The Polish Capital Market and Post-trading Infrastructure ... Polish... · The Polish Capital...
Transcript of The Polish Capital Market and Post-trading Infrastructure ... Polish... · The Polish Capital...
The Polish Capital Market and Post-trading Infrastructure in the New EU Regulatory Era
Ph.D. Iwona Sroka, President & CEO, KDPW and KDPW_CCP
EMEA Audit Parters' Meeting Warsaw, 26 September 2014
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join the celebrations of the 25th anniversary of economic freedom in Poland
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was established in 1991
was separated in 1994, as an independent, join stock company
was created in 2011
25 Years of Polish Freedom
Overview of the Polish Capital Market
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KDPW
Financial Supervision Authority (KNF)
WSE Main Market,
BondSpot, Catalyst,
NewConnect, OTC
Financial
institutions and
intermediaries Issuers Institutional
investors
Individual
investors
National Bank of
Poland
KDPW_CCP
Polish Capital Market vs. Europe
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Equity market
Futures market
Market Operator 2012 2013
London Stock Exchange Group 21,37% 20,56%
NYSE Euronext 15,36% 15,21%
Deutsche Börse 12,42% 12,29%
BME (Spanish Exchanges) 8,31% 7,48%
SIX Swiss Exchange 5,69% 6,28%
NASDAQ OMX Nordic 5,71% 5,72%
Oslo Børs 1,42% 1,11%
Warsaw Stock Exchange 0,57% 0,64%
CEESEG - Vienna 0,23% 0,23%
Athens Exchange 0,15% 0,18%
Boerse Stuttgart 0,14% 0,18%
Irish Stock Exchange 0,09% 0,13%
CEESEG - Budapest 0,11% 0,09%
CEESEG - Prague 0,13% 0,08%
Bucharest Stock Exchange 0,01% 0,01%
Bulgarian Stock Exchange 0,00% 0,01%
CEESEG - Ljubljana 0,00% 0,00%
Luxembourg Stock Exchange 0,00% 0,00%
Malta Stock Exchange 0,00% 0,00%
Bratislava Stock Exchange 0,00% 0,00%
Cyprus Stock Exchange 0,00% 0,00%
KDPW and KDPW_CCP
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• Stable and credible shareholders • Main objective: safety and stability of financial
system • Low risk profile - not-for-profit infrastructure
institution • Supervision by Polish FSA and ESMA, oversight
by Polish Central Bank ***
• EU registration of KDPW Trade Repository – one of 4 first TRs registered in Europe
• LEI assigning (KDPW_LEI) • Services for energy market (KDPW_GIR) • Planned CSDR authorisation of KDPW
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100 %
NBP
Treasury
WSE
33%
33%
33%
KDPW_LEI
• EMIR authorisation of KDPW_CCP (3rd in Europe)
• KDPW_CCP own capital: EUR 54 M (USD 70 M) • Central counterparty functionality through
novation • Reporting to KDPW_TR (non mandatory)
At-a-Glance Statistics: August 2014
KDPW participants – 65
KDPW_CCP participants – 38
Issuers – 1152 (of which 77 are foreign)
Deposited equities issues – 1099
Deposited debt instrument issues – 1099
Capitalisation of equities in KDPW – PLN 582 billion (EUR 138 billion)
Capitalisation of debt instruments in KDPW – PLN 580 billion (EUR 139 billion)
Number of cleared transactions – cash market: 13.69 million
Value of cleared transactions – cash market: PLN 451 billion (EUR 107) billion
Number of cleared transactions – derivatives market: 3.2 million
Value of cleared transactions – derivatives market: PLN 435 billion (EUR 104 billion)
Value of all operations cleared and settled in 2013: PLN 12 trillion (EUR 2.9 trillion)
Regulated Market ATS Derivative OTC
Clearing
Risk Management
Collateral Management
SPAN VaR
Govt. Bonds T-Bills PLN WIG20
Companies
REPO OTC
Regulated Market ATS Cash OTC
Central Securities Depository
Corporate Actions
Numbering Agency (ISIN, LEI)
Operational Links with Foreign CSDs
Managing Deposit Accounts Registering and Safekeeping
of Securities
OFE Transfer Payments
Trade Repository
Exchange Clearing House (GIR KDPW)
Database Management
Settlement
Investor Compensation Scheme
Asset Management
Guarantee Fund
100%
Main responsibilities of KDPW and KDPW_CCP
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.
Central Securities Depository of Poland
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)
Number of Securities Accounts
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KDPW_CCP is a modern clearing house, which clears transactions using a range of mechanisms ensuring systemic mitigation of counterparty default risk. It was separated from KDPW structure as of July 1, 2011. 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 223 million (ca. EUR 52 million), which can be used in the clearing guarantee system as one of its resources.
Clearing House KDPW_CCP
KDPW_CCP operates as a CCP (central counterparty) within the meaning of Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories, performing the clearing of transactions executed in the cash and derivatives markets, both in on-exchange and off-exchange (OTC) markets.
In accordance with KDPW_CCP regulations (the Rules of Transaction Clearing (Organised Trading) and the Rules of Transaction Clearing (Non-Organised Trading)) KDPW_CCP becomes the counterparty for all transactions accepted for clearing.
This is performed using the mechanism of clearing novation, introduced on the basis of the Law on Trading in Financial Instruments.
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About KDPW_CCP
KDPW_CCP - Markets & Products
CASH MARKET DERIVATIVES MARKET
Regulated ATS OTC Regulated
- Warsaw Stock
Exchange (WSE)
- BondSpot
shares, bonds,
subscription rights,
allotment certificates,
investment &
structured certificates,
index participation
units, mortgage
bonds, warrants,
ETFs
- NewConnect
- Catalyst
- BondSpot
shares,
allotment
certificates,
bonds,
mortgage bonds
- Warsaw Stock
Exchange (WSE)
futures contracts,
options, index
participation units
Forward Rate
Agreements,
Interest Rate
Swaps,
Overnight Index
Swaps, Basis
Swaps
- OTC
(MarkitWire,
SWIFTAccord)
OTC
- Matching
Engine
for REPO
T-bonds
KDPW_CCP guarantees clearing of transactions executed on the regulated cash and derivatives market.
Regulated cash market trading platforms Regulated derivatives market trading platform
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KDPW_CCP guarantees clearing of transactions executed on the cash market in the alternative trading system.
ATS cash market trading platforms:
Regulated Market and Alternative Trading System
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Regulation (EU) No 648/2012 on OTC derivatives, central counterparties and trade
repositories (EMIR)
Regulation (EU) No 909/2014 on improving securities settlement in the European
Union and on central securities depositories and amending Directives 98/26/EC and
2014/65/EU and Regulation (EU) No 236/2012 (CSDR)
EU Regulations in Post-trade Infrastructure
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Harmonisation of KDPW_CCP with EMIR requirements:
Harmonisation with the definition of CCP: Novation
Harmonisation with the capital requirement
New order of using the resources of the clearing guarantee system
New service: OTC clearing
Authorisation of KDPW_CCP
Harmonisation of KDPW with EMIR requirements:
Creation of Trade Repository service
Registration of Trade Repository with the European Securities and Markets Authority
Harmonisation of KDPW and KDPW_CCP with EMIR
Amended provisions of the Act on Trading in Financial Instruments effective as of 4 August 2012 introduced novation to the Polish legal system.
Through novation, the clearing house becomes a central counterparty: a buyer to each seller and a seller to each buyer, taking over the mutual rights and obligations of the original trading parties.
CCP as SELLER
SELLER
BUYER
CCP as BUYER
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Novation
EMIR
compliant
Increase of the share capital of KDPW_CCP in view of the implementation of clearing of OTC trade to PLN 223 million (ca. EUR 54 million).
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 non-clearing activities;
the capital necessary to cover legal risk and business risk.
Capital Requirement of KDPW_CCP
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EMIR
compliant
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Clearing Guarantee System – Default Waterfall
Credits of the defaulting member
Margins:
initial deposit > initial margin > additional margin
Resources of the relevant default fund
Contributed by the defaulting member
Dedicated resources of KDPW_CCP
(in the amount corresponding to at least 25% of the capital requirements taking into account the allocation of the resources in relation to the size of the fund)
Contributions of other KDPW_CCP clearing members to the relevant default fund
Own funds of KDPW_CCP
(up to 110% of the capital requirements)
Additional contributions of other KDPW_CCP clearing members to the relevant default fund
(not more than 50% of the last existing contributions according to the lates update)
Remaining own funds of KDPW_CCP
EMIR
compliant
KDPW_CCP operates an OTC derivatives trade clearing system including a clearing liquidity guarantee system.
Main functionalities of the OTC trade clearing system:
clearing of trades accepted to the OTC clearing system and intermediation in settlement arising from clearing
risk management
collateral management
function of central counterparty (CCP) through novation
reporting to the Trade Repository (service offered by KDPW)
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OTC Clearing in KDPW_CCP
Bank A
Bank B
Trade Repository
(KDPW)
National Bank of
Poland Confirmation
platforms* Communication
SWIFT
CSD (KDPW)
• repo settlement
• safekeeping
SWI
EMIR
compliant
FRA
IRS
OIS
Basis Swaps
REPO
Nov. 2014: ESMA application for instruments denominated in EUR
Other currencies – with regard to market demand
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PLN
OTC Clearing: Cleared Instruments
KDPW_CCP has focused on OTC
derivatives denominated in PLN
MarkitWire
KDPW_CCP clears trades on the basis of clearing instructions delivered by an electronic platform operator (MarkitWire, SWIFT Accord or proprietary matching solution for REPO).
SWIFT Accord
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OTC Clearing: Confirmation Platforms
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Authorised CCPs in UE (as of 22.09.2014)
No. CCP Country Date
1 Nasdaq OMX Clearing AB Sweden 18.03.2014
2 European Central Counterparty N.V. Netherlands 1.04.2014
3 KDPW_CCP Poland 8.04.2014
4 Eurex Clearing AG Germany 10.04.2014
5 Cassa di Compensazione e Garanzia S.p.A. Italy 20.05.2014
6 LCH.Clearnet SA France 22.05.2014
7 European Commodity Clearing Germany 11.06.2014
8 LCH.Clearnet Ltd United Kingdom 12.06.2014
9 Keler CCP Hungary 4.07.2014
10 CME Clearing Europe Ltd United Kingdom 4.08.2014
11 CCP Austria, Abwicklungsstelle für Börsengeschäfte GmbH
Austria 14.08.2014
12 LME Clear Ltd United Kingdom 3.09.2014
13 BME Clearing Spain 16.09.2014
In addition to compliance with its reporting obligations as a CCP, KDPW_CCP has developed the service of reporting derivative contracts to the Trade Repository operated by KDPW (KDPW_TR) on request of Clearing Members.
Reporting can be delegated both by Clearing Members and through them by their Clients and entities concluding derivative transactions on request of their Clients (Brokers).
On 7 November 2013 The European Securities Market Authority (ESMA) has registered the KDPW Trade Repository, confirming that it fulfills all trade repository requirements under EMIR.
The KDPW Trade Repository (KDPW_TR) was one of the first four such institutions to be registered in Europe.
KDPW_TR is approved to register all derivative contracts classes, both from the regulated and OTC market.
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EMIR
compliant
Reporting to the Trade Repository
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1. DTCC Derivatives Repository Ltd. (DDRL) 14 November 2013
1. Krajowy Depozyt Papierów Wartościowych S.A. (KDPW) 14 November 2013
1. Regis-TR S.A. 14 November 2013
1. UnaVista Limited 14 November 2013
2. CME Trade Repository Ltd. (CME TR) 5 December 2013
2. ICE Trade Vault Europe Ltd. (ICE TVEL) 5 December 2013
Reporting to the Trade Repository (as of 12.09.2014)
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LEI Assigning
On 19 August 2013, KDPW has been assigned a prefix (2594) necessary to assign identifiers – future LEI – to legal entities.
According to the provisions of regulations delegated under EMIR, a relevant identifier is necessary in order to report derivative trades to a trade repository.
The prefix has been assigned by the ROC Secretariat (Regulatory Oversight Committee Secretariat) and will identify codes assigned by KDPW in the global LEI system (GLEIS). The KDPW prefix has been requested by the Polish Financial Supervision Authority, which acts as a sponsoring authority in the process of ROC’s authorisation of a local unit as an LOU (pre-LOU) within the global LEI system.
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CSDR
Impact of the CSD Regulation on central depositories, market participants, issuers and investors: Single authorisation of CSDs and supervision process – Q2 2015 Move to a T+2 settlement cycle – as of 6 October 2014 in KDPW Prudential requirements
Capital requirements: proportional to risk profile of the CSD, with minimum of 6 months operating expenses
The end of paper securities New rules on account segregation
CSD participants must offer choice to their clients between omnibus a/c & individual segregation at CSD level
Account segregation at CSD level Issuer choice of a CSD
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T+2 Settlement Cycle
From the perspective of building international competitiveness, KDPW is
starting to prepare for European authorisation as a central securities depository (CSD) under the Central Securities Depository Regulation (CSDR).
European authorisation will confirm KDPW’s compliance with the highest EU
standards applicable to CSD infrastructure. The clearing house KDPW_CCP
has completed a similar authorisation process under EMIR.
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CSD Authorisation
CSD Services
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Numbering Agency (LEI, ISIN, FISIN)
Key functionalities:
Omnibus accounts for foreign investors
Collective securities accounts on the CSD level, with option to segregate by investor/group of investors
Hold/Release mechanism (optional)
Cash settlement in central bank money – PLN in Polish Central Bank, EUR in TARGET2
Agent for Securities lending & borrowing - automatic and negotiated
Settlement and collateral management for repo (Tri-party Repo Agent)
Partial settlement
CA: information, distribution of proceedings, tax services
GIR - clearing and settlement of energy market transactions
T+2 settlement cycle regarding to CSDR requirements
Ancilliary Services
Core Services
Commercial Services
Initial recording of securities in a book-entry system
Maintaining securities accounts at the top-tier level
Regulated market
Alternative Trading System
OTC cash market
Central Depository of Securities
Corporate Actions processing
Operational links to foreign CSDs
Trade Repository
Commodities Clearing House (GIR KDPW)
Securities settlement system
CSD authorisation process planned for 2015/2016
Tri-Party Repo
Maintaining securities accounts at the top-tier level
Initial recording of securities in a book-entry system
www.kdpw.eu
www.kdpwccp.eu