BF Warsaw 2013 - Sroka - KDPW

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Iwona Sroka's presentation delivered at the SWIFT Business Forum in Warsaw on 14 June 2013.

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BF Warsaw 2013 - Sroka - KDPW

  1. 1. KDPW and KDPW_CCP: Ready for EMIR Iwona Sroka – President & CEO, KDPW and KDPW_CCP Warsaw, 14 June 2013
  2. 2. Overview of the Polish Capital Market 2
  3. 3. Shareholders of KDPW and KDPW_CCP 3 NBP Treasury WSE 100 % History  1991 - 1994 Integral part of the Warsaw Stock Exchange  1994 – now Independent institution, joint stock company  Current shareholders (since 1999) State Treasury 1/3 of shares WSE 1/3 of shares National Bank of Poland 1/3 of shares  KDPW_CCP (July 2011) KDPW 100% of shares. 33% 33% 33%
  4. 4. Functionalities of KDPW_CCP (CCP) / KDPW (CSD) CCP Risk management Clearing Collateral administration CSD Operating the CSD Settlement Corporate Actions Asset management Trade Repository 4
  5. 5. WSE BondSpot OTCTrade Settlement KDPW_CCP Settlement Clearing CSD Risk Management System NBP Clearing KDPW Trade Repository Market Infrastructure 5
  6. 6. At-a-Glance Statistics: May 2013  KDPW participants – 67  Issuers – 1104 (of which 69 are foreign)  Deposited equities issues – 1088  Deposited bond issues – 680  Capitalisation of shares in KDPW – PLN 495 billion (EUR 119billion)  Capitalisation of bonds in KDPW – PLN 646 billion (EUR 156 billion)  Value of all operations cleared and settled in 2012: PLN 11 trillion (EUR 2.6 trillion)
  7. 7. 7 Capitalisation of Securities Capitalisation of shares, bonds and other securities registered in KDPW (bln EUR) 0 20 40 60 80 100 120 140 160 12-2002 12-2003 12-2004 12-2005 12-2006 12-2007 12-2008 12-2009 12-2010 12-2011 12-2012 EURbln shares bonds other securities
  8. 8. 8 Regulated Market Trades Turnover Regulated market cash and derivatives turnover (bln EUR) 0 20 40 60 80 100 120 140 160 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 EURbln(singlecount) cash market derivatives market
  9. 9. Number of Securities Accounts 9 Source: KDPW, based on information reported by Participants. Year-end data for 2005-2012; end of April data for 2013. 853,333 908,926 996,565 1,028,962 1,132,602 1,477,419 1,497,609 1,508,519 1,486,122 0 800,000 1,600,000 2005 2006 2007 2008 2009 2010 2011 2012 2013
  10. 10. 10 KDPW Group – Business Model • Article 9: Reporting obligation • Article 55: Registration of Trade Repository by ESMA Article 4: Clearing obligation of OTC derivatives Article 14: Authorisation of KDPW_CCP
  11. 11. 11 Harmonisation of KDPW and KDPW_CCP with EMIR Harmonisation of KDPW and 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 a CCP  Creation of Trade Repository service  Application for registration of Trade Repository with the European Securities and Markets Authority (2 May 2013)
  12. 12. 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 12 Novation
  13. 13. Increase of the share capital of KDPW_CCP in view of the implementation of clearing of OTC trade to PLN 209,5 million (ca. EUR 50 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 13
  14. 14. 14 * Under EMIR Capital of KDPW_CCP (remaining own capital of KDPW_CCP) Clearing fund (remaining resources of the fund) Capital of KDPW_CCP (25% of designated capital*) Clearing fund (contributions of the defaulting participant) Margins (deposited by the defaulting participant) Receivables of the defaulting participant Order of Using the Resources of the Clearing Guarantee System Clearing Guarantee System
  15. 15. Why KDPW_CCP?  Access to the Polish capital market  Liquidity in PLN in central bank (NBP) money  Option of contributing collateral in Polish Treasuries, WIG20 stocks and PLN  Stability of the Polish banking sector  Reduced risk of cash, derivatives and OTC trade  Effective trade guarantee and clearing system  Settlement in central bank money  Application of high standards of risk management  Standard default procedures 15 OTC Clearing (1)
  16. 16. 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 trade accepted to the OTC clearing system and intermediation in settlement arising from clearing  management of clearing risk  administration of collateral  function of central counterparty (CCP) through novation  reporting to a trade repository (service offered by KDPW) 16 OTC Clearing (2)
  17. 17. List of OTC instruments cleared in KDPW_CCP: Phase 1 – December 2012:  Forward Rate Agreements  Interest Rate Swaps  Overnight Index Swap  Basis Swaps  REPO Phase 2 – January 2014:  FX swaps  FX options  Interest rate options  Currency Interest Rate Swaps (CIRS) 17 PLN PLN and other currencies OTC Clearing (3)
  18. 18. 18 Authorisation of KDPW_CCP Filing an application for authorisation under EMIR by PFSA (Q2 2013) The scope of harmonisation includes among others:  organisational requirements – including appointment of a Risk Committee, an Audit Committee and a Remuneration Committee, harmonisation of corporate boards and positions;  operational rules – including harmonisation of agreements between KDPW_CCP S.A. and KDPW S.A., investment policies, audit policies, data archivisation policies;  precautionary requirements – including the default procedure, the list of instruments acceptable as collateral, guarantee funds, liquidity risk controlling measures.
  19. 19. 19 Trade Repository  A trade repository is a set of information which fulfils the requirements of the Regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories.  The KDPW Trade Repository became operational on 2 November 2012.  It operates under the Trade Repository Rules.  On 2 May 2013, KDPW filed an application for registration of a trade repository with the European Securities and Markets Authority for purposes related to the reporting of details of concluded derivative contracts in accordance with the obligation imposed by the provisions of the EU Regulation EMIR.
  20. 20. KDPW Group’s Integrated Offer 20 Building top-quality post- trade infrastructure for the regulated market Polish market competitive with developed markets  OTC clearing  Harmonisation of KDPW Group’s IT systems with UTP (WSE system)  Development of a risk management system based on SPAN methodology  Introduction of novation  Introduction of securities netting in cash market clearing  Implementation by KDPW Group of a system of loans initiated by participants  Launch of a confirmation platform for matching of repo and buy/sell-back trades  Trade Repository service  Harmonisation of the KDPW system with cash settlement on SORBNET2  Standardisation of corporate actions processing under ISO20022  Introduction of omnibus securities accounts  Development of KDPW services for repo trades (including tri-party repo agent)  Development of DvP operational links with foreign CSDs  Harmonisation with the requirements of CSDR
  21. 21. www.kdpw.eu www.kdpwccp.eu

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