Joining Euroclear Finland as a member, Citi’s sub-custody division DCC now features direct custody and clearing services with the CSDs in all four big Nordic countries, the bank announced Tuesday. PostTrade 360° speaks with the region’s head of securities services Ola Mjørud.
“We launched one client Monday and have a number of others we will be getting going with, so we will have a decent volume already from start,” says Ola Mjørud – head of Citi’s Nordic securities services.
His team, under Citi’s Direct Custody and Clearing division (DCC), is mostly focused on the sub-custody activities which serve investors and broker-dealers across the globe with handling Nordic assets. As such, it competes in the region with Nordic banks such as SEB and Nordea.
Seeks many direct connections – from Dublin
With the trend among large clients to reduce their number of custody partners, a part of Citi’s strategy is to be a directly connected participant with many CSDs. And with Europe’s ongoing establishment of the standardised Target2-Securities framework (T2S), Citi DCC is aiming at connecting directly with all the T2S-enabled CSDs from its European securities services operations hub in Dublin. The idea is to enable clients direct connectivity with most of Europe’s CSDs through a single service supplier relation – and to benefit from scale advantages of unified operational processes in the hub.
Transaction volumes and operations are thus handled from Dublin, while Ola Mjørud’s Stockholm-based Nordic team – of six people one of whom in Helsinki – manages the products, benefiting from a local understanding of issues like national taxation, regulation, corporate actions and individual CSD features. More generous trading cut-off times for clients is one of the possible advantages of being a directly connected participant (DCP) compared with going through partner sub-custodians.
“The clients are very happy with this model that combines the global coverage with the local presence,” says Ola Mjørud, who expects that the full coverage of the four big Nordic countries, that comes with the new Finnish connection, will be a strength factor when competing for mandates from international clients.
At PostTrade 360°’s question, he acknowledges that the new Finnish function is launched based on demand from key clients, but leaves them unnamed.
In Sweden, Citi has been a directly connected participant with the CSD since 2006 (then VPC, now Euroclear Sweden), tells Ola Mjørud. Direct connection with Denmark’s VP Securities was added in 2016 ahead of the T2S implementation there in 2018, and now the Finnish entry follows the same pattern. As Euroclear Finland announced at last year’s PostTrade 360° conference, it plans to launch T2S in november 2022. In Norway, Citi launched its direct custody services in 2018.
Citi’s press release Tuesday carries a comment by Euroclear Finland CEO Hanna Vainio: “Finland is a market that is presently undergoing various important infrastructure changes, such as upcoming entry into T2S. Attracting clients such as Citi to the Finnish capital market helps to reinforce our message of commitment to the industry.”