Bjørn Sibbern has been president of NASDAQ OMX Copenhagen since April of 2008. He was the chief executive of E*Trade Bank in Denmark from 2006-2008, and before that he was vice president of customers and company service at OMX. He spoke with Sarah Rudolph about the Nordic markets and about the new Genium Inet platform the exchange launched Monday, which one news story called “the world’s fastest trading system.”
Q: Could you tell us a bit about NASDAQ OMX Copenhagen? What options products do you offer, and what kind of traders trade there?
A: In the Danish derivatives market, the most interesting options product is options in large cap names. That is probably typical for most exchanges. The most heavily traded name is Vestas Wind Systems, the largest windmill company in the world. Another is Novo Nordisk, a pharmaceutical company that specializes in insulin products. That is the highest cap company on which options are traded.
Q: Is there a lot of interest in options in Denmark?
A: I think there is great potential, but traditionally the interest has been in the cash products. The tax for derivatives has been pretty high, both from a retail and an institutional perspective. So there has not been a big tradition of trading options compared to our neighbor Sweden, for example, which has a much bigger market because of lower taxation and tradition. But we have seen recent changes in the tax scheme in Copenhagen, so we have high expectation for growth in the derivatives market. And investors are becoming better at understanding how you can use options, in particular for hedging. That is becoming more and more relevant for investors.
The Danish derivatives market is traded together with the Swedish and Finnish products on the same platform, with the same clearing; we have combined the three markets. We currently have 90 members connected to the Nordic platform.
Q: What is your most popular product in general at the exchange?
The C20 index is our popular index, similar to the S&P 500 in the U.S. It is the most traded in Copenhagen. In Sweden it is the S30 index.
Q: Can you trade options on those indexes?
A: You can, but I think on the index side there is more trading in futures. In the equity products there is more trading in single name options than futures.
Q: What technology is NASDAQ OMX Copenhagen currently using, and what are your technology plans for the future?
A: We just launched a new platform on October 25 called Genium Inet. The reason for the launch is, of course, that it is much faster – 25 times faster than the existing system. Speed is one of the main drivers, but we also believe the new platform is more reliable and more flexible in functionalities. There is also an enormous increase in capacity. The system can handle much bigger volume. All that is very important for our high frequency traders. So now we can move our fixed income and derivatives onto the same platform.
I should also mention that Genium Inet is a system we have sold to other exchanges. NASDAQ OMX has sold trading systems to more than 60 exchanges around the world – either trading systems or clearing systems. We are a big system provider around the world. We have sold Genium Inet to the Australian Stock Exchange and the Singapore Exchange.
Q: MarketsWiki is holding an event on October 27 called “A World of Opportunity” about accessing international markets. How do you see foreign markets reaching out internationally?
A: We have doubled the number of our derivative members in the past year, and I think the reason behind this development is that the world is becoming more international. It is extremely important for NASDAQ OMX in the Nordic market to make sure businesses around the world have easy and cheap access to trade our markets. We spend a lot of time on infrastructure to make sure it’s reliable and fast and make sure we reach a global investor base.
Q: What specific efforts do you make to reach a global investor base?
A: We spend lot of time trying to add new members to our platforms. The key is to have interesting products. Our biggest product is the Swedish Index product. We try to make sure banks and brokers connect to our markets by securing ECNs and having strong products on the platform.
Also the fact we are a part of NASDAQ and have access to the US market gives us a great upside.
Q: What are the regulatory or other obstacles facing U.S. and European citizens who are interested in accessing your exchange?
A: It’s not easy for US citizens to access the exchange. Currently, financial institutions in the US cannot have direct electronic access to trade options. Investors around the world go through Nordic banks or through banks and brokers in the UK — which are often subsidiaries of US banks. Half of our member base comes from outside the Nordic countries, when we look at options and derivatives.
If and when the SEC issues a no-action relief, our options can be traded by qualified US customers.