In Sweden there is a central counterparty – NASDAQ OMX Derivatives Markets – for derivative instruments that are traded on OMX. There was until recently no central counterparty for spot transactions in Swedish shares and interest-bearing securities. With the creation of new trading facilities in Europe, however, clearance of Swedish shares through a central counterparty is now possible. 3 In October it was announced that a central counterparty service will also be provided in future for spot share transactions on OMX Nordic Exchange Stockholm. The tendencies I have just mentioned indicate an explosive development. What will be its consequences for the Swedish financial infrastructure? The Swedish systems will indeed be wholly or partly replaced by or linked up with systems elsewhere. This means that to a growing extent, securities trading, clearance and settlement will be arranged outside Sweden. As integration increases, national securities markets and financial infrastructures will become more and more intertwined. For the Riksbank it is important that the systems in the Swedish infrastructure work safely and efficiently – even if they are in foreign ownership and located abroad. Coping with the increased integration entails new and stronger demands for joint solutions and cross-border cooperation. There is much to be done in all these respects. In order to oversee the foreign systems that affect the Swedish infrastructure, the Riksbank will be cooperating with other central banks. Counterparty risks and insufficient market transparency In the light of what I have just described, it is clear that trading, clearance and settlement are changing rapidly.

If the fixed-income market is to perform its important function, more is needed than participants who set prices for the various assets. There must also be participants who trade actively at those prices. Neither must the counterparty risks be perceived as unduly high because that may deter participants from trading. Moreover, the market must be capable of handling large volumes without this by itself having an appreciable effect on prices. In other words, the market should be adequately liquid. Why is liquidity important for monetary policy? The answer is that in a liquid market, relevant news shows up quickly in interest rates. An adjustment of the Riksbank’s repo rate, for example, has a rapid pass-through to the short market rates, as well as to somewhat longer rates. This applies, of course, in so far as the repo rate adjustment takes the market by surprise. If market participants instead understand how the Riksbank interprets new information in the form of macroeconomic outcomes, they can draw conclusions about the Riksbank’s future actions. News is then reflected in the formation of interest rates at the time when the macroeconomic outcomes are known. The relevant interest rates also react quickly to various forms of information from the Riksbank. Somewhat longer interest rates may be affected, for instance, when we publish a repo rate forecast, a so-called interest-rate path that presents the Riksbank’s assessment of the future development of the policy rate. The conditions for good market liquidity include low transaction costs, management of counterparty risks and market transparency.