Keeping it regional

Henrik Paulsson was appointed head of derivatives at northern Europe’s largest securities market, OMHex, in January. His challenge is to create a more integrated business while retaining a primarily Nordic focus.

With the world’s major derivatives exchanges going all out for global leadership – think about Eurex’s current drive into the US market, for instance – it might be difficult to see how a relatively small regional exchange such as Sweden’s Stockholmsbörsen can still operate as a viable market. But Henrik Paulsson, who was appointed head of derivatives at the exchange’s parent group, OMHex, in January, has just such a view. “I’m convinced there is still room for regional exchanges,” says Paulsson. “As long as we can provide efficiency for the customers, there will still be room for us.”

That’s not to say, however, that pure organic growth is the order of the day. OMHex was formed in September with the merger of OM, which owned the Stockholmsbörsen, and HEX, which operated the Helsinki Exchange as well as exchanges in Tallinn and Riga. The merged company now operates as two divisions: HEX Integrated Markets and OM Technology. The former now offers access to 80% of the Nordic and 75% of the Baltic equity markets, while the latter sells trading technology.

Paulsson was promoted to the position of president of derivatives markets when Simon Nathanson, a 16-year veteran at the exchange, left to become chief executive of Swedish software company NeoNet.

Paulsson’s rise at OM has been rapid. A trained lawyer, he joined the exchange in 1998 as its legal counsel – he began his career as a judges clerk before moving on to become a lawyer at one of Sweden’s biggest law firms. But Paulsson found his interests being drawn further and further away from law and more towards business.

“I moved over to OM and was heavily involved in different projects, and not just on the legal side. I got much wider responsibilities, which I enjoyed,” says Paulsson. He worked on a number of projects related to expanding the company’s derivatives business, including the introduction of fixed-income futures. Paulsson then moved on to a full-time project management position.

The shift into business development proved a sensible one, as his recent promotion shows. “I have a deep interest in derivatives,” he says, “and this was a chance to get more involved in the details, to have a firmer grip on everything that is going on, and of course I now have profit and loss responsibility.”

Paulsson’s main focus at the moment, he says, is on the continued integration of the Swedish and Finnish businesses. But this is by no means all he has to think about. The exchange is also making efforts to more closely integrate its market with exchanges in Norway and Denmark, and also with London.

Paulsson says: “We’re linking the markets so that each exchange and clearing house can serve the customers locally, and give them the best, most efficient service. But still everyone is connected to the same pool of liquidity.”

Stockholmsbörsen, the Oslo Exchange, the Copenhagen Exchange and a new equity derivatives exchange called EDX London, launched jointly last year by the London Stock Exchange (LSE) and OMHex, now offer their products through a common trading system.

EDX is the offspring of an earlier OM business for trading Scandinavian equity derivatives in the City called OM London Exchange – the LSE paid OM £24 million for a 76% controlling stake in EDX. Meanwhile, the latest integration link with London was formed last month with the announcement that transactions in Scandinavian derivatives traded on EDX will be cleared by London Clearing House Clearnet (LCH.Clearnet).

On top of all this, the Stockholmsbörsen is also trying to improve its business by adopting international futures standards for its contracts. “Changing our exchange-traded forwards into a futures style is part of a bigger trend to have a more international, harmonised market,” says Paulsson. This change, which Paulsson says should take place in the third quarter of this year, will see Stockholmsbörsen’s contracts settled daily.

With so many issues to deal with, let’s hope Paulsson is an effective multi-tasker. His history suggests he is. When he was studying to qualify as a lawyer, Paulsson unusually opted to take an MBA at the same time. “This is not the normal way,” he says. And neither is remaining a regional derivatives business. But that’s what makes OMHex different.