Poland Establishes CCP

Terry Flanagan

KDPW spins off clearing functions.

Poland is making  strides in becoming a magnet for securities trading, with major projects underway to boost its financial infrastructure.

Responding to new regulation, KDPW will launch a new CCP service for OTC derivatives in 2012.

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. KDPW_CCP will operate as a clearinghouse in the Polish market using the central counterparty (or CCP) model.

In order to eliminate the risk of uncleared transactions, the clearinghouse will use a state-of-the art recently implemented risk management system based on the globally recognized SPAN methodology. KDPW_CCP also has its own capital of PLN 100 million, which it can use to guarantee clearing liquidity, if necessary.

KDPW_CCP intends to adopt SWIFT’s Accord for Treasury for matching OTC derivatives transactions. This will extend the benefits of standardization, operational risk and cost reduction and improved customer service for KDPW_CCP and its clearing community.

KDPW_CCP is engaged in an intensive project aiming to start the clearing of OTC derivatives in 2012. For that purpose, together with the Banking Experts Team, KDPW_CCP has developed an OTC derivatives clearing model.

“Our biggest project next year is to start clearing selected OTC derivatives trades. The main benefit of the project is to release credit limits which banks impose on their counterparties. This in turn may improve liquidity on the interbank market, which is so much needed these days,” said KDPW president and CEO Iwona Sroka.

The number of securities accounts has for the first time crossed the mark of 1.5 million in 2011. Nearly 60 thousand new accounts have been opened in 2011. According to a survey conducted by the European Central Securities Depositories Association (ECSDA) on request of KDPW, Poland is the CEE market with the most active individual investor community.

“As measured by the number of securities accounts on the surveyed markets, Poland is the regional leader. The number of accounts in Lithuania, Latvia or Estonia is under 500 thousand,” said Sroka. “By comparison, there are over 1.5 million accounts on the Polish market.”

On July 1, Poland’s National Depository for Securities (KDPW) transferred 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.
KDPW_CCP took over from KDPW all functions of clearing transactions concluded on the regulated market and in the alternative trading system including guaranteeing the clearing of transactions on the basis of a multi-tier risk management system.

“The creation of KDPW_CCP has made a positive impact on the international position of the Polish capital market and has been welcomed by rating agencies, especially owing to reduced counterparty risk. The implemented modifications have been strongly supported by the Polish financial market infrastructure community,” said Sroka.

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.
Clearinghouses will benefit from a new international messaging standard that improve the flow of communications among counterparties.

The creation of the clearinghouse KDPW_CCP is the highlight of the past year at the National Depository. As a result, the Polish market complies with global standards of clearing houses and central securities depositories. The challenge of 2012 is to implement interbank OTC derivatives clearing.

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