Transcript Slajd 1 - Ministerstwo Spraw Zagranicznych

National Depository for Securities (KDPW)
and Clearing House KDPW_CCP
Warsaw, January 2013
Agenda
 KDPW and KDPW_CCP on the Polish Capital Market
 National Depository for Securities (KDPW)
 Clearing House KDPW_CCP
 New European Regulations. Impact on KDPW and KDPW_CCP
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KDPW and KDPW_CCP
on the Polish Capital Market
Institutions of the Polish Capital Market
Financial Supervision Authority (KNF)
WSE Main Market,
Bondspot, Catalyst,
New Connect, OTC
KDPW
KDPW_CCP
National Bank of
Poland
Institutional
investors
Financial institutions
and intermediaries
Issuers
Individual
investors
4
Shareholders of KDPW and KDPW_CCP
History
33%
33%
WSE
NBP
100 %

1991 - 1994
Integral part of the Warsaw Stock Exchange

1994 – now
Independent institution, joint stock company

Current shareholders (since 1999)
State Treasury
1/3 of shares
WSE
1/3 of shares
National Bank of Poland
1/3 of shares
Treasury
33%

KDPW_CCP (July 2011)
KDPW
100% of shares.
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Functionalities of KDPW_CCP (CCP) / KDPW (CSD)
CCP
CSD
Clearing risk
management
Operating
the CSD
Clearing
Settlement
Collateral
administration
Corporate
Actions
Asset
management
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Market Infrastructure
Trade
WSE
BondSpot
OTC
KDPW_CCP
Clearing
Clearing
Risk Management System
KDPW
Settlement
Settlement
CSD
Trade Repository
NBP
National Depository for Securities
(KDPW)
Polish Central Securities Depository
The functions and tasks of KDPW are set out in the Act on Trading in
Financial Instruments of 29 July 2005.
Main task: To organise, operate and supervise the depository-settlement
system for trade in financial instruments in Poland
Pursuant to Article 48.7 of the Act on Trading…, KDPW may outsource, under
a contract, the performance of specific tasks to a subsidiary. In line with this
provision, KDPW has outsourced to the clearing house KDPW_CCP the
performance of tasks including trade guarantees and clearing.
Main Tasks of KDPW

Managing Participants’ depository accounts in which securities are
registered as electronic records

Registration and safekeeping of dematerialised financial instruments in
Participants’ depository accounts

Settlement of transactions executed on regulated markets (WSE and
BondSpot) and transactions executed outside of regulated markets
(NewConnect, BondSpot)

Monitoring the number of securities in trading to ensure it corresponds with
the number of securities issued

Corporate actions – performance of issuers’ obligations to securities
holders (e.g., dividend payment, merger of shares)

Assigning ISIN (International Securities Identifying Numbers) to Polish
issues of financial instruments (KDPW is the national institution responsible
for assignment of ISIN)
Financial Instruments Registered in KDPW

All securities admitted to trading on the regulated market must be
registered in KDPW

The following securities are registered in KDPW:
-

Shares (Polish and foreign)
Bonds (Treasury bonds, NBP (central bank) bonds, corporate bonds
(Polish and foreign), municipal bonds, convertible bonds, EIB bonds,
preferred bonds, non-public bonds, mortgage bonds)
Investment certificates of investment funds
Futures contracts (WIG20 index futures, currency futures, stock
futures)
Index participation units
Options (European), (WIG20 index options, stock options)
Exception: Treasury bills: safekeeping, clearing and settlement in the
National Bank of Poland system
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Main Rules of Clearing in KDPW

KDPW only clears dematerialised securities

Securities are transferred by means of booking entries in the KDPW depository,
clearing and settlement system

Transfers are made between KDPW Participants’ accounts

Obligatory segregation of assets (proprietary assets, clients’ assets)

Holding balances are changed at the time of a booking entry

Clearing transactions for: WSE, BondSpot, New Connect (ATS), MTS Poland

DvP clearing model: BIS model I, BIS model II

Clearing:
T+2, T+3 – transactions on the regulated market – WSE, BondSpot
T+0 to T+n – transactions outside the regulated market – OTC

Two clearing modes:
RTGS DVP (8:00 – 17:00), FOP (8:00 – 18:30)
Multi-batch mode (7:30 – 19:00)
Clearing Cycle
The clearing cycle for transactions in shares, allotment certificates, certificates
concluded on the regulated market is three business days (T+3), the cycle for
bonds is two business days (T+2).
This means that the buyer becomes the owner of shares on the third clearing
day after the transaction date, or on the second clearing day in case of bonds.
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Number of Securities Accounts
1,600,000
1,477,419
1,497,609
1 528 692
2010
2011
2012
1,132,602
996,565
1,028,962
908,926
853,333
800,000
0
2005
2006
2007
2008
2009
Source: KDPW, based on information reported by Participants.
Year-end data for 2005-2011; end of November data for 2012.
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Operational Links with Other Depositories
KDPW maintains 20 operational links with foreign depositories: 10 direct links between KDPW and a foreign depository
and 10 indirect links via an international depository (Clearstream Banking Luxembourg, Euroclear Bank) or a custodian
bank (Bulgaria). KDPW has both a direct and an indirect link with Slovakia.
New operational links 2012:
– Romania (Sibex Depository)
– Latvia
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Investor Compensation Scheme

Supervision of the Investor Compensation Scheme and the functions of licensing and potentially
penalising brokerage businesses that are scheme participants are performed by the Financial
Supervision Authority.

The function of the Investor Compensation Scheme is to provide additional protection of investor
assets managed by licensed investment firms where all investment firm precautionary procedures
and supervision systems fail in offering full protection to investors.

KDPW administers and manages the resources of the system.

The Investor Compensation Scheme pays out 100% of covered investors’ assets up to the PLN
equivalent of EUR 3 thousand plus 90% of any surplus over that limit, however, not more than
the PLN equivalent of EUR 22 thousand.

In practice, the maximum compensation now available is EUR 20,100 as the Investor
Compensation Scheme pays out only 90% of any surplus over EUR 3,000.
Clearing House KDPW_CCP
Inception of KDPW_CCP
Pursuant to Article 48.7 of the Act on Trading…, KDPW may outsource, under
a contract, the performance of specific tasks to a subsidiary. In line with this
provision, KDPW has outsourced to the clearing house KDPW_CCP the
performance of tasks including:

clearing of trade on the regulated market

clearing of trade in dematerialised securities in the alternative trading
system

maintenance of a clearing liquidity guarantee system including a regulated
market trade clearing guarantee system
KDPW_CCP
KDPW_CCP is a modern clearing house, which clears transactions using a range of
mechanisms ensuring systemic mitigation of counterparty default risk.
CHARACTERISTICS:
Separate legal entity
In line with international standards, due to the different risks of CCP clearing house
services and risks of the core business of the central securities depository (KDPW), a
separate legal entity had to be set up to provide clearing house services: KDPW_CCP.
Guarantee of the clearing of trade based on CCP capital
An important feature of KDPW_CCP is that its capital can be used in the clearing
guarantee system, which improves the safety of clearing. KDPW_CCP has a capital of
PLN 200 million, which can be used in the clearing guarantee system as one of its
resources.
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Role of the Central Counterparty - CCP
The central counterparty (CCP) becomes a buyer to the seller and a seller to
the buyer.
Typical trade:
SELLER
BUYER
CCP as a counterparty:
SELLER
CCP as BUYER
CCP as SELLER
BUYER
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Clearing House KDPW_CCP:
Benefits for the Market
 Reduced counterparty risk thanks to guarantees of cleared transactions
 Novation: KDPW_CCP takes over rights and obligation of original parties
 More effective risk management
 Capital of the clearing house as a part of the clearing guarantee system
 New categories of entities eligible as clearing members
 Improved perception of the Polish capital market infrastructure by Polish and foreign
financial institutions
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Clearing Guarantee System
Financial and precautionary requirements for
participants
Margins
Clearing fund
Capital of KDPW_CCP
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KDPW_CCP Participants
 Local financial institutions: investment firms, banks
 Foreign financial institutions: investment firms, foreign entities
performing functions of clearing transactions in financial
instruments
 Companies operating a clearing house
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Order of Using the Resources of the Clearing
Guarantee System – Organised Trading
ca. EUR 50 million
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New European Regulations:
Impact on KDPW and KDPW_CCP
EMIR – Main Goals
Response to the crisis:

G-20 summit in Pittsburg (September 2009):
All standardised OTC derivative contracts should be cleared through central counterparties (CCP) by the
end of 2012 at the latest and OTC derivative contracts should be reported to trade repositories.
Focus on:

reducing counterparty risk including strengthening clearing requirements,

reducing operational risk including greater standardisation and electronic processing,

increasing transparency including through trade repositories
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EMIR - Implications
Article 4
 Clearing obligation for OTC derivative contracts
Article 9
 Reporting obligation: derivative contracts are reported to a trade repository
Article 14
 Authorisation of a central counterparty (CCP)
Article 55
 Registration of trade repositories by ESMA
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Harmonisation of KDPW_CCP with EMIR
Harmonisation of KDPW_CCP with EMIR requirements:

Harmonisation with the definition of CCP (Article 2): Novation

Harmonisation with the capital requirement (Article 16)

Authorisation of a CCP (Article 14)
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Capital Requirement
Increase of the share capital of KDPW_CCP S.A. in view of the implementation of
clearing of OTC trade to PLN 200 million (ca. EUR 50 million) – Resolution of the
General Meeting of June 2012.
Minimum capital requirement: at least EUR 7.5 million (under Article 16 of EMIR)
According to the EBA technical standards, the capital of a CCP should be at least equal to
the sum of:
 gross operational expenses during an appropriate time span for restructuring;
 the capital necessary to cover operational risk;
 the capital necessary to cover credit, counterparty credit and market risks of nonclearing activities;
 the capital necessary to cover legal risk and business risk.
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Clearing OTC Derivatives Trade.
Why KDPW_CCP?

Access to the Polish capital market

Liquidity in PLN in central bank (NBP) money

Option of contributing collateral in Polish Treasuries, WIG20 stocks and PLN

Stability of the Polish banking sector

Reduced risk of cash, derivatives and OTC trade

Effective trade guarantee and clearing system

Settlement in central bank money

Application of high standards of risk management

Standard default procedures
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System Functionalities
KDPW_CCP will operate an OTC derivatives trade clearing system including a clearing
liquidity guarantee system.
Main functionalities of the OTC trade clearing system:

clearing of trade accepted to the OTC clearing system and intermediation in
settlement arising from clearing

management of clearing risk

administration of collateral

function of central counterparty (CCP) through novation

reporting to a trade repository (service offered by KDPW)
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Cleared Instruments
List of instruments cleared in KDPW_CCP:
Phase 1 – 2 January 2013:

Forward Rate Agreements

Interest Rate Swaps

Overnight Index Swap

Basis Swaps

REPO
PLN
Phase 2 – January 2014 :

FX swaps

FX options

Interest rate options

Currency Interest Rate Swaps (CIRS)
PLN and other currencies
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Trade Repository in Polish Legislation

According to the amendment of the Act on Trading in Financial
Instruments effective as of 4 August 2012 (Article 48.5a), the National
Depository for Securities may – under the rules set out in separate
regulations – operate a trade repository, i.e., activities involving the
collection and storage of information concerning trade in financial
instruments and information concerning such instruments.
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KDPW Trade Repository

A trade repository is a set of information which fulfils the requirements of the
Regulation of the European Parliament and of the Council on OTC derivatives,
central counterparties and trade repositories.

The KDPW Trade Repository became operational on 2 November 2012.

It operates under the Trade Repository Rules approved by the KDPW Management
Board.

Once the European Commission has approved the technical standards, the trade
repository’s regulations and IT tools will be harmonised with the requirements of
the standards.

At the turn of Q1 and Q2 2013, KDPW will file for the registration of the trade
repository by ESMA (European Securities and Markets Authority) under the
requirements of EMIR.
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www.kdpw.eu
www.kdpwccp.eu