The assessment was performed by Jan Woltjer, Monetary and Financial Systems Department (MFD), International Monetary Fund (IMF).
In Denmark, there is also a small marketplace for nonlisted stocks called Dansk Authoriseret Markedsplads A/S. For more information, see http://www.danskamp.dk/search.asp.
In 2004, trading in bonds at CSE amounted to DKr 7,059 billion and in 2005 DKr 8,534 billion, while the trading in equities during the same period amounted to, respectively, DKr 593 billion and DKr 936 billion. Note, however that the blue-chip index (OMXC20) increased 37¼ percent during 2005.
The take-over of one of the largest companies, TDC (a telephone company), and the envisaged delisting in 2006, may have contributed to these figures.
The book is available on the website of Danmarks Nationalbank: http://www.nationalbanken.dk/dnuk/specialdocuments.nsf.
Only government bonds and mortgage bonds are eligible, but these securities are the most common tradable securities in Denmark. Next to the automatic collateralization scheme, participants can transfer eligible securities in VP to a so called pooling pledge account. This account is used to collateralize overdrafts on the current account the participant have with Danmarks Nationalbank and monetary policy transaction. Participants use their current account to transfer cash to the VP settlement account in KRONOS. The sum of the cash in the VP settlement account in KRONOS and the liquidity that can be raised under the automatic collateralization scheme forms the cash cover and the liquidity buffer
The STA allows other institutions that fulfill certain conditions stated in the law, to enter the market and provide registration and clearing and settlement services as a CSD and hence to compete with VP. At the moment no other institutions has requested approval of the DFSA to operate a CSD in Denmark.
As indicated under rec. 3, under the automatic collateralization agreement participants can use all eligible securities in their trading account, as well as eligible securities to be delivered in the clearing (selfcollateralization). VP, as administrator on behalf of Danmarks Nationalbank calculates automatically the potential amount that can be raised, taking into account the applicable haircuts set by Danmarks Nationalbank. Loans granted under the agreement have to be redeemed before 1.30 p.m. the same day.
See page 97–105 “Assessment of Settlement Risk in VP Securities Services,” in the Financial Stability Report 2005 (Copenhagen: Danmarks Nationalbank). Available on http://www.nationalbanken.dk/dnuk/specialdocuments.nsf.
See Monetary Review, 2nd quarter, 2001, page 89–90 (Copenhagen: Danmarks Nationalbank), which is available on: n http://www.nationalbanken.dk/dnuk/specialdocuments.nsf.
In a study triggered by this assessment, it was demonstrated that in 2005, all larger banks’ eligible collateral significantly exceeded their total net payment obligations in all systems—even when the participant with the largest net payment obligation was withdrawn from the settlement on every day during 2005 and all the remaining participant’s net positions were recalculated. Among the minor banks, however, only a handful of banks had recalculated net positions, which on very few days surpassed the value of their eligible collateral. However, this reflects flaws in the methodology used in the study that tends to exaggerate the effects on small banks and does not include the fact that banks can pledge securities for intraday credit already in the settlement cycle in which the securities are received. The study “Protection of Settlement in Danish Payment Systems” can be found in Financial Stability 2006 published by Danmarks Nationalbank (Copenhagen). It is available on: http://www.nationalbanken.dk/.