Contents The Oslo Børs VPS Business Areas Board of Directors of Oslo Børs VPS Holding Board of Directors Annual Report 2015

Transcription

1 Annual report 2015

2 Contents 03 - The Oslo Børs VPS Business Areas 03 - Oslo Børs 05 - Verdipapirsentralen (VPS) 09 - Oslo Market Solutions 47 - Note 13 Fixed assets 48 - Note 14 Intangible assets - including assets developed in-house 50 - Note 15 Goodwill 51 - Note 16 Financial instruments 10 - Board of Directors of Oslo Børs VPS Holding 53 - Note 17 Accounts receivable/losses on receivables 54 - Note 18 Share capital and shareholder information 12 - Board of Directors Annual Report Note 19 Related parties 56 - Note 20 Contingent liabilities 23 - Group Annual Accounts 56 - Note 21 Other liability 23 - Statement of comprehensive income 24 - Statement of financial position 26 - Statement of changes in equity 27 - Cash flow statement 28 - Notes to the group accounts 28 - Accounting principles 33 - Note 1 Business combinations 33 - Note 2 Segment information 34 - Note 3 Investments in joint ventures, shares etc Note 4 Specification of profit and loss items 36 - Note 5 Pension costs and pension liabilities 41 - Note 6 Remuneration of officers, executive personnel, the auditor etc Note 7 Number of employees 43 - Note 8 Leasing contracts 44 - Note 9 Taxation 45 - Note 10 Earnings per share, diluted earnings per share 45 - Note 11 Uncertainty associated with estimates used 57 - Annual Accounts Oslo Børs VPS Holding ASA 57 - Profit and loss account 58 - Balance sheet 60 - Cash flow analysis 61 - Notes to annual accounts 61 - Note 1 Principles applied for the parent company accounts 62 - Note 2 Shares in subsidiary companies 62 - Note 3 Tax expense/deferred tax assets 63 - Note 4 Receivables and payables between companies in the same group 64 - Note 5 Equity 64 - Note 6 Share capital and shareholder information 67 - Note 7 Financial expense 67 - Note 8 Remuneration of executive personnel 67 - Note 9 Pension cost and pension liabilities 67 - Note 10 Auditor 46 - Note 12 Specification of balance sheet items 68 - Auditor s Report 2

3 The Oslo Børs VPS Group The Oslo Børs VPS Group operates and delivers co-ordinated and attractive marketplaces for listing and trading of securities, together with securities registration and settlement services for securities in Norway, financial market data and internet solutions. Oslo Børs VPS Holding ASA owns 100% of the share capital of Oslo Børs ASA, Verdipapirsentralen ASA (VPS) and Oslo Market Solutions AS. Oslo Børs owns 97% of the shares in Fish Pool ASA, and VPS owns 100% of the shares in Evolution Software Sweden AB. Business areas Through its business areas, the Oslo Børs VPS Group operates marketplaces for trading in financial instruments, together with settlement, securities registration and information services, in order to give customers access to an efficient and effective capital market. Oslo Børs The Oslo Børs business area comprises the wholly-owned subsidiary Oslo Børs ASA, which is authorised to operate stock exchange activities. The main objective of Oslo Børs is to be the central marketplace for listing and trading of financial instruments in the Norwegian market. The role of Oslo Børs is to make it possible for purchasers and sellers of securities to carry out their transactions in a rapid, efficient and secure manner. Oslo Børs organises listing and trading of equities, equity certificates, ETPs, fixed income products and derivatives products. Bente A. Landsnes is the Chief Executive Officer of Oslo Børs. The other members of the executive management team are Tom Kristoffersen (secondary market), Øyvind Skar (market data), Kjetil Nysæther (IT), Øivind Amundsen (legal affairs and primary market), Thomas Borchgrevink (surveillance and operations) and Per Eikrem (corporate communications/ marketing and staff). Oslo Børs (including Fish Pool) had 94 employees at the close of 2015, as compared to 90 at the close of Oslo Børs uses the Millennium Exchange trading system for trading in equities and fixed income instruments. Millennium Exchange is owned and operated by the London Stock Exchange Group. Oslo Børs uses the SOLA system for trading in standardised derivatives. This system is licensed from the Montreal Exchange. For trading in non-standardised derivatives (OTC derivatives) Oslo Børs uses the EDGE trading system, which was developed by Baymarkets AB was characterised by varying levels of activity in both the primary and secondary markets. The first six months saw a generally high level of activity for listing as well as for trading, but with some variability. A somewhat lower level of activity was seen in the second half of the year. Ten new companies were admitted to listing in There was again a good increase in the number of fixed-income issues listed and registered with Oslo Børs. Nearly all Norwegian companies regard the Oslo Børs marketplaces as the natural place to list. Oslo Børs also has a strong position internationally in the energy/offshore, seafood and shipping sectors with regard to the listing of both fixed income issues and equities. Segmental information for the Oslo Børs business area over the last two years is as follows (figures in NOK 1,000): Operating revenue - external Operating revenue - internal Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period

4 Revenue was NOK 13 million lower in 2015 than in After adjusting for non-recurring revenue related to Burgundy in 2014, revenue was NOK 6 million lower. Ordinary revenue from the equity instruments area was NOK 14 million lower, while ordinary revenue from the derivatives area was NOK 7 million lower and ordinary revenue from the fixed-income area was NOK 3 million higher. The market data area reported an increase in revenue of NOK 5 million. Other operating costs were NOK 4 million lower in 2015 than in The decrease was partly due to cost-reducing non-recurring items in 2015, and partly due to higher costincreasing non-recurring items in 2014 relative to 2015 in relation to the trading system projects. Equity Markets The Equity Markets area accounted for approximately 48% of total operating revenue for Oslo Børs in Operating revenue - Equity Markets (Figures in NOK 1,000) Fixed fees - issuers Trading and technical fees - members Document, registration and new listing fees Total operating revenue Key figures - Equity Markets No. of listed shares at OBX Index at Market capitalisation of listed companies at (NOK billion) No. of member firms - equity markets No. of trades (1,000) Value of trades (NOK billion) The Oslo Børs Benchmark Index closed 2015 at , having risen by 5.9% over the course of The value of shares and equity certificates traded totalled NOK 1,164 billion for the year, which was 5% higher than in The total number of transactions carried out through the exchange s trading system was 25.6 million in 2015, which was approximately 7% higher than in New share issues carried out in 2015 raised NOK 27 billion, in line with With ten new listings on Oslo Børs in the year, and twelve companies removed from listing, the number of companies listed on Oslo Børs fell to 180 at the close of The number of companies listed on the regulated marketplace Oslo Axess fell to 29 after three new companies were admitted to listing and nine companies were removed from listing, three of which transferred to Oslo Børs. At the close of 2015 there were four exchange traded funds (ETFs) listed on Oslo Børs, the same number as at the end of Of the companies listed on Oslo Børs and Oslo Axess, 46 were from countries other than Norway. The number of firms with membership for trading in equities increased by two in The total number of member firms at the close of 2015 was 50, of which 18 were local and 32 were located outside of Norway. The revenue generated from fixed fees paid by issuers (annual listing fees) is dependent on the number of companies and their market capitalisation. Revenue from fixed fees paid by members depends on the number of active member firms and the pricing tariffs they select. Revenue from variable trading fees is affected by order fees and the value of transactions carried out. Fixed Income Markets The Fixed Income Markets area accounted for approximately 11% of total operating revenue for Oslo Børs in Operating revenue - Fixed Income Markets (Figures in NOK 1,000) Fixed fees - issuers Fixed fees - members Trading fees Document, registration and new listing fees Other revenue Total operating revenue Key figures - Fixed Income Markets No. of listed issues at (Oslo Børs) No. of listed issues at (Nordic ABM) Market value of listed issues at (NOK billion) No. of member firms - fixed income Value of trades exc. repos (NOK billion) Value of repo trading (NOK billion) Figures for market value and trading value include fixed income instruments listed on both the Oslo Børs and Nordic ABM marketplaces. The revenue Oslo Børs derives from the fixed income market is principally determined by the number of issues listed. 1,721 loans were listed at the end of 2015, representing an increase of 26 loans since the start of the year. Of the loans, 1,088 were listed on Nordic ABM (Alternative Bond Market) and 633 on Oslo Børs. New debt issued in respect of new and existing loans amounted to NOK 294 billion in 2015, which was NOK 23 billion lower than in

5 Derivatives Market The Derivatives Market area accounted for approximately 8% of total operating revenue for Oslo Børs in Trading fees account for around 98% of the area s revenue. The revenue from trading fees is dependent on the number of contracts traded and the premiums paid. The premium paid on a derivatives contract is determined principally by the price of the underlying instrument, the period to maturity and, in the case of options, the price volatility of the underlying instrument. The number of derivatives contracts traded on Oslo Børs was 17% lower in 2015 than in Aggregate premium turnover for all derivatives products was some 11% lower. The reduction in the number of transactions affected contracts of all types. Contract turnover on Fish Pool was 42% lower at 55,000 tonnes in 2015 as a whole. Operating revenue - Derivatives Markets (Figures in NOK 1,000) Trading fees Other revenue Total operating revenue Key figures - Derivatives Markets Equity options, No. of contracts traded (1,000) Equity options, turnover (NOK million) Index options, No. of contracts traded (1,000) Index options, turnover (NOK million) Equity forwards, No. of contracts traded (1,000) Equity forwards, turnover (NOK million) Index forwards, No. of contracts traded (1,000) Index forwards, turnover (NOK million) Total No. of contracts (1,000) Total value of turnover - options (NOK milllion) Total value of turnover - forwards (NOK million) Average premium equity options (NOK) Average premium index options (NOK) Average premium equity forwards (NOK) Average premium index forwards (NOK) Tonnes traded on Fish Pool (full year) Market data Revenue from sales of financial market data accounted for approximately 30% of total operating revenue for Oslo Børs in Sales of financial market data are principally measured by the number of end users that have access to market data from Oslo Børs. Customers of information distributors such as Thomson Reuters, Bloomberg etc. subscribe to price and market index information from a range of different marketplaces. The number of terminals with access to data from Oslo Børs increased by around 1% in 2015 to approximately 40,800. There was a decrease in the number of professional users. Three types of subscription to real-time information from Oslo Børs are available: Professional users with full access to real-time information (63%), private individuals with limited access to real-time information (25%) and private individuals with full access to real-time information (12%). The two largest distributors accounted for around 52% of revenue from sales of financial market data in Other revenue is generated by the sale of various products such as share price tables for newspapers, index weighting and SMS services. The two products that produce the largest revenue are fundamental data on issuers and mutual funds information. Operating revenue - Market Data (Figures in NOK 1,000) Financial market data Other revenue Total operating revenue Verdipapirsentralen (VPS) The business area comprises the wholly-owned subsidiary Verdipapirsentralen ASA, which is a Norwegian public limited company authorised to register rights to financial instruments pursuant to the Securities Register Act. VPS develops and markets products and services for banks, investment firms, investment management companies and other financial institutions. These in turn deliver the products and services to issuers and investors. The services offered by VPS make it easier and more efficient for issuers to raise capital and manage their securities registers, and give 5

6 investors the reassurance that they will be able to exercise their rights as owners of securities. Registering the ownership of securities with a central securities depository such as VPS provides legal protection and procedures for the priority of interests, which are important practical features for confidence in the capital markets. VPS helps to improve the efficiency of securities trading through its participation in payment clearing and settlement systems. John-Arne Haugerud is the Chief Executive Officer of VPS. The other members of the executive management team are Sveinung Dyrdal (securities services), Leif Arnold Thomas (fund services), Jorunn Blindheim Øystese (legal affairs and compliance), Vigdis Diesen (operations), Ole Solberg (quality and security) and Harald Næss (IT). VPS (including Evolution) had 133 employees at the close of 2015, as compared to 128 at the close of The growth that VPS has experienced in recent years continued in 2015 as a whole. The primary market for both equity capital and fixed-income instruments was good, and similarly volumes in the settlement area grew relative to Segmental information for the VPS business area over the last two years is as follows (figures in NOK 1,000): Operating revenue - external Operating revenue - internal revenue. Operating revenue generated from within the group, together with other operating revenue, was lower. Operating costs, excluding depreciation and amortisation, were NOK 17 million higher in 2015 than in Reasons for the increase include increases in salaries and prices, non-recurring items and a higher level of activity at Evolution. Issuer Products The Issuer Products area accounted for 29% of total VPS revenues in The Issuer Products area offers products and services that rationalise and improve the efficiency of tasks carried out by account operators and issuers, while at the same time ensuring that investors, companies and other users receive accurate information. The services are delivered through reliable and secure applications. Most services are available over the internet. The Issuer Products area offers its services through the following products: VPS Corporate is a web-based work platform for account operators that operate share and equity certificate VPS accounts for issuers, providing services for registering and monitoring the companies they have registered in VPS. VPS Corporate is also used by investment firms to register subscriptions for new issues/distribution sales and for registering bid acceptances. Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period The revenue generated by VPS was NOK 14 million higher in 2015 than in All business areas reported an increase in VPS Company Services is a web-based solution that allows VPS-registered issuers to make more efficient use of the information registered about the securities they issue. The application is a subscription-based additional service for companies registered in VPS. VPS Fixed Income is a web-based work platform for account operators that operate fixed income VPS accounts for issuers. The system was launched in 2008, and is used by account operators and VPS to register fixed income instruments and carry out actions relating to these instruments. The revenue generated by the Issuer Products area in respect of limited companies is affected by the value of the share capital of the companies registered for the services and the number of shareholders. In respect of fixed income instruments, revenue is affected by the volume of debt issued and the number of bondholders. In addition, revenue is affected by 6

7 the number of corporate actions relating to securities that are carried out, and the complexity of these actions. At the close of the year, a total of 1,075 (1,131) share issues/ equity certificate issues and 2,766 (2,740) bond/certificate issues were registered in VPS. Operating revenue - Issuer Products (Figures in NOK 1,000) Total operating revenue Key figures - Issuer Products No. of AS/ASA companies registered in VPS No. of equity certificate issues registered in VPS No. of bond issues registered in VPS No. of short-term fixed income issues registered in VPS Investor Products The Investor Products area accounted for approximately 26% of total VPS revenues in The Investor Products area provides registration of rights to securities for investors through products and services that allow them to own, transfer and manage their holdings of securities securely and efficiently. The core element of this offer is the VPS account, which is offered to investors through a network of account operators. Investors use their VPS accounts to record all types of registered securities that they own, whether these are shares, warrants, units in mutual funds, equity certificates or fixed income instruments. The Investor Products area delivers its services through the following products: VPS Investor Services is a web-based work platform used by account operators for operating investor accounts. The platform allows account operators to set up and manage investors and their rights on the VPS system. VPS Investor Services is used by banks and savings banks as well as investment firms and investment managers. 150 institutions have entered into agreements for VPS Investor Services, and the platform has 8,500 users. VPS Investor Services is recognised as the core VPS system. VPS Client Services is a web-based interface used by end-investors that is delivered either through internet banking services or from the web pages of investment managers. VPS Client Services gives investors access to complete information on their holdings of VPS registered securities, even if they use more than one account operator, as well as details of account information and personal information and reports of their holdings and transactions. In addition, investors can use VPS Client Services to subscribe for and sell fund units and to participate in corporate actions such as share issues, annual general meetings etc. Revenue from the Investor Products area is largely dependent on the number of VPS accounts and the market value of the securities registered in VPS at the start of the year. The number of income-earning VPS accounts increased by approximately 3% between 2014 and 2015, while total market value increased by approximately 2%. Operating revenue - Investor Products (Figures in NOK 1,000) Total operating revenue Key figures - Investor Products No. of accounts Market value (NOK million) Settlement Products The Settlement Products area accounted for approximately 23% of total VPS revenues in Settlement Products provides clearing and settlement services for trading in securities. VPS Settlement contributes to the effective operation of the capital market in Norway through efficient and secure transfers of securities on the one hand and monetary settlement from buyer to seller on the other hand. The clearing and settlement system supports straight through processing (STP) for the entire value chain. VPS attaches great importance to developing the system in response to changing customer requirements, and VPS closely follows market developments and trends both in Norway and internationally. In addition, VPS pays particular attention to complying with international recommendations and standards for clearing and settlement. Oslo Børs has chosen LCH.Clearnet to operate as a central clearing counterparty (CCP) in the Norwegian market in addition to SIX (formerly Oslo Clearing). The clearing and settlement services provided by VPS are based on generally recognized principles such as delivery against payment (DvP) and multilateral netting between settlement participants. Clearing of payments takes place through the central bank of Norway, Norges Bank. 7

8 The settlement ratio achieved by VPS has risen significantly over the years, from 80% at the end of the 1990s to over 96% at the close of The efficiency of the settlement process is supported by an automated securities borrowing and lending arrangement based on a lending pool. In addition, trades that cannot be settled on the agreed settlement day are resubmitted for settlement until they are cancelled or settled, and the settlement cycle is run twice a day. Transfers of securities holdings take place in real time, and the system can handle settlement on the same day that a trade takes place (S = T + 0). Standard settlement of T+2 was introduced in October Settlement participants communicate with the system using an international open-standard interface (ISO 15022). VPS started implementation of ISO communication in 2002, and usage has grown very strongly. At the end of 2015, VPS had 70 settlement participants (i.e. entities that have entered into a settlement agreement with VPS). Of these, 38 are direct participants in VPO, and 32 use a settlement agent to settle their trades through VPO. 30 of the direct participants in VPO are Norwegian investment firms. The revenue generated by the Settlement Products area is dependent on the number of securities transactions carried out in the market, but following the introduction of CCPs the number of financial instruments listed and the number of firms with membership of Oslo Børs have become more important as factors that determine the volume of settlement transactions carried out by VPS. A further important factor is the number of transactions carried out between investment firms and their end-customers. VPS processed 12.4 million settlement transactions for trades in securities in This represents an increase of 3% from Operating revenue - Settlement Products (Figures in NOK 1,000) Total operating revenue Key figures - Settement Products Settlement ratio 96.60% 96.15% No. of trades settled (1,000) Fund Services The Fund Services area accounted for approximately 20% of total VPS revenues in Fund Services offers a broad range of services for fund management companies and other distributors of mutual fund products to assist with the management of their funds and the unit holder registers for individual funds. The VPS account system provides the basis for the Fund Services products, and investors holdings of fund units are registered on a VPS account in the same way as for other securities. The Fund Services area comprises two main areas, complemented by additional services: Fund Services and Fund Distribution Services. In both these areas, VPS is responsible for operations, maintenance and ongoing development of the systems, which allows customers to focus on their core activities. The Fund Services area started work in 2011 on a major project to modernise the systems used for fund services. The project was completed and the final elements of the solutions involved were put into production in The Fund Services area covers all aspects of the value chain, from establishing and registering a mutual fund through to distribution and customer service. Fund Services also includes integrated payment functionality that supports purchases and sales of fund units with full delivery against payment for investors. It is not compulsory to register holdings of fund units with a central securities depository. Accordingly, the Fund Services area markets its registration services to securities custodians and distributors of both Norwegian and international fund management products in competition with other service providers and the customers own systems. At the close of 2015, just under 60% of the market value of Norwegian mutual funds was registered with VPS. In addition, various foreign mutual funds and nominee-registered funds are registered with VPS. The total market value of VPS-registered mutual fund holdings was NOK 539 billion at the close of 2015, representing an increase of 6% from the end of The number of investor holdings in mutual funds registered in VPS increased by 5% in 2015, and the number of transactions in mutual funds was 4% higher in 2015 than in

9 The revenue generated by the Fund Services area is principally dependent on the number of transactions, the value of assets registered and the number of holdings. Operating revenue - Fund Services (Figures in NOK 1,000) Total operating revenue Key figures - Fund Services No. of mutual funds registered in VPS Market value of mutual funds registered in VPS (NOK billion) No. of investor holdings in mutual funds No. of mutual fund transactions Evolution contributed revenue of NOK 18 million in 2014 and NOK 23 million in Oslo Market Solutions The business area comprises the wholly-owned subsidiary Oslo Market Solutions AS. Oslo Market Solutions has specialist expertise in capturing, processing, distributing and presenting financial market data. Sales of information relating to Norwegian securities forms a central part of the business area s activities. A second major aspect is sales of specialised web and internet solutions for trading in securities and real-time presentation of market data. The business area offers both standard products and customised solutions for issuers, investment firms, leading media players and other parties involved with the financial markets. Tine Charlotte Holm is the Chief Executive Officer of Oslo Market Solutions AS. The business area had 14 employees at the close of 2015, as compared to 11 at the end of Segment information for the Oslo Market Solutions business area over the last two years is as follows (figures in NOK 1,000): Operating revenue - external Operating revenue - internal Depreciation Amortisation of excess value Write-down of excess value Other operating costs Total operating costs Operating profit Share of income in joint ventures Financial income Financial expense Investment in joint ventures Other assets Liabilities Investment in the period Operating revenue was 1% higher in 2015 than in However, there was a shift in the source of revenue from revenue generated from within the group to external revenue as a result of projects carried out for Oslo Børs, VPS and Fish Pool in The business area s operating revenues vary with the state of completion of customer projects and the timing of annual system licence payments. Personnel expenses and other operating expenses were 4% higher in 2015 than in

10 Board of Directors of Oslo Børs VPS Holding ASA Benedicte Schilbred Fasmer (born 1965), Chair Benedicte Schilbred Fasmer has been a member of the board of Oslo Børs VPS since 2007 and was a member of the board of Oslo Børs Holding ASA from 2005 to She holds the position as Executive Vice President at DNB. Schilbred Fasmer has a Master of Science from the Norwegian School of Economics and Business Administration. She was previously Head of Business Development and Investor Relations at Argentum, Director Capital Markets Division at Sparebanken Vest, the Chief Financial Officer and Investor Relations Officer, and Head of Corporate Communications and HR, at Rieber & Søn. Her work experience prior to this include Paal Wilson Management AS, chief of staff and later vice president at Citibank International plc, head of the Norwegian branch of Nautopolis.com, and investment banker at Pareto Securities ASA in Bergen. Schilbred Fasmer was previously a member of the Council of Representatives of Exportfinans ASA, the Nomination Committee of Lerøy Seafood ASA and the Council of Representatives and the Nomination Committee of StatoilHydro ASA. She is a Board member of Unicef Norge and has also been a board member of Norwegian Air Shuttle ASA, Vesta Forsikring and Fana Sparebank, and a member of the Control Committee for Storebrand Bank. Widar Salbuvik (born 1958) Widar Salbuvik has been member of the board of Oslo Børs VPS since He is the chief executive officer of Wisa Holding AS. Salbuvik is a graduate of Economics from the Norwegian School of Economics and Business Administration. He has extensive experience from a number of directorships in private, public and listed companies. He founded and led the investment bank Pareto from , having previously been employed as a research assistant ( ) at NHH and as an associate at Fearnley Finans AS ( ). Salbuvik is Chairman of the Board in Herøya Næringspark AS, Argentum Centre of Private Equity at NHH, SveaReal AS/AB and Capus HR Gruppen AS, amongst others. He is a member of the Corporate Assembly of Telenor ASA and the Supervisory Board of DNB, as well as a Board member of Kings Bay AS. He has previously been Chairman of Argentum, Pareto, Fesil and Sævik Supply, amongst others. Harald Espedal (born 1972), Deputy Chair Harald Espedal has been member of the board of Oslo Børs VPS since He is Chairman of Espedal AS. Espedal has a Masters degree in business and is a graduate of the higher-level auditing course at the Norwegian School of Economics and Business Administration. He was previously managing director of Skagen AS which acts as investment manager for Skagen Funds. manager of Andersen (Ernst & Young) in Stavanger and has also worked as Investment Director at Vesta and as European portfolio manager at Skandia (which at that time owned Vesta). Prior to this, he was head of finance and analysis with SpareBank1 SR-Bank. Espedal is Chairman of the Boards of Lyse Energi, Sandnes Sparebank and Prosafe. He has also been Chairman of the Board of the Norwegian Mutual Fund Association. Ottar Ertzeid (born 1965) Ottar Ertzeid has been member of the board of Oslo Børs VPS since He was a member of the boards of Oslo Børs Holding and of Oslo Børs from 2002 to 2007, and from 2007 to 2009 he was a member of the Nomination Committee for Oslo Børs VPS Holding ASA. Ertzeid is a Group Executive Vice President of DNB, responsible for DNB Markets and is a business economics graduate of the Norwegian School of Management. Ertzeid has been head of DNB Markets since Prior to this he was head and deputy head of DNB Markets, and held various senior management positions in the foreign exchange and capital markets area at DNB. He has also been the chief financial officer of DNB Boligkreditt and the head of finance at Realkreditt. Continues on page

11 Board of Directors of Oslo Børs VPS Holding ASA Sissel Bakker (born 1963), employee representative VPS Sissel Bakker was elected as an employee representative to the VPS board in She is responsible for project management in VPS and has been employee at VPS since Sissel is PMP certified and has education in project management from Handelshøyskolen BI. She has long experience as project manager and adviser from implementation of IT systems in different industries. Hedvig V. Vold (born 1976), employee representative Oslo Børs Hedvig V. Vold was elected as an employee representative to the Oslo Børs Board in She works as Senior Analyst in Market surveillance. Hedvig has been an employee at Oslo Børs since 2001, and has also worked for the Listing department during this time. She is a Certified Public Accountant and holds a Master of Business Administration and Economics from the Norwegian Business School. Employee deputy representative Morten Nordby (born1959), employee representative VPS Morten Nordby is Senior Development Officer, VPS Clearing and Settlement. He has been with VPS since 1985, and was responsible for developing the VPS settlement environment and ISO interface. Employee representative since April

12 Board of Directors`Annual Report for 2015 The Oslo Børs VPS group looks back on 2015 as a year in which there were high levels of activity in both the primary and secondary markets. Oslo Børs VPS Holding ASA reports a consolidated profit of NOK 299 million for 2015 as compared to a profit of NOK 304 million in The information required pursuant to Sections 3-3b and 3-3c of the Norwegian Accounting Act is provided in the Board s report on Corporate Governance and in the company s report on Corporate Social Responsibility, which are available on the company s website The report on Corporate Social Responsibility covers all the companies in the group. Strategy The Oslo Børs VPS group comprises Oslo Børs VPS Holding ASA, Oslo Børs ASA, Verdipapirsentralen ASA and Oslo Market Solutions AS. Oslo Børs ASA owns 97% of the shares in Fish Pool ASA. Verdipapirsentralen ASA owns 100% of the shares in Evolution Software Sweden AB. Oslo Børs VPS Holding ASA operates from Tollbugata 2, Oslo. Unless otherwise stated, this commentary applies to the Oslo Børs VPS group. Through the marketplaces operated by Oslo Børs ASA and Fish Pool ASA, the central securities depository and settlement activities operated by Verdipapirsentralen and the service range offered by Oslo Market Solutions and Evolution, the group aims to offer attractive marketplaces, settlement and registration of securities and information services for financial instruments, in order to give its customers access to an efficient capital market. The group has formulated its overall strategy for the imminent strategy period with the objective of meeting the increasing competition faced by its core businesses, as well as generating increasing revenue from value-adding services. The strategy attaches importance to ensuring that the group continues to operate a state-of-the-art and competitive infrastructure. In addition to this, the group aims to create additional sources of revenue by attracting new customers and building value-adding products and services that complement its core activities. The Oslo Børs VPS group enjoys a high degree of strategic and financial flexibility, and the Board accordingly has a very positive view of the opportunities that the continuing development of its activities will offer. The group s main challenge over the next few years will be the competitive environment in Europe and the effect this will have on the entire Norwegian securities chain, including listing, registration, trading and settlement. At an overall level and over a longer-term perspective, the group intends to achieve the following goals: 1. We will operate a profitable and attractive financial infrastructure 2. We will develop and market profitable value-adding services that meet the market s requirements 3. We will be the preferred securities chain for domestic companies, investors and investment firms 4. We will develop greater international interest in the group The leading marketplace for selected sectors International focus on selected value-adding services Broadly-based and robust distribution network 5. We will be an attractive workplace 6. We aim to have satisfied shareholders The group aims to preserve and develop its position in the listing and registration markets in Norway and to strengthen its position as the principal marketplace on which to trade listed securities. The group will also aim to strengthen its position internationally, both in relation to the listing of companies within the group s sectors of particular strength and as a supplier of information and related services. For the group to increase its earnings in the time ahead it needs to generate continued revenue growth from all the areas in which it operates. While market conditions and the amount of revenue reported by the group will vary over time, the group s aim is to create the basis for underlying growth in its businesses, regardless of varying market conditions. The group s overall strategy is to continue to grow organically while also being open to structural changes that would build on and strengthen our core businesses. Careful cost control is central to the group s ability to grow its earnings in the time ahead. The group s aim is for normalised underlying costs not to increase each year. The greatest threats faced by the group during the strategy period consist of not being able to maintain Oslo Børs s position as the principal marketplace on which to trade listed Norwegian securities and of not being able to position VPS for the increasing level of competition for central securities depository business in the time ahead. Competition for listing and trading securities is international and has been accelerating for the last decade. The level of competition faced by the group s settlement and registration activities is expected to increase as the ECB s settlement platform Target2Securities (T2S) and the EU s Regulation on Securities Settlement and on Central Securities Depositories 12

13 (CSDR) are implemented in Europe. The Directive on Markets in Financial Instruments (MiFID II) will lead to the launch of new trading platforms also offering trading in Norwegian securities. Increased regulation and greater complexity may cause trading and settlement activity to be concentrated to an increasing extent at a small number of member firms. Current and future newly-created central securities depositories (CSDs) in Europe will over time seek to acquire customers across international borders. Structural changes may create new, larger depositories. VPS currently has a strong market position and satisfied customers. In a market more exposed to competition, however, it may be challenging for VPS to maintain its current market share. VPS offers a broad range of services that meet the requirements of all customer groups. However, VPS operates with lower business volumes than other CSDs, which means that cost-effective operations and a high level of quality are essential if any future pressure on prices is to be counteracted. The group s strategy for strong sectors has contributed to VPS already having attracted more international issuers than is the case for CSDs with which VPS might naturally be compared. Furthering this strategy and ensuring that VPS successfully implements IT solutions that enable it to attract further international customers are important to ensuring that business volumes are maintained and increased at VPS. Market trends 2015 was characterised by varying levels of activity in both the primary and secondary markets. The first six months saw a generally high level of activity for listing and registration as well as for trading and settlement, but with some variability. A somewhat lower level of activity was seen in the second half of the year. Eleven new companies were admitted to listing in Furthermore, VPS experienced good growth in the registration of other equity capital instruments such as warrants and equity certificates. There was again a good increase in the number of fixed income issues listed and registered. There was also an increasing level of corporate action activity at VPS at the close of 2015 relative to Virtually all Norwegian companies regard Oslo Børs as the most attractive stock exchange and marketplace. Oslo Børs also has a strong position internationally in the energy and offshore, seafood and shipping sectors with regard to the listing of both fixed income issues and equities. In January 2016 Oslo Børs opened its new marketplace, Merkur Market (a multilateral trading facility). The new marketplace offers listing and electronic trading of shares and equity certificates for both small and large companies as a supplement to the regulated Oslo Børs marketplaces. Merkur Market is an option that may suit many companies from both Norway and elsewhere. The marketplace is also open to companies that are not public limited companies (ASA), and will be of interest to companies that seek greater visibility and liquidity as well as the opportunity for their shares to be traded electronically. Companies admitted to trading on Merkur Market will be registered in VPS. The marketplaces operated by Oslo Børs are an important source of capital for business and industry, and the new marketplace will expand the scope of this in line with the changes made possible by EU rules and regulations. Merkur Market is a multilateral trading facility subject to the rules in the Securities Trading Act, the Securities Trading Regulations and the marketplace s own rules. Since the Markets in Financial Instruments Directive (MiFID) came into effect in November 2007, a number of new players have established marketplaces for trading exclusively in European equities. These new players have to a large extent based their offer on unsponsored listing, which means they offer trading in equities that are listed on competing exchanges. The new marketplaces are primarily regulated multilateral trading facilities (MTFs) and unregulated broker crossing networks. Increasing volumes of trading activity are taking place in dark pools, particularly unregulated broker crossing networks. Dark pools allow investors to carry out trades using hidden order books, enabling them to trade major blocks of shares without affecting the market in the share in question. However, in the majority of dark pools the average order size is similar to competing transparent order books. In April 2015 Oslo Børs launched its own dark pool, North Sea. North Sea enables Oslo Børs members to carry out larger orders at the midpoint between bid and offer prices on a well-regulated marketplace. In summary, competition for listing and trading in equities has continued to intensify, and this is reflected in the fees and incentive schemes offered by both new and established marketplaces. A lot of investment is being made in trading systems and technology offering short delays (latency) and high-availability infrastructure (co-location) to facilitate high-frequency trading and algorithmic order routing. Investment of this type is also helping to limit the price differences (arbitrage opportunities) that arise between marketplaces due to technological factors. There is also intense competition between investment firms, and most now have infrastructure and algorithmic order routers that give them access to a range of marketplaces. This technology is now offered by a large number of third-party suppliers, making it cost-effective even for smaller investment firms. Access to competing marketplaces allows investment firms to meet investors demands and to satisfy the regulatory requirements imposed by the authorities. Furthermore, the costs associated with trading, clearing and settlement are now 13

14 to a great extent variables in the decision logic employed by algorithmic order routers, and this is reinforcing the level of price competition between marketplaces and helping to lower trading costs for investment firms. There is a trend for central counterparty clearing houses (CCPs) to connect directly to an infrastructure such as VPS. This has resulted in both LCH.Clearnet and Euro CCP joining Six X-Clear as direct settlement members at VPS and of the Norwegian central securities settlement system (VPO). Future changes in the regulatory framework will have an impact on the Oslo Børs VPS Holding group. Over recent years, the EU has intensified its work on regulating the infrastructure for financial instruments. EU initiatives in this area will affect Oslo Børs VPS Holding ASA to varying degrees. As part of their program to create a transparent, stable and more coordinated financial system, the European Parliament and the European Council have approved revisions to various pieces of legislation in the securities area. As far as Oslo Børs is concerned, it is the new Directive on Markets in Financial Instruments (MiFID II) that is particularly relevant. MiFID II and the associated regulation (MiFIR) will replace MiFID, which dates from MiFID II and MiFIR principally apply to investment firms and regulated marketplaces. The background for revising MiFID is particularly the experience gained from the financial crisis, the rapid pace of development seen in trading technology and hence trading patterns, and changes in the financial infrastructure. The EU is also concerned that the trend for a large proportion of trading to take place away from regulated markets and trading facilities is seen as damaging investor protection and reducing market quality. MiFID II and MiFIR were approved by the EU in the spring of The revision is such that a very high proportion of the regulation will be carried out directly at the EU level through so-called Level 2 regulation. The Level 2 regulation will be highly comprehensive and detailed due to extensive use of what are known as regulatory technical standards (RTSs). The draft RTSs and other Level 2 regulation documents are mostly available in draft form from ESMA. MiFID II will introduce Organised Trading Facilities (OTFs), a new type of marketplace for fixed income issues and other types of non-equity-related financial instruments. Requirements are also being introduced whereby trading in certain types of standardised cleared OTC derivatives will have to take place on supervised marketplaces (regulated markets, MTFs and OTFs). MiFIR will introduce restrictions on the trading of listed shares in so-called dark pools (i.e. marketplaces where orders are not public). Limits will be introduced on the volume of trading in any single share in dark pools over a given period. Such limits will be determined by ESMA and will apply to total trading volumes across the EEA area. MiFID II will widen the scope of the regulation to which multilateral trading facilities are subject. Oslo Børs operates two MTFs, namely Oslo Connect (for non-standardised derivative contracts) and Merkur Market (for shares). MiFID II will also introduce a new type of MTF for SMB companies. Oslo Børs has stated that it will consider establishing Merkur Market as an SMB MTF when MiFID II is implemented in Norway. MiFID II will bring in detailed regulation for so-called algorithmbased trading, including in connection with marketplaces rules and control over such trading. MiFID II will bring about greater transparency (information about orders and turnover) for trading in shares, the consolidation of market information and a greater focus on investor protection. With regard to fixed income securities, MiFID II will introduce both pre-trade and post-trade transparency rules, an area that is not regulated in the current MiFID. However, a range of exceptions has been proposed that will mean that there will still not be the same degree of harmonisation between marketplaces as there will be for equities. MiFID II is due to be implemented in January 2017, but it is expected that this will be postponed to January Proposals for new Norwegian legislation for MiFID II are not yet available, but are expected during the course of It is regarded as important for the Norwegian securities market that Norway implements MiFID II at the same time as the EU member states. Changes have also been approved to the Transparency Directive (periodic financial reporting and disclosure of large shareholdings). With regard to new legislation, Norway is behind compared to the EU where the directive was implemented from November The new legislation is expected to put an end to the requirement for quarterly financial statements, meaning Oslo Børs will have to consider introducing separate rules on this. The Transparency Directive will also lead to a broadening of the rules on the disclosure of large shareholdings to include financial derivatives and will make the rules more harmonised between EEA states. A central access point for the officially appointed storage mechanisms (OAMs) in EEA states will be introduced at ESMA, with reporting formats also being standardised. This will lead to the need for common technical solutions to be developed in the EEA and will therefore involve development costs for the area s OAMs. The EU has also approved a new Market Abuse Directive (MAD II) and regulation (MAR). It is only MAR that is directly relevant to Norway as an EEA state, as MAD regards the criminal 14