute orders as one trade at the stock exchange, which is then allocated to the underlying clients 2

3 Settlement cost to investor is based on: 1/2 Intermediary s internal processing cost Instruction handling (STP), system cost for portfolio management and mirroring CSD bookings to internal systems For large providers app. 0,05-0,15 /transaction (0,10 used in ex. cases) No major difference between direct or indirect systems Local CSD settlement cost Settlement system cost (HEXClear) 0,25 /transaction/clearing party Local CSD registration cost Bookings to book-entry accounts 0,152 /booking 3

4 Settlement cost to investor is based on: 2/2 Local CSD messaging cost Sent messages + receive of status messages Fixed line (or SWIFT) Fixed fee < 0,001 0,005 /transaction (0,002 used in ex. cases) T2S settlement cost T2S Transaction cost (as charged from CSDs) 0,15 /transaction/clearing party including bookings T2S messaging cost SWIFT and possible other providers Fee level not indicated (0,005 used in ex. cases, expected to be somewhat higher compared to EC Finland fixed fees) Fixed fees 4 T2S and CSD (not included in example cases)

5 Example cases Case 1 Current Finnish settlement model Case 2 Only clearing party accounts are in T2S and all investor accounts remain at local CSD Most discussed implementation model in Denmark Case 3 All account are in T2S, clearing party accounts used Model proposed by T2S Project Team to Finland, similar to current Swedish settlement model Case 4 T2S implementation model for indirect holding markets Used as a benchmark, not legally allowed in Finland 5

6 As today Case 1: Settlement in EC Finland Sell 100 to B EC Finland HEXClear + Centralised register Buy 100 from A Investor A1 Investor A2 Investor B1 Buy 20 shs Investor B2 Buy 30 shs Investor B3 Buy 50 shs Intermediary's internal cost: 2 x 0,10 3 x 0,10 ECF Messaging cost: 1 x 0,002 1 x 0,002 Settlement fee: 1 x 0,25 1 x 0,25 Registration fee: 2 x 0,152 3 x 0,152 Total: 0,756 1,008 e 6

7 Danish model Case 2: Clearing accounts in T2S, end-investor accounts in EC Finland -No major cost savings estimated for EC Finland Fees as today Sell 100 to B Mirroring T2S Buy 100 from A Mirroring 7 Investor A1 Sell 50 to A Sell 100 shs Buy 50 from A1 Buy 50 from A2 Investor A2 Sell 50 to A EC Finland Investor B1 Buy 20 from B Buy 100 from A Sell 20 to B1 Sell 30 to B2 Sell 50 to B3 Investor B2 Buy 30 from B Intermediary's internal cost: 2+1 x 0, x 0,10 T2S Messaging cost: 1 x 0,005 1 x 0,005 T2S Settlement fee: 1 x 0,15 1 x 0,15 ECF Messaging cost: 2 x 0,002 3 x 0,002 ECF Settlement fee: 2 x 0,25 3 x 0,25 Registration fee: 2 x 0,152 3 x 0,152 Total: 1,263 1,767 e Investor B3 Buy 50 from B

8 Swedish model Case 3: All accounts in T2S - Assumed that EC Finland can reduce it s current cost structure so that no add-ons to T2S operated functionalities Sell 100 to B Buy 50 from A1 Buy 50 from A2 T2S Buy 100 from A Sell 20 to B1 Sell 30 to B2 Sell 50 to B3 Investor A1 Sell 50 to A Investor A2 Sell 50 to A Investor B1 Buy 20 from B Investor B2 Buy 30 from B Investor B3 Buy 50 from B Intermediary's internal cost: 4+1 x 0, x 0,10 T2S Messaging cost: 5 x 0,005 7 x 0,005 T2S Settlement fee: 5 x 0,15 7 x 0,15 Total: 1,275 1,785 e 8

9 Main European markets model Case 4: Omnibus structure, the benchmark -Not allowed by legislation in Finland T2S Sell 100 to B Buy 100 from A Investor A1 Investor A2 Investor B1 Buy 20 shs Investor B2 Buy 30 shs Investor B3 Buy 50 shs Intermediary's internal cost: 2 x 0,10 3 x 0,10 T2S Messaging cost: 1 x 0,005 1 x 0,005 T2S Settlement fee: 1 x 0,15 1 x 0,15 Total: 0,355 0,455 e 9

10 Summary Case no Difference to today Difference to omnibus 1 (Today) 0,756 n/a 113 % 2 ("Danish") 1, % 256 % 3 ("Swedish") 1, % 259 % 4 (Omnibus) 0, % n/a 1 (Today) 1,008 n/a 122 % 2 ("Danish") 1, % 288 % 3 ("Swedish") 1, % 292 % 4 (Omnibus) 0, % n/a 10

11 Thank you. Janne Palvalin Nordea