The National Depository for Securities (KDPW) will transfer its clearing functions for transactions executed in the regulated market and alternative trading system, as well as the management of clearing liquidity guarantee system to KDPW_CCP, while the Warsaw Stock Exchange (WSE) will authorise KDPW_CCP to clear all transactions executed in all the markets of the WSE Capital Group.
The Warsaw Stock Exchange signed an agreement with KDPW_CCP and KDPW, in which it is a shareholder and active stakeholder, to perform the clearing and settlement of transactions executed in the markets operated by the WSE. From 1 July 2011, the clearing of transactions will be carried out by KDPW_CCP, while the settlement of these transactions (transfers between depository accounts) will be performed by KDPW.
KDPW_CCP will operate as a clearing house in the Polish market using the central counterparty (or CCP) model. In order to eliminate the risk of uncleared transactions, the clearing house will use a state-of-the art recently implemented risk management system based on the globally recognised SPANŸ methodology. KDPW_CCP also has its own capital of PLN 100 million, which it can use to guarantee clearing liquidity, if necessary.
Transaction settlement and central securities depository functions will remain within KDPW. With the transfer of transaction clearing, risk management and margining to the CCP, it was possible to separate the more high-risk functionality, which until now has been concentrated in one institution - KDPW. The relevant internal operating regulations for both KDPW and KDPW_CCP have been approved by the Polish Financial Supervision Authority (UKNF) and in future, the new clearing house will seek recognition as a qualified CCP on the basis of the provisions of EMIR*.
- With the launch of a CCP clearing house in the Polish market, KDPW meets international standards and this significantly raises the competitiveness of the Polish capital market. I see this as an important step in the further development of a European profile for our market - said Ludwik Sobolewski, President & CEO of the Warsaw Stock Exchange. The Warsaw bourse will continue actively to work together with both KDPW_CCP and KDPW in order to develop a broader range of services offered by these institutions, in order to build a financial centre in Warrsaw for the CEE region - added the WSE President.
After KDPW_CCP is launched, further plans for new services will be developed, which will extend the range of clearing house functionality, including securities netting, the clearing and guarantee of OTC derivatives transactions, as well as the clearing and guarantee of repos, reverse repos and market lending.
- The creation of the KDPW_CCP clearing house is the result of the implementation of a key project in the KDPW Corporate Strategy for 2010-2013, which sees the growth of both companies based on a new business model. New solutions we are planning to introduce as part of the project should increase the interest of investors in the Polish market, both domestic and foreign. We are already seeing potential foreign members of KDPW_CCP, based in markets where similar standards as those met by KDPW_CCP already apply, showing an active interest in direct participation in our new clearing house - says Iwona Sroka, President & CEO of KDPW.
KDPW_CCP is the third such institution in the CEE region, after the clearing houses operating in Austria and Hungary. KDPW_CCP will however be providing clearing services for the largest capital market in Central and Eastern Europe. In terms of cash market turnover, which will be cleared by KDPW_CCP, Warsaw is a larger market than both Austria and Hungary together. In terms of the futures market, the Polish market is five times larger**. Additionally, there are plans to offer clearing services to other smaller markets in the region, which do not have their own CCP clearing house.
*EMIR is a draft Regulation of the European Parliament and Council on OTC traded derivatives, CCPs and trade repositories. It will define standards for the operation of CCP clearing houses. The planned regulation will also address in particular capital requirements for CCPs and the size of clearing funds used to guarantee transactions.
** On the basis of data from FESE for the first 4 months of 2011