Central and Eastern Europe
25 May 2016
No nation is an island, and the Polish CSD has post-trade services to cater to all of Central and Eastern Europe, says KDPW’s Iwona Sroka
Image: Shutterstock
Poland is the largest and the most attractive market for foreign investors in Central and Eastern Europe (CEE). It has a critical mass to attract new investors, especially those acting on emerging markets. The country has a stable economy with a relatively strong banking sector and is well perceived by foreign investors, who are confident in the high resilience of the Polish economy to potential financial downturns.
Looking at the financial market and its infrastructure, it is really worth noting the way in which the KDPW Group has built Central Europe’s leading clearing and settlement infrastructure. Thanks to services offered in KDPW, the Polish central securities depository (CSD), and KDPW_CCP, the clearinghouse, the quality and safety of the Polish financial market and its attractiveness to international investors has been strongly improved. KDPW Group offers the services of an authorised central counterparty (CCP), including over-the-counter (OTC) clearing, a registered trade repository and a global numbering agency, and it is also preparing for CSD authorisation.
KDPW_CCP is authorised under the European Market Infrastructure Regulation (EMIR) and has broad experience in extending the scope of its services. In view of its current levels of trade clearing and taking into account future volume growth and the potential to offer its services in the CEE region, KDPW_CCP holds the necessary level of its own capital, which currently stands at approximately €54 million. A CCP’s own capital is the last line of defence in the face of member insolvency. The higher the capital of the CCP, the lower the risk exposure of the remaining members.
The clearinghouse performs a broad range of services in the financial market. For the regulated market, KDPW_CCP clears equities, fixed income and other cash market instruments, as well as derivatives such as futures and options based on indices, equities, bonds, currencies and interest rates. It also offers clearing of securities lending and borrowing and derivatives from the interbank market such as basis swaps and repos.
OTC clearing
In December 2012, KDPW_CCP started to provide the clearing and guarantee of OTC derivatives and repo trades (OTC_Clearing). KDPW_CCP began in this way to process interbank trades, mainly aiming to reduce the risk of default by trading counterparties and, consequently, to generate growth in this market sector.
In its OTC_Clearing service, KDPW_CCP clears transactions accepted to the kdpw_otc system, acts as an intermediary in the settlement resulting from the clearing process, manages clearing risk, administers collateral, acts as the CCP using novation and reports to the KDPW_TR trade repository.
Collateral management
KDPW_CCP is planning to add new types of acceptable collateral to its collateral management service, including collateral posted as margins or contributions to funds, both in organised and non-organised trade.
The new functionalities added to the existing collateral management structure include capability for contributing cash or securities denominated in euro as collateral, and additional messages with extended information for clearing members and payment agents of clearing members. The new mechanisms are available for testing in the test environment.
Netting
The Polish clearinghouse offers a netting mechanism which allows KDPW_CCP to generate one settlement instruction which is sent to KDPW or another settlement institution (for securities and/or cash settlement) for all operations that credit or debit a designated settlement account. The implementation of netting and aggregation of debits and credits, in securities arising from cleared transactions concluded on the regulated market or in an alternative trading system, implies improved operating standards of the clearing process which can result in a significant reduction of the number of instructions sent for settlement, while also reducing the cost of trade settlement.
RMA application
Last year, KDPW_CCP, in collaboration with GPW, launched the Risk Management Access (RMA) application for all entities that clear transactions on the exchange. RMA allows all clearing members and brokers that provide clearing services to define maximum limits on the value of orders entered by an exchange member whose transactions it clears.
The application allows users to configure filters and offers a ‘kill switch’ functionality, which blocks new orders of an exchange member and cancels any orders already on the order book.
Trade repository
KDPW_TR was one of the first trade repositories in Europe to be registered by the European Securities and Markets Authority (ESMA) in confirmation of compliance with all international standards that guarantee the highest quality of service.
KDPW_TR has participated in the implementation of EMIR from the very beginning and is engaged in active dialogue with all market participants, regulators and other trade repositories as well as reporting participants. KDPW_TR aligns its services with the legal requirements and the ESMA guidelines and follows the needs of market players covered by the reporting obligation.
Some strengths of KDPW_TR include: secure and certified access to the application; a user-friendly, intuitive website interface with reporting functionalities and direct access to maintained data; global communication standards such as XML messages and dedicated message queues; access to expert support; existing procedures applicable in the event of contingencies and solutions ensuring high security standards; and business continuity in data collection and maintenance, including a back-up site.
The trade repository offers the reporting of derivative trades via a user-friendly secure website interface or over automatic direct connections. Derivatives trades are reported in messages developed in line with the scope of information required under the EMIR technical standards. They include all data necessary for the trade repository to identify trades and process reports as required by ESMA.
Numbering agency
As the Polish CSD, KDPW is the only institution in Poland, and one of few institutions in Europe, to offer such a broad range of numbering services for financial market entities and instruments. It can assign LEI, ISIN, CFI and FISN codes.
Since 1994 KDPW has been a member of the Association of National Numbering Agencies (ANNA), and since 1996 it has played the role of a national numbering agency.
In August 2013, KDPW was assigned the prefix (2594) necessary to issue legal entity identifier (LEI) codes. The prefix was assigned by the Regulatory Oversight Committee (ROC) Secretariat, and identifies LEIs issued by KDPW in the global LEI system. The Polish Financial Supervision Authority was the sponsor of KDPW’s prefix, and in December 2013, the ROC made the decision and authorised KDPW to issue LEIs.
Since then, KDPW has issued approximately 6,000 codes to entities in more than 20 EU member states. The main advantages of the KDPW LEI service include: customer service in English and Polish; competitive fees for the issuance and renewal of LEIs; prompt processing of orders; a dedicated account manager for each order, available to clients at every step of the application verification process; automatic communication of all events in the processing of orders; competent staff dedicated to customer service, and with an understanding of the specificity of the Polish capital market, including local legal requirements.
The online application site is available in Polish, English and Romanian, and allows LEI holders to access management services such as filing applications for issuance or transfer of an LEI with KDPW; filing applications for the issuance; reviewing and processing of issued LEIs, including data updates and corporate actions; reviewing of order history including payment details; invoice downloads; and user account management. It also offers automatic communication with KDPW, reviews of the details of entities holding LEI, and access to detailed information on LEIs and LEI issuance.
KDPW Group offers post-trade services to the market with the largest turnover in the CEE region. This is a strong market, which provides a stable revenue stream that in turn allows us to offer low-cost processing of trades.
Looking at the financial market and its infrastructure, it is really worth noting the way in which the KDPW Group has built Central Europe’s leading clearing and settlement infrastructure. Thanks to services offered in KDPW, the Polish central securities depository (CSD), and KDPW_CCP, the clearinghouse, the quality and safety of the Polish financial market and its attractiveness to international investors has been strongly improved. KDPW Group offers the services of an authorised central counterparty (CCP), including over-the-counter (OTC) clearing, a registered trade repository and a global numbering agency, and it is also preparing for CSD authorisation.
KDPW_CCP is authorised under the European Market Infrastructure Regulation (EMIR) and has broad experience in extending the scope of its services. In view of its current levels of trade clearing and taking into account future volume growth and the potential to offer its services in the CEE region, KDPW_CCP holds the necessary level of its own capital, which currently stands at approximately €54 million. A CCP’s own capital is the last line of defence in the face of member insolvency. The higher the capital of the CCP, the lower the risk exposure of the remaining members.
The clearinghouse performs a broad range of services in the financial market. For the regulated market, KDPW_CCP clears equities, fixed income and other cash market instruments, as well as derivatives such as futures and options based on indices, equities, bonds, currencies and interest rates. It also offers clearing of securities lending and borrowing and derivatives from the interbank market such as basis swaps and repos.
OTC clearing
In December 2012, KDPW_CCP started to provide the clearing and guarantee of OTC derivatives and repo trades (OTC_Clearing). KDPW_CCP began in this way to process interbank trades, mainly aiming to reduce the risk of default by trading counterparties and, consequently, to generate growth in this market sector.
In its OTC_Clearing service, KDPW_CCP clears transactions accepted to the kdpw_otc system, acts as an intermediary in the settlement resulting from the clearing process, manages clearing risk, administers collateral, acts as the CCP using novation and reports to the KDPW_TR trade repository.
Collateral management
KDPW_CCP is planning to add new types of acceptable collateral to its collateral management service, including collateral posted as margins or contributions to funds, both in organised and non-organised trade.
The new functionalities added to the existing collateral management structure include capability for contributing cash or securities denominated in euro as collateral, and additional messages with extended information for clearing members and payment agents of clearing members. The new mechanisms are available for testing in the test environment.
Netting
The Polish clearinghouse offers a netting mechanism which allows KDPW_CCP to generate one settlement instruction which is sent to KDPW or another settlement institution (for securities and/or cash settlement) for all operations that credit or debit a designated settlement account. The implementation of netting and aggregation of debits and credits, in securities arising from cleared transactions concluded on the regulated market or in an alternative trading system, implies improved operating standards of the clearing process which can result in a significant reduction of the number of instructions sent for settlement, while also reducing the cost of trade settlement.
RMA application
Last year, KDPW_CCP, in collaboration with GPW, launched the Risk Management Access (RMA) application for all entities that clear transactions on the exchange. RMA allows all clearing members and brokers that provide clearing services to define maximum limits on the value of orders entered by an exchange member whose transactions it clears.
The application allows users to configure filters and offers a ‘kill switch’ functionality, which blocks new orders of an exchange member and cancels any orders already on the order book.
Trade repository
KDPW_TR was one of the first trade repositories in Europe to be registered by the European Securities and Markets Authority (ESMA) in confirmation of compliance with all international standards that guarantee the highest quality of service.
KDPW_TR has participated in the implementation of EMIR from the very beginning and is engaged in active dialogue with all market participants, regulators and other trade repositories as well as reporting participants. KDPW_TR aligns its services with the legal requirements and the ESMA guidelines and follows the needs of market players covered by the reporting obligation.
Some strengths of KDPW_TR include: secure and certified access to the application; a user-friendly, intuitive website interface with reporting functionalities and direct access to maintained data; global communication standards such as XML messages and dedicated message queues; access to expert support; existing procedures applicable in the event of contingencies and solutions ensuring high security standards; and business continuity in data collection and maintenance, including a back-up site.
The trade repository offers the reporting of derivative trades via a user-friendly secure website interface or over automatic direct connections. Derivatives trades are reported in messages developed in line with the scope of information required under the EMIR technical standards. They include all data necessary for the trade repository to identify trades and process reports as required by ESMA.
Numbering agency
As the Polish CSD, KDPW is the only institution in Poland, and one of few institutions in Europe, to offer such a broad range of numbering services for financial market entities and instruments. It can assign LEI, ISIN, CFI and FISN codes.
Since 1994 KDPW has been a member of the Association of National Numbering Agencies (ANNA), and since 1996 it has played the role of a national numbering agency.
In August 2013, KDPW was assigned the prefix (2594) necessary to issue legal entity identifier (LEI) codes. The prefix was assigned by the Regulatory Oversight Committee (ROC) Secretariat, and identifies LEIs issued by KDPW in the global LEI system. The Polish Financial Supervision Authority was the sponsor of KDPW’s prefix, and in December 2013, the ROC made the decision and authorised KDPW to issue LEIs.
Since then, KDPW has issued approximately 6,000 codes to entities in more than 20 EU member states. The main advantages of the KDPW LEI service include: customer service in English and Polish; competitive fees for the issuance and renewal of LEIs; prompt processing of orders; a dedicated account manager for each order, available to clients at every step of the application verification process; automatic communication of all events in the processing of orders; competent staff dedicated to customer service, and with an understanding of the specificity of the Polish capital market, including local legal requirements.
The online application site is available in Polish, English and Romanian, and allows LEI holders to access management services such as filing applications for issuance or transfer of an LEI with KDPW; filing applications for the issuance; reviewing and processing of issued LEIs, including data updates and corporate actions; reviewing of order history including payment details; invoice downloads; and user account management. It also offers automatic communication with KDPW, reviews of the details of entities holding LEI, and access to detailed information on LEIs and LEI issuance.
KDPW Group offers post-trade services to the market with the largest turnover in the CEE region. This is a strong market, which provides a stable revenue stream that in turn allows us to offer low-cost processing of trades.
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