The Danish Investment Association, part of Finance Denmark, has confirmed that as of April investors in investment funds will have greater insight into indirect trading costs incurred, expressed as an annualised percentage.
The ÅOP (Årlige Omkostninger i Procent or Annual Costs in Percent) regime means that investors will have access to information about the indirect costs incurred when they invest, in addition to what has traditionally been reported as “costs”. It does not mean any additional costs are being applied, simply that transparency is increased to the benefit of investors, stresses the Association.
The indirect costs arise, for example, because it is not always possible to find a counterparty that wishes to trade at the same price as the investor. This necessitates a shift away from the price that the investor would prefer. In this sense it represents money that is not earned by the fund or banks. The indirect costs will also be different for funds that are trading when compared to individual investors, for example, because of the effects of scale, the Association adds. A full technical briefing on indirect costs has also been published by the Association (in Danish) here: http://finansdanmark.dk/media/37380/hvad-er-indirekte-handelsomkostninger-en-teknisk-gennemgang.pdf.
The ÅOP regime is the result of an agreement between Finance Denmark, Investering Danmark, Forbrugerrådet Tænk (Danish Consumer Council), and Dansk Aktionærforening (Danish Shareholders Association). The agreement is intended to provide access to the same information that financial institutions are meant to provide to their customers under Mifid II. The agreement will run until 1 January 2020, when the ÅOP regime is intended to be replaced by new EU rules.