The Norwegian CSD, VPS, is to make participation in its automated securities borrowing and lending programme for fails coverage compulsory.
Though most Norwegian brokerage firms participate in the programme voluntarily, foreign houses tend not to.
Local custodians are not convinced VPS has the authority to make participation compulsory. “DnB NOR has questioned whether the depository has the authority to require mandatory participation for those clients not wishing to join,” says a spokesman for DnB NOR in Oslo. It is DnB NOR’s opinion that enforcement of compulsory participation would require a change in the depository’s mandate.
The DnB NOR spokesman adds that the lending programme is run after the first settlement cycle but there are plans to move the programme to the second settlement cycle in order to minimize the need for borrowing.
“The move of the pool borrowing and lending programme from the first to the second settlement cycle will reduce the risk of borrowing securities for trades that would have settled in the second cycle,” he says. “Many clients have chosen not to use the programme citing access to other fails coverage schemes and cost.”