What does Euroclear Sweden do?
As of October 2008 VPC AB is part of the Euroclear group and as of February 2009 VPC’s legal name is Euroclear Sweden.
Euroclear Sweden plays a central role in the Swedish capital market. It 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, it 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 are checks to ensure the transaction covers the right parties, the right security and the right amount. One must also ensure that the seller can supply the securities and that the buyer has sufficient liquid funds to cover the purchase price. After this, the instructions regarding the transfers are compiled. It is not until clearing is complete that the actual settlement is made. Settlement consists of both the transfer of securities 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 Euroclear Sweden is the organisation that holds the electronic registers of securities, it is Euroclear Sweden that handles settlement of them.
The Riksbank and Euroclear Sweden
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 for this. However, it is important that the two different transfers in the settlement process occur simultaneously. To simplify the process, the Riksbank has therefore given Euroclear Sweden the right to book transactions in special accounts in the RIX system. Participants in RIX can during the course of the day, via what is known as a liquidity bridge, transfer liquidity between their normal RIX accounts and the payment accounts administered by Euroclear Sweden.
The amounts processed in the settlement of securities through Euroclear Sweden are very large. These transactions lead to the banks having large exposures to one another. Any problems in clearing could thus entail considerable costs for the economy as a whole. The Riksbank therefore oversees clearing and settlement of securities through Euroclear Sweden. The Riksbank is assessing Euroclear Sweden jointly with Finansinspektionen, the Swedish Financial Supervisory Authority, in accordance with the European Central Bank (ECB) and the Committee of European Securities Regulators (CESR) Recommendations for Securities Settlement Systems In The European Union, May 2009, see the link below.
Read more about Euroclear Sweden on their website via the external link below.