The Polish Capital Market and Post-trading Infrastructure in the New EU Regulatory Era

Transcription

1 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

2 25 Years of Polish Freedom join the celebrations of the 25th anniversary of economic freedom in Poland was established in 1991 was separated in 1994, as an independent, join stock company was created in

3 Overview of the Polish Capital Market Financial Supervision Authority (KNF) KDPW WSE Main Market, BondSpot, Catalyst, NewConnect, OTC KDPW_CCP National Bank of Poland Institutional investors Financial institutions and intermediaries Issuers Individual investors 3

4 Polish Capital Market vs. Europe Equity market Market Operator 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% Futures market 4

5 KDPW and KDPW_CCP 33% WSE NBP Treasury 33% 33% KDPW_LEI 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 100 % *** 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) 5

6 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: 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)

7 Main responsibilities of KDPW and KDPW_CCP 100% Settlement Regulated Market ATS Cash OTC Central Securities Depository Managing Deposit Accounts Registering and Safekeeping of Securities Corporate Actions Operational Links with Foreign CSDs Database Management Numbering Agency (ISIN, LEI) Clearing Regulated Market ATS Derivative OTC REPO OTC Investor Compensation Scheme Risk Management Asset Management SPAN VaR Guarantee Fund OFE Transfer Payments Trade Repository PLN Collateral Management Govt. Bonds T-Bills WIG20 Companies Exchange Clearing House (GIR KDPW)

8 Central Securities Depository of Poland The functions and tasks of KDPW are set out in the Act on Trading in Financial Instruments of 29 July 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.

9 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)

10 Number of Securities Accounts 10

11 Clearing House KDPW_CCP 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, 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.

12 About 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 offexchange (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. 12

13 KDPW_CCP - Markets & Products CASH MARKET DERIVATIVES MARKET Regulated ATS OTC Regulated OTC - Warsaw Stock Exchange (WSE) - BondSpot - NewConnect - Catalyst - BondSpot - Matching Engine for REPO - Warsaw Stock Exchange (WSE) - OTC (MarkitWire, SWIFTAccord) shares, bonds, subscription rights, allotment certificates, investment & structured certificates, index participation units, mortgage bonds, warrants, ETFs shares, allotment certificates, bonds, mortgage bonds T-bonds futures contracts, options, index participation units Forward Rate Agreements, Interest Rate Swaps, Overnight Index Swaps, Basis Swaps

14 Regulated Market and Alternative Trading System KDPW_CCP guarantees clearing of transactions executed on the regulated cash and derivatives market. Regulated cash market trading platforms Regulated derivatives market trading platform KDPW_CCP guarantees clearing of transactions executed on the cash market in the alternative trading system. ATS cash market trading platforms: 14

15 EU Regulations in Post-trade Infrastructure 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) 15

16 Harmonisation of KDPW and KDPW_CCP with EMIR 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 16

17 Novation 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. SELLER CCP as BUYER CCP as SELLER BUYER EMIR compliant 17

18 Capital Requirement of KDPW_CCP 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. EMIR compliant 18

19 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) EMIR compliant Remaining own funds of KDPW_CCP 19

20 OTC Clearing in KDPW_CCP 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) EMIR compliant Bank A Confirmation platforms* Communication National Bank of Poland SWIFT Trade Repository (KDPW) Bank B SWI CSD (KDPW) repo settlement safekeeping 20

21 OTC Clearing: Cleared Instruments FRA IRS OIS Basis Swaps REPO PLN KDPW_CCP has focused on OTC derivatives denominated in PLN Nov. 2014: ESMA application for instruments denominated in EUR Other currencies with regard to market demand 21

22 OTC Clearing: Confirmation Platforms 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). MarkitWire SWIFT Accord 22

23 Authorised CCPs in UE (as of ) No. CCP Country Date 1 Nasdaq OMX Clearing AB Sweden European Central Counterparty N.V. Netherlands KDPW_CCP Poland Eurex Clearing AG Germany Cassa di Compensazione e Garanzia S.p.A. Italy LCH.Clearnet SA France European Commodity Clearing Germany LCH.Clearnet Ltd United Kingdom Keler CCP Hungary CME Clearing Europe Ltd United Kingdom CCP Austria, Abwicklungsstelle für Börsengeschäfte GmbH Austria LME Clear Ltd United Kingdom BME Clearing Spain

24 Reporting to the Trade Repository 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). EMIR compliant 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. 24

25 Reporting to the Trade Repository (as of ) 1. DTCC Derivatives Repository Ltd. (DDRL) 14 November Krajowy Depozyt Papierów Wartościowych S.A. (KDPW) 14 November Regis-TR S.A. 14 November UnaVista Limited 14 November CME Trade Repository Ltd. (CME TR) 5 December ICE Trade Vault Europe Ltd. (ICE TVEL) 5 December

26 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. 26

27 CSDR Impact of the CSD Regulation on central depositories, market participants, issuers and investors: Single authorisation of CSDs and supervision process Q 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 27

28 T+2 Settlement Cycle 28

29 CSD Authorisation 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. 29

30 CSD Services Regulated market Core Services Securities settlement system Maintaining securities accounts at the top-tier level Alternative Trading System Central Depository of Securities Ancilliary Services Commercial Services Initial recording of of securities in a in book-entry a book-entry system system Corporate Actions processing Operational links to foreign CSDs Trade Repository OTC cash market Numbering Agency (LEI, ISIN, FISIN) Commodities Clearing House (GIR KDPW) Tri-Party Repo 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 (Triparty 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 CSD authorisation process planned for 2015/

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