VPC AB plays a central role in the Swedish capital market. VPC is the organisation that holds registers of almost all shares and debt securities traded in the Swedish financial markets. As well as keeping the register, VPC clears and settles transactions in Swedish shares and debt securities.
After a securities transaction has been matched in a marketplace, it needs to be cleared and settled. Clearing consists of several stages. There must be a check that the parties are correct, the security is correct and the amount is correct, then a check that the seller can supply the security and that the buyer has sufficient liquidity to cover the purchase price. After this, the instructions regarding the transfers are compiled. It is only after clearing that actual settlement can take place. Settlement consists of both the transfer of the security from the seller's account to the buyer's account and the corresponding transfer of payment from the buyer's account to the seller’s account. As VPC is the organisation that holds the electronic registers of securities, it also handles settlement of securities. It is important that payment is settled in accounts with the central bank to avoid unnecessary credit risks. The Riksbank’s RIX system is used to make these payments. In addition, it is important that the two different transfers in the settlement process occur simultaneously. To simplify the process, the Riksbank has therefore given VPC the right to book transactions in special accounts in the RIX system. During the course of the day the participants in RIX can transfer liquidity, via what is known as a liquidity bridge, between their normal RIX accounts and the payment accounts administered by VPC. (See further under RIX).
The amounts processed in the settlement of securities through VPC are very large. As a result of these transactions the banks have large exposures to one another. Any problems in settlement could thus entail considerable costs for the economy as a whole. The Riksbank therefore monitors the clearing and settlement of securities transactions through VPC. As part of this monitoring work, the Riksbank regularly assesses the clearing and settlement systems in accordance with the international standards produced jointly by the Committee on Payment and Settlement Systems, CPSS, and the International Organisation of Securities Commissions, IOSCO; see the links below.
VPC is mainly owned by the four major Swedish banks FöreningsSparbanken, Nordea, SEB and Svenska Handelsbanken, and since year-end 2004 by OMX Exchanges Oy. Since the end of 2004, VPC AB has owned the Finnish CSD. The central banks of Sweden and Finland have signed an agreement on cooperation in the oversight of the CSDs to make their oversight work more efficient. For more information about VPC, see the link to their website below.