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Capital Markets Trends in the Nordics

Harmonising while retaining local expertise.

Executive Summary

The Nordic markets have many of the same priorities as their European peers; there’s a huge focus on improving efficiency, transitioning away from legacy infrastructure and modernising systems to enable them to support future market requirements. There’s also a significant regional focus on environmental, social and governance (ESG) topics, though the transposition and implementation of the revised Shareholder Rights Directive (SRD II) in the Nordic markets has some room for improvement.

Coping with market infrastructure changes: Given the developments across Europe and the rest of the world when it comes to market structure standardisation and modernisation, the Nordic markets are keen to ensure that they keep pace with these changes and retain their competitive edge. This means eventually moving to shorten the settlement cycle to trade date plus one day (T+1) and potentially beyond when it makes sense. It also means connecting to centralised European platforms such as the Target2-Securities (T2S) system as necessary from a cross-border efficiencies point of view.

A focus on shareholder engagement: The ESG agenda has long been a focus in the region’s markets, with an emphasis on the ‘E’ and the ‘G’ especially. The region’s differentiation is very much tied to strength in these areas, and this means a continuing focus on shareholder support and engagement. Furthermore, postpandemic demand for digital and hybrid meetings in several of the Nordic markets is one step toward a more digitalised issuer to investor chain overall.

Harmonisation where it makes sense: One of the key goals is to make the region more attractive to foreign investors. The retention of attractive local differentiators from a tax or capital raising perspective remains a focus but greater standardisation and harmonisation with the EU can deliver benefits. One of the benefits of standardisation is the ability to industrialise processes across many markets and automate as many risky manual processes as possible.

A focus on improving efficiency: Financial institutions are increasingly seeking to improve efficiency across their operations to reduce cost and risk. There are numerous areas in which automation can reduce manual process burdens across the trade lifecycle with a view to meeting the requirements of the shortening of the European settlement cycle in the future.

Evaluation of next generation technologies: Financial institutions in the Nordic region have been a little slower to experiment with technologies such as distributed ledger in their home markets than some of their continental European counterparts. However, there is a high degree of interest in the potential of technologies such as artificial intelligence (AI) to generate new revenue streams, reduce inefficiency and modernise the landscape.

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