One-stop shop
26 Jan 2019
With the market facing inevitable change, Maciej Trybuchowski, CEO of KDPW, explains how the firm can help
Image: Shutterstock
Europe’s financial market is facing an inevitable change caused by the impending Brexit. Many providers of capital market services have so far been based in the City of London. Their clients are now looking for new vendors, including providers of services under the extensive EU legislation.
A complete package of post-trading services is also available in cities other than traditional financial hubs such as Paris or Frankfurt. The services are also offered on the Polish market by the KDPW Group.
Looking at the financial market and its infrastructure it is really worth noticing how the KDPW Group 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 were strongly improved. KDPW Group offers the services of an authorised central counterparty (CCP), including over-the-counter (OTC) clearing, a registered trade repository, a global numbering agency (international securities identification number, classification codes, financial Instrument short name) as well as legal entity identifier (LEI) assignment and is in the process of CSD authorisation.
However, the post-trade solutions are offered are not only for the domestic financial market. With the European authorisations and registrations KDPW Group is open to foreign clients. Raiffeisen Bank International has opened an omnibus account direct in KDPW. ABN AMRO Clearing Bank, KDPW_CCP’s first foreign participant, has started to clear transactions on the Warsaw Stock Exchange’s (GPW) cash and derivatives market in June 2016. As a general clearing member of the KDPW_CCP, ABN AMRO opens access to the Polish capital market for investors using the bank’s global post-trade services. KDPW trade repository has participants from UK, Italy, Czech Republic, Bulgaria or Romania.
Clearing services
KDPW_CCP is authorised under EMIR (PLN and EUR) 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 own capital, which currently stands at €55 million. The CCP’s own capital is the last line of defence in the face of member insolvency and 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.
KDPW_CCP started providing clearing and the guarantee of OTC derivatives and repo trades as of December 2012. 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.
KDPW_CCP added new types of acceptable collateral to the 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 contributing cash in Euro as well as bonds denominated in Euro as collateral.
The Polish clearing house offers netting mechanism, which allows KDPW_CCP to generate one settlement instruction sent to KDPW or another settlement institution (for securities and/or cash settlement) for all operations, which credit and/or debit a designated settlement account. The implementation of netting and aggregation (directional netting) 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. This results in a significant reduction of the number of instructions sent for settlement while reducing the cost of trade settlement.
Trade repository services
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, which 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, 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.
KDPW_TR 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.
As counterparties will be required under the Securities Financing Transaction Regulation to report details of their transactions to trade repositories, KDPW is preparing to provide market participants with a new service enabling them to meet this obligation. KDPW has operated for more than two years as a trade repository under the EMIR and has the necessary experience, expertise, resources and a range of technological and procedural solutions necessary to accept and maintain trade reports. In addition, as a trade repository authorised by the ESMA under the EMIR, KDPW_TR is eligible for the fast-track authorisation procedure under the SFTR.
The ARM service
On 3 January 2018, KDPW launched its approved reporting mechanism (ARM) service.
The ARM service consists of sending trade data to the relevant supervisory authority on transactions executed as part of trading in financial instruments on behalf of entities obliged to report such data under the Markets in Financial Instruments Regulation.
Owing to delays in the implementation of the second Markets in Financial Instruments Directive, KDPW will be offering ARM services on the basis of provisions of national law incorporated in legislation on the distribution of insurance services, until KDPW obtains official authorisation from the Polish Financial Supervision Authority.
An ARM is authorised to provide services throughout the whole EU. Reports are sent by the ARM to the relevant supervisory authority, depending on the domicile of the entity with the obligation to submit reports.
LEI assigning
According to the Regulatory Oversight Committee’s decision on 27 December 2013, KDPW became a local operating unit authorised to issue LEIs. Since then, KDPW has issued approximately 14.8 thousand codes to entities.
The main advantages of the KDPW LEI service include:
Customer service in English and Polish
Very competitive fees for the issuance and renewal of LEIs
Prompt processing of orders
Individually dedicated account manager for each order, available to the client at every step of the application verification process
Automatic communicating of all events in the processing of orders
Highly competent staff dedicated to customer service and an excellent understanding of the specificity of the Polish capital market including local legal requirements
KDPW provides LEI management services including filing applications for the issuance or transfer of an LEI with KDPW; reviewing and processing of issued LEIs, including data updates and corporate actions; reviewing of order history including payment details; downloading invoices; user account management.
A complete package of post-trading services is also available in cities other than traditional financial hubs such as Paris or Frankfurt. The services are also offered on the Polish market by the KDPW Group.
Looking at the financial market and its infrastructure it is really worth noticing how the KDPW Group 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 were strongly improved. KDPW Group offers the services of an authorised central counterparty (CCP), including over-the-counter (OTC) clearing, a registered trade repository, a global numbering agency (international securities identification number, classification codes, financial Instrument short name) as well as legal entity identifier (LEI) assignment and is in the process of CSD authorisation.
However, the post-trade solutions are offered are not only for the domestic financial market. With the European authorisations and registrations KDPW Group is open to foreign clients. Raiffeisen Bank International has opened an omnibus account direct in KDPW. ABN AMRO Clearing Bank, KDPW_CCP’s first foreign participant, has started to clear transactions on the Warsaw Stock Exchange’s (GPW) cash and derivatives market in June 2016. As a general clearing member of the KDPW_CCP, ABN AMRO opens access to the Polish capital market for investors using the bank’s global post-trade services. KDPW trade repository has participants from UK, Italy, Czech Republic, Bulgaria or Romania.
Clearing services
KDPW_CCP is authorised under EMIR (PLN and EUR) 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 own capital, which currently stands at €55 million. The CCP’s own capital is the last line of defence in the face of member insolvency and 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.
KDPW_CCP started providing clearing and the guarantee of OTC derivatives and repo trades as of December 2012. 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.
KDPW_CCP added new types of acceptable collateral to the 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 contributing cash in Euro as well as bonds denominated in Euro as collateral.
The Polish clearing house offers netting mechanism, which allows KDPW_CCP to generate one settlement instruction sent to KDPW or another settlement institution (for securities and/or cash settlement) for all operations, which credit and/or debit a designated settlement account. The implementation of netting and aggregation (directional netting) 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. This results in a significant reduction of the number of instructions sent for settlement while reducing the cost of trade settlement.
Trade repository services
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, which 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, 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.
KDPW_TR 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.
As counterparties will be required under the Securities Financing Transaction Regulation to report details of their transactions to trade repositories, KDPW is preparing to provide market participants with a new service enabling them to meet this obligation. KDPW has operated for more than two years as a trade repository under the EMIR and has the necessary experience, expertise, resources and a range of technological and procedural solutions necessary to accept and maintain trade reports. In addition, as a trade repository authorised by the ESMA under the EMIR, KDPW_TR is eligible for the fast-track authorisation procedure under the SFTR.
The ARM service
On 3 January 2018, KDPW launched its approved reporting mechanism (ARM) service.
The ARM service consists of sending trade data to the relevant supervisory authority on transactions executed as part of trading in financial instruments on behalf of entities obliged to report such data under the Markets in Financial Instruments Regulation.
Owing to delays in the implementation of the second Markets in Financial Instruments Directive, KDPW will be offering ARM services on the basis of provisions of national law incorporated in legislation on the distribution of insurance services, until KDPW obtains official authorisation from the Polish Financial Supervision Authority.
An ARM is authorised to provide services throughout the whole EU. Reports are sent by the ARM to the relevant supervisory authority, depending on the domicile of the entity with the obligation to submit reports.
LEI assigning
According to the Regulatory Oversight Committee’s decision on 27 December 2013, KDPW became a local operating unit authorised to issue LEIs. Since then, KDPW has issued approximately 14.8 thousand codes to entities.
The main advantages of the KDPW LEI service include:
Customer service in English and Polish
Very competitive fees for the issuance and renewal of LEIs
Prompt processing of orders
Individually dedicated account manager for each order, available to the client at every step of the application verification process
Automatic communicating of all events in the processing of orders
Highly competent staff dedicated to customer service and an excellent understanding of the specificity of the Polish capital market including local legal requirements
KDPW provides LEI management services including filing applications for the issuance or transfer of an LEI with KDPW; reviewing and processing of issued LEIs, including data updates and corporate actions; reviewing of order history including payment details; downloading invoices; user account management.
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