As of 1 July 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.
On 27 June the Management Board of KDPW_CCP (Iwona Sroka - President and Slawomir Panasiuk – Vice President) presented new functionality of KDPW_CCP to the media at the press conference in Warsaw.
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.
The establishment of KDPW_CCP is one of the key projects crucial to the development of the Polish market under the KDPW Strategy 2010-2013. The first steps towards establishing a CCP clearing house was the creation of the Clearing Guarantor KDPW_CLEARPOOL in May 2010. The company was set up to guarantee the clearing liquidity system with its own capital of EUR 15 million (PLN 60 million). The capital could be used in extreme cases after the main resources of the KDPW guarantee system have been exhausted.
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 SPAN 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” said Iwona Sroka, President of KDPW and KDPW_CCP.
The launch of KDPW_CCP operation will be concurrent with the implementation of a new clearing guarantee system based on two main tiers: individual margins with a mark-to-market mechanism and a solidary clearing fund. The model will be complemented by the capital of the KDPW_CCP clearing house.
The change of the structure of contributions to the clearing guarantee fund, effective to the clearing members from its effective date, involves in particular a shift of the main burden from solidary funds to individual margins, which will not be used in case of another member’s default. The main benefit of the change, available from the effective date of the new model, is that the margins will be protected.
Another difference compared to the existing solution is the introduction of margins for cash transactions. Previously, margins were only used for derivative transactions. The profile of the clearing fund will also change.
The existing model based on individual margins for the derivative market and a solidary clearing fund for the regulated cash and derivative market will be replaced by a model based on individual margins on both markets while the solidary clearing fund for the regulated market will be supplemented with additional margins required from members whose uncovered risk is greater than available resources in the clearing fund.
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.
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.
