The Trading Terms for Monthly Gas Forward Contracts

Transcription

1 The Trading Terms for Monthly Gas Forward Contracts Consolidated text approved by virtue of the Resolution of Management Board No. 250/63/12 of 6 December 2012, enters into force on 20 December Page 1

2 Table of Contents Table of Contents... 2 Part 1 Terms and abbreviations used in the document Part 2 Introduction Section 1 Designation of the type of forward contracts and the description of the Forward Contracts Program Section 2 Starting date for the trade in Forward Contracts or the method of establishing such date Section 3 Dates for trading in Forward Contracts during individual cycles Section 4 Information about incorporating the Risk Factors into the Trading Terms... 5 Section 5 Date of preparing the Trading Terms Section 6 Place, form and time of public access to the Trading Terms... 5 Part 3 Persons responsible for the information provided in the Trading Terms Section 1 Business name and the registered seat and address of the party who drew up Parts 1 4 of the Trading Terms and Appendix no. 1 to the Trading Terms Section 2 Persons acting on behalf of the Polish Power Exchange... 6 Section 3 Responsibility representations... 6 Section 4 Business name and the registered seat and address of the party who drew up Appendix no. 2 to the Trading Terms... 6 Section 5 Persons acting on behalf of the Warsaw Commodity Clearing House... 6 Section 6 Responsibility representations... 7 Part 4 Details of the terms of trading in Forward Contracts Section 1 Description of risk factors for the buyers or sellers of Forward Contracts Section 2 Conditions to be met by the buyers and sellers of Forward Contracts... 8 Section 3 Rights and obligations resulting from Forward Contracts Section 4 Quotation dates of Forward Contracts Section 5 Method of establishing daily clearing prices as well as the mode and terms for publishing the quotation information Section 6 Date of delivery of a Forward Contract Section 7 Date of expiration of Forward Contracts Section 8 Basic rules for trading in Forward Contracts. The mode of introducing potential modifications to such rules Section 9 Information which could significantly affect the assessment of forward contracts and risks involved in buying such contracts Appendix 1 The Gas Forward Instrument standard Appendix 2 The Warsaw Commodity Clearing House Detailed clearing rules for the markets being run by POLPX Page 2

3 Part 1 Terms and abbreviations used in the document. Exchange Member an entity that has got the Exchange Member status, according to the Exchange Rules, Day of Delivery corresponds to the gas day within the meaning of the TNCg and refers to consecutive hours starting from 6 a.m. on a given day until 6 a.m. on the next day, on which the gas contracted on the exchange on the Trading Day is delivered or received, Trading Day the day when a CFIM session regarding gas forward contracts takes place, Expiration Day the last day of trading, market the Commodity Market operated by the Polish Power Exchange in accordance with the Exchange Rules, Exchange, POLPX Polish Power Exchange (Towarowa Giełda Energii S.A.) forward instrument a forward commodity instrument within the meaning of the Exchange Rules, underlying instrument E-group high-methane natural gas conforming to the standard specified by the Exchange Management Board, the price of which is determined on the Day-Ahead Market in accordance with the principles set out in the Exchange Rules, TNCg means the Gas Transmission Network Code prepared by Gas Transmission Operator GAZ-SYSTEM S.A., in accordance with Article 9 g) of the Energy Law Act, Clearing House means the Warsaw Commodity Clearing House which operates a settlement and clearing house fulfilling the function of a clearing house in accordance with the Act on Trading in Financial Instruments (ustawa o obrocie instrumentami finansowymi), Shipper Code means the code used for the identification of a Shipper; Contract or Forward Contract means a transaction executed on the CFIM, which creates certain rights or obligations related to the possession of forward contracts, Yearly contract a forward contract with the delivery term of one year, Quarterly contract a forward contract with the delivery term of one quarter, Monthly contract a forward contract with the delivery term of one month, Forward instrument price the gas price at the delivery date set at the time of concluding a forward contract, Long position opening (a long position) buying (acquisition) of a forward contract, Short position opening (a short position) sale (disposal) of a forward contract, Long position on a forward contract delivery date a long position at the moment of expiration of a forward contract, Short position on a forward contract delivery date a short position at the moment of expiration of a forward contract, Opposite position a position being opposite to the short position is a long position concerning forward contracts of the same series; a position being opposite to the long position is a short position concerning forward contracts of the same series, Exchange Rules the Trading Rules for the Commodities Market of the Polish Power Exchange, Page 3

4 Regulation Regulation of the Council of Ministers of 22 December 2009 on the specific mode and terms for introducing Property Rights to exchange trading (Journal of Laws of 2010, No. 6, item 30), Underlying market the underlying instrument market, the Day Ahead Market operated by the Exchange, DAMg Gas Day-Ahead Market making a distinctive part of the DAM&IDM and operated by the Exchange, DAM&IDMg or Gas Day-Ahead Market and Intraday Market means the gas Day-Ahead Market and Intraday Market operated by the Exchange, CFIM the Commodity Forward Instruments Market with Physical Delivery operated by the Exchange, Forward instrument series forward contracts fulfilling standards determined by the Exchange and characterised in particular by the same underlying instrument and the same expiration date, Trading System means the electronic communications system, including all relevant hardware and software, and specifically the dedicated computer application that facilitates the trading on the CFIM, Order table tabulated summary of buy and sell orders, OTC deal a forward instrument sales contract concluded between Exchange Members outside a CFIM session, Act the Act of 26 October 2000 on commodity exchanges (consolidated text: Journal of Laws of 2010 No. 48, item 284, as amended), Act on Trading in Financial Instruments means the act of 29 July 2005 on trading in financial instruments ( ustawa o obrocie instrumentami finansowymi ) (Journal of Law No 183/2005, item 1538, as amended), Contract value the forward instrument price or clearing price multiplied by the number of hours on the contract delivery date, Trading Terms these Trading Terms for Monthly Gas Forward Contracts, Position closing taking a position opposite to the position being closed, Shipper means a Shipper as defined in the TNCg. Part 2 Introduction. Section 1 Designation of the type of forward contracts and the description of the Forward Contracts Program. A forward instrument should be understood as a commodity forward instrument mentioned in 84 of the Exchange Rules, the price of which depends directly on the price of commodities of a specific type. Gas Forward Contracts shall make part of a property rights program within the meaning of 3(3) of the Regulation. A gas Forward Contract should be deemed as an agreement obliging the seller (the issuer of an instrument) to deliver gas at a specific point in time, at a specific price and obliging the buyer (the acquirer of an instrument) to take the gas at a specific point in time and a specific price. Page 4

5 Gas Forward Contracts shall be quoted in series. Three series of month Forward Contracts shall be quoted simultaneously. The delivery date of monthly forward contract shall be established in accordance with the Calendar of Forward Contracts Quotations and the Execution of Contracts, starting from 6:00 a.m. on the first day of delivery until 6:00 a.m. on the first day following the end of the delivery period, specified in the Calendar of Forward Contracts Quotations and the Execution of Contracts. Section 2 Starting date for the trade in Forward Contracts or the method of establishing such date. The starting date for the trade in the first series of Forward Contracts shall be established by the Exchange Management Board upon the introduction of Forward Contracts to exchange trading. The Exchange Management Board shall establish the contract quotation and the execution dates for all introduced Forward Contracts in the Calendar of Forward Contracts Quotations and the Execution of Contracts mentioned in 15. The Calendar of Forward Contracts Quotations and the Execution of Contracts shall be set and announced to the public not later than 14 days before the trading starts. Section 3 Dates for trading in Forward Contracts during individual cycles. The Exchange Management Board shall establish the quotation dates for all introduced Forward Contracts in the Calendar of Forward Contracts Quotations and the Execution of Contracts mentioned in 15. Section 4 Information about incorporating the Risk Factors into the Trading Terms The risk factors for the buyers and sellers of Forward Contracts have been described in Section 1 of Part 4 in these Trading Terms. Exchange Members trading in Forward Contracts should analyse thoroughly the content of the aforementioned item. Section 5 Date of preparing the Trading Terms. These Trading Terms were prepared on 6 December Section 6 Place, form and time of public access to the Trading Terms. The Trading Terms shall be made available at least 7 days prior to the commencement of the trade in Forward Instruments and can be accessed at the offices of the Exchange and on its website. Part 3 Persons responsible for the information provided in the Trading Terms. Section 1 Business name and the registered seat and address of the party who drew up Parts 1 4 of the Trading Terms and Appendix no. 1 to the Trading Terms. Company name: Registered office: Address: Communication details: Polish Power Exchange Warsaw 23 Poleczki St, Building H Warszawa Page 5

6 Phone: Fax: address: Website address: Section 2 Ireneusz Łazor Persons acting on behalf of the Polish Power Exchange - President of the Management Board Adam Simonowicz - Vice-President of the Management Board The above persons are responsible for all information specified in Parts 1 4 of the Trading Terms and in Appendix no. 1 to the Trading Terms. Section 3 Responsibility representations We represent that the information specified in Parts 1 4 of the Trading Terms and in Appendix no. 1 to the Trading Terms is true and reliable and that it does not omit any facts or circumstances which have to be disclosed according to requirements specified in the applicable provisions of law... Ireneusz Łazor President of the Management Board.. Adam Simonowicz Vice-President of the Management Board Section 4 Business name and the registered seat and address of the party who drew up Appendix no. 2 to the Trading Terms Company name: Warsaw Commodity Clearing House Registered office: Warsaw, 80 Jana Pawła II Av, unit F 35 Address: 23 Poleczki St, Building H Warszawa Communication details: Phone: Fax: address: Website address: irgit@irgit.pl Section 5 Persons acting on behalf of the Warsaw Commodity Clearing House Dariusz Bliźniak - President of the Management Board Andrzej Kalinowski - Member of the Management Board The above persons are responsible for all information contained in Appendix no. 2 to the Trading Terms. Page 6

7 Section 6 Responsibility representations We represent that the information specified in Appendix no. 2 to the Trading Terms is true and reliable and that it does not omit any facts or circumstances which have to be disclosed according to requirements specified in the applicable provisions of law. Dariusz Bliźniak President of the Management Board.. Andrzej Kalinowski Member of the Management Board Part 4 Details of the terms of trading in Forward Contracts. Section 1 Description of risk factors for the buyers or sellers of Forward Contracts. 1 General Information 1. All investment decisions should be taken on the grounds of appropriate knowledge of mechanisms regulating the trade in forward Contracts and of the awareness of risk specific to such instruments. 2. The Exchange shall not bear any responsibility for investment risks involved in the trade in Forward Contracts. 2 Market risk 1. Market risk is connected with changes in the prices of Forward Contracts and in the prices of underlying instruments. The forward instrument price depends mainly on the underlying instrument price. An Exchange Member entering into transactions on a Commodity Forward Instruments Market is exposed to higher risk of price changes than those on the underlying instrument market, in connection with the existence of the so-called financial leverage effect. 2. The financial leverage effect is caused by the fact that the value of the contributed collateral is part of the forward instrument s value and therefore losses or profits caused by a forward instrument price referred to the value of capital committed (being the collateral value) many have significant values which are not found on the underlying instrument market. 3. A contingent loss incurred on the Commodity Forward Instruments Market may exceed the initial value of an investment, understood as the amount of contributed collateral. 4. In the case of a decrease in the value of initial margin and variation margin below the level determined by the Clearing House, an Exchange Member holding open positions shall be requested to supplement the margin. If the margin is not supplemented within a specified term, the positions of such member will be closed. 5. Closing a position at a price lower than the long position opening price and closing a position at a price higher than the short position opening price implies a loss on a transaction. The loss exceeds the value of initial investment, if the relevant difference between the opening and closing value of a position is higher than the value of margin that has been paid. Page 7

8 3 Liquidity risk 1. On the Commodity Forward Instruments Market, and in particular at the initial stage, certain difficulties may occur connected with entering into a large transaction or entering into such transaction may adversely affect the level of market prices. 2. Exchange Members may find it hard to close positions, which have previously been opened, at the expected price, which is caused by the lack of opposite orders. 3. Trade liquidity may also depend on the activity of market makers. 4 Specific risks Specific risks result from the changes in prices of gas quoted on the Day-Ahead Gas Market run by POLPX, which may be subject to significant volatility, thus affecting the forward instrument price as well as the amount of collateral margins. 5 Legal risk The power sector is subject to legal acts of legislation as well as to implementing regulations, which may affect the underlying instrument price. 6 Delivery risk 1. The Exchange shall not be responsible for a physical delivery or off-take of gas under Forward Contracts concluded on the CFIM. 2. Should the nomination of the physical delivery of gas be impossible, the volume of transaction concluded on the CFIM will be reduced accordingly by the volume attributable to such Days of Delivery. Section 2 Conditions to be met by the buyers and sellers of Forward Contracts 7 The buyers and sellers of Forward Contracts on terms specified in these Trading Terms, can be Exchange Members admitted to activities regarding Gas Forward Contracts carried out on the CFIM in accordance with Exchange Regulations, who hold the status of a Clearing House member. Section 3 Rights and obligations resulting from Forward Contracts. 8 A forward contract is regarded as an agreement mentioned in 87 of the Exchange Regulations, obliging the seller (the issuer) to deliver gas within a specific date and at a specific price, and obliging the buyer (the acquirer) to receive gas within a specific date and at a specific price. A contract concluded on the exchange is executed through a financial settlement and a physical delivery of gas. Section 4 Quotation dates of Forward Contracts. 9 Starting and closing trade in particular series of Forward Contracts takes place in accordance with the Calendar of Forward Contracts Quotations and the Execution of Contracts mentioned in 15. Page 8

9 Section 5 Method of establishing daily clearing prices as well as the mode and terms for publishing the quotation information. 10 Daily clearing price 1. The daily clearing price shall be calculated on the grounds of transactions which have been entered into during a continuous trading system quotation phase after closing each exchange session, with accuracy up to PLN The daily clearing price shall be determined as an arithmetic mean of the prices in last 10 transactions concluded during an exchange session in a continuous trading system. 3. If fewer than 10 transactions have been concluded during an exchange session, the daily clearing price shall be determined as an arithmetic mean of the prices of all transactions concluded during continuous trading system quotations. 4. If no transaction has been concluded during an exchange session, the daily clearing price shall be determined as an arithmetic mean of price limits of the most favourable buy and sell orders transacted during continuous trading quotations, and if no such orders have been placed, the clearing price shall be the last known daily clearing price. 11 The procedure and time of the public announcement of the quotation results 1. The information on the volume, quotations, and the value of Transactions market shall be made available to Exchange Members on the a non-public website that is accessible only for the Exchange Member concerned and the Exchange. 2. Upon the end of an exchange session, the information on the volume and quotations shall be published by the Exchange on its publicly available website. Section 6 Date of delivery of a Forward Contract The beginning and end of the term for the delivery of contracts encompassing consecutive series of Forward Instruments shall be compliant with the Calendar of Forward Contracts Quotations and the Execution of Contracts mentioned in During the period for execution of a contract, gas deliveries are carried out every day, in accordance with the rules specified in the Day-Ahead Market Detailed Rules for Trading and Settlement, subject to the provisions of 6. Section 7 Date of expiration of Forward Contracts. 13 The expiration date of given contracts shall be the last day of trading in a given series of forward contracts. Page 9

10 Section 8 Basic rules for trading in Forward Contracts. The mode of introducing potential modifications to such rules. 14 Admission of Forward Contracts to exchange trading The admission of Forward Contracts to exchange trading shall be granted by the Management Board of the Exchange. 15 Introduction of Forward Contracts to exchange trading The introduction of Forward Contracts to exchange trading shall be effected by the Management Board of the Exchange, who determine the dates of quotation and execution for all introduced series of Forward Contracts, which are referred to as the Calendar of Forward Contracts Quotations and the Execution of Contracts. 16 Underlying instrument The underlying instrument is E-group high-methane natural gas, conforming to the standard specified by the Exchange Management Board, the price of which is determined on the Day-Ahead Market, expressed as PLN/MWh, with accuracy up to PLN 0, Quotation system 1. Forward Contracts are quoted in a continuous trading system or through concluding OTC deals, only with the use of the Trading System. 2. OTC deals may be concluded on terms specified in Exchange Regulations and in these Trading Terms. 3. OTC deals may be concluded at the request of an Exchange Member, if a deal should result in closing a position or closing a portfolio. 4. After receiving a request of OTC transaction conclusion, the Exchange Management Board shall determine specific conditions for the placement and execution of orders regarding a given deal. 5. The Exchange Management Board shall be entitled to refuse the consent for concluding an OTC deal, if doing so could infringe upon relevant legal regulations or when a refusal is necessary for the reason of trade or clearings safety. 6. The Exchange Management Board shall be entitled to require that a requesting party present additional information which is necessary to examine the request or to determine specific conditions for the placement and execution of orders. In particular, the Exchange Management Board shall be entitled to demand that a requesting party present documents concerning the obligation, the fulfilment of which requires the conclusion of an OTC deal. 18 Quotation hours Quotations shall be carried out on working days between 8:00 a.m. to 2:00 p.m., according to the Calendar of Forward Contracts Quotations and the Execution of Contracts mentioned in 15, unless decided to the contrary by the Exchange Management Board. Page 10

11 19 Orders 1. Exchange Members shall place their orders with reference to the Portfolios. In the Trading System, Portfolios are defined as accounts. A Shipper Code is assigned to each Portfolio. 2. In the Trading System, each Exchange Member has got as many Portfolios, as many Shipper Codes there are in their possession. Exchange Members can hold Portfolios for Shipper Codes which have been made available. 3. Each Portfolio may be assigned to one Exchange Member only, unless an Exchange Member shares such a portfolio with another Exchange Member according to principles specified in the Rules. 4. Exchange Members may place multiple orders with respect to given Portfolio Each order of an Exchange Member placed on the CFIM should define in particular the following parameters: a) designation (ID) of the Forward Contract being the object of the Order, b) type of Order (buy/sell), c) portfolio the Order relates to, d) number of Forward Contracts, e) price limit expressed in PLN/MWh, accurate to PLN 0,01 or an instruction to execute the order without a price limit f) validity term, g) conditions for the execution of the order, specified in these Trading Terms, h) designation (ID) of the Exchange Member issuing the Order, i) date and hour of Order issuance, j) Order number. 2. One order must not include more than 100 Forward Contracts. At the request of an Exchange Member, POLPX may increase (on a one-off basis) the limit of Forward Contracts per an order Orders introduced to quotations should contain the conditions for execution and validity terms. Depending on the conditions for execution and validity terms, the types of orders are as follows: a) Rest of Day order an order is valid on the day it is placed on the exchange. b) Good until Expiry order an order is valid until the end of an instrument s quotation. c) Good until Date order an order is valid until the date specified in the phase of placing the order. Quotations shall take place until the date when a set time limit expires. d) Timed order an order is valid on the day of placing it on the exchange until the date specified in the phase of placing the order. e) Fill and Kill order an order is valid until the first transaction is concluded (or first transactions if an order is executed in several transactions simultaneously), with the non-executed part of Page 11

12 the order becoming cancelled. An order can be executed in whole, in part or it may not be executed at all. An order can be placed without a price limit. f) The Fill or Kill order - an order is valid until the first transaction is concluded (or first transactions if an order is executed in several transactions simultaneously). An order must be executed in whole or it cannot be executed at all. If an order layout does not allow the execution of the whole order, an order shall be cancelled. 2. The Fill and Kill as well as Fill or Kill types of orders are not included in the order table. Once such orders have been placed, the transaction is concluded or orders are deleted Orders can be placed on the market (market orders) or locally (local orders). Local orders are not quoted. 2. Local orders can be placed on the market through activation. The activation time determines the time an order is accepted on the market. 3. A market order can become a local order through suspension. Orders can be activated and suspended when quotations are carried out on the CFIM. 4. Orders can be placed on the market only during the quotation phase on the CFIM. Outside the quotation phase on the CFIM, Exchange Members are entitled to place local orders. 5. Orders placed on the market remain active until the modification or cancellation process has been completed An order may comprise an additional condition, upon which the appearance of such order on the market is dependent an activation conditioned order (Stop Loss). 2. The activation condition involves the following parameters: a) the activation condition instrument name of the instrument to which the activation condition refers, b) the activation condition limit the price or the price limit of the activation condition instrument, c) the activation condition type indication whether the activation condition is met when: i) the last transaction price is equal to or lower than the activation condition limit, ii) the last transaction price is equal to or higher than the activation condition limit, iii) a market order of specified type (buy / sell), with the price limit equal to or lower than the activation condition limit, appears in the order table, subject to the provisions of clause 5 below, iv) a market order of specified type (buy/ sell), with the price limit equal to or higher than the activation condition limit, appears in the order table, subject to the provisions of clause 5 below. 3. An activation-conditioned order is a local order until the moment of activation. 4. Activation of an activation-conditioned order takes place when the condition for activation is met. As a result of the activation, an activation-conditioned order is placed on the market and the modification, suspension, cancellation or execution of such order are compliant with the principles adopted for orders without the activation condition. The time of accepting orders on the exchange determines the sequence of activation for activation-conditioned orders. Page 12

13 5. A market order subject to immediate execution does not result in meeting the activation condition. 6. Activation-conditioned orders are activated only during the continuous trading phase. 7. Before activation, an activation-conditioned order is valid until the end of an instrument quotation period. After activation, an activation-conditioned order is valid until the end of a period compliant with the chosen type of order. 8. Activation-conditioned orders are not subject to modification in terms of activation conditions Exchange Members are entitled to modify their own orders. The following items may be modified: a) the offered number of Forward Contracts, b) price limit. 2. Orders may be modified during the quotation phase on the CFIM. If a modification regards a decrease of the gas volume, the time for placing an order shall not be altered. In other instances of modification (increasing the volume and changing the price), a new time of placing the order shall be adopted. 3. Orders cannot be modified, if quotations on a Forward Contract have been suspended. 25 An order can be cancelled by an Exchange Member who has placed the order before the validity of the order expires. Orders being the subject of concluded transactions cannot be cancelled. 26 The principles for fixing prices, execution of orders and transactions 1. Transactions are concluded at a price equal to the price limit which has been specified in an earlier introduced order which is waiting to be executed in an order table, in accordance with the following principles: a) first, Orders with the highest price limit in case of buy Orders, and with the lowest price limit in case of sell Orders shall be executed, b) Orders with equal price limits shall be executed according to the time of Order acceptance (Orders accepted earlier shall be executed first). 2. Orders can be executed in part, with every partial transaction concerning at least one forward instrument. 27 Transactions. Only Exchange Members admitted by the Exchange Management Board to the activities on the Commodity Gas Forward Instruments Market can act as parties to the transactions. 28 The procedure for amending the Trading Terms These Trading Terms may be amended by the Exchange Management Board. All amendments of Trading Terms should be published nit later than 7 days before their entering into force. Page 13

14 Section 9 Information which could significantly affect the assessment of forward contracts and risks involved in buying such contracts. 29 Apart from the information contained in these Trading Terms, the Exchange is not aware of any other information which could significantly affect the assessment of forward contracts and risks involved in buying such contracts. Page 14

15 Appendix 1 The Gas Forward Instrument standard. Name of the forward instrument Underlying instrument Forward instrument nominal value Forward instrument price Forward Contract value Term of delivery Execution period Quotation period Delivery unit Expiration day The first trading day of a new series Quotation unit Contract settlement mode GAS_BASE_M-mm-yy where: GAS_BASE_M basic name of the forward instrument, mm number of the consecutive month in a year, when the forward contract is going to be executed, yy two last digits of the year of the execution date. E-group high-methane natural gas, conforming to the standard specified by the Exchange Management Board, the price of which is determined on the Day-Ahead Market, expressed as PLN/MWh, with accuracy up to PLN 0,01. 1MW multiplied by the number of hours specified in the Calendar of Forward Contracts Quotations and the Execution of Contracts, depending on the number of days in a month: MWh. Expressed as PLN/MWh, with accuracy up to PLN 0,01. Forward instrument nominal value multiplied by the forward instrument price. One calendar month (from 28 to 31 days) at hours between 06:00 a.m. on the first day of the month and 06:00 a.m. on the first day of the month following the month in which the contract is delivered. In accordance with the Calendar of Forward Contracts Quotations and the Execution of Contracts. In accordance with the Calendar of Forward Contracts Quotations and the Execution of Contracts. 1MWh for every hour of the time limit for a contract execution. The last day of trading. The last session day specified in the Calendar of Forward Contracts Quotations and the Execution of Contracts. The first session day specified in the Calendar of Forward Contracts Quotations and the Execution of Contracts 1 forward instrument. Physical delivery of equal volumes of gas in every hour during the contract delivery term. Page 15

16 Appendix 2 The Warsaw Commodity Clearing House Detailed clearing rules for the markets being run by POLPX Detailed clearing rules for the markets being run by POLPX The Rules comes into force on the day of December the 6 th Page 16

17 Definitions 1) the House it should be understood as the exchange clearing house (in the understanding of the Act), run by the Warsaw Commodity Clearing House Joint Stock Company; 2) WCCH it should be understood as the Warsaw Commodity Clearing House Joint Stock Company with seat of business in Warsaw; 3) the Property Rights it should be understood as the property rights under certificates of origin in the understanding of the regulations set forth in the Power Law Act; 4) the Gas it should be understood gaseous fuels as referred to in Article 3 item 3a) of the Power Law Act, being the exchange commodity admitted to trading on the exchange commodity Market pursuant to relevant internal regulations of the Exchange; 5) the Act it should be understood as the act dated on the day of October the 26 th 2000 concerning the commodity exchanges (unified text in the Journal of Law No 121/2005, item 1019 with later amendments); 6) the Clearing Bank it should be understood as the bank that - acting on the grounds of appropriate agreements concluded with the House and individual Clearing Members of the House provides financial services connected with clearing of the Transactions entered into on the exchange; 7) the Clearing Member of the House it should be understood as an entity that has obtained the House membership by virtue of resolution passed by the WCCH Management Board and that has been allowed by the House to clear Transactions being entered into on the exchange; 8) the Exchange Member it should be understood as an entity that has concluded the membership agreement with the Exchange; 9) the Delivery Day it should be understood as a day on that the exchange commodity sold or purchased on the Trading Day will be delivered or received; 10) the Trading Day it should be understood as a day on that POLPX market rates are fixed for given Delivery Day; 11) the Exchange, POLPX it should be understood as the Polish Power Exchange; 12) the exchange it should be understood as the Exchange Commodity Market run by the Exchange; 13) the Private Web Site it should be understood as a web site accessible only for given House Member and for the House; 14) TSOe or the Electricity Transmission System Operator it should be understood as PSE Operator Joint Stock Company with seat of business in Konstancin-Jeziorna; Page 17

18 15) TSOg or the Gas Transmission System Operator it should be understood as The Industrial Gas Pipelines Operator GAZ-SYSTEM Joint Stock Company with seat of business in Warsaw; 16) TNCe it should be understood as the Electricity Transmission Network Code worked out by the TSOe; 17) TNCg it should be understood as the Gas Transmission Network Code worked out by the TSOg; 18) the Power Law Act it should be understood as the act dated on April the 10 th 1997 and titled "The Power Law" (Journal of Law No 89/2006, item 625 with later amendments); 19) the Bank Account - it should be understood as an account opened by the Clearing Member of the House in the Clearing Bank for clearing the transactions entered into on the DAM, IDM, DAMg, PRM, CFIM and EAM markets; 20) the Subsidiary Account it should be understood as an account, opened by the Clearing Member of the House in the Clearing Bank in addition to the bank account and designed for the House's crediting of the account with receivables by the right of clearing of the Transactions, which have been entered into on the DAM, IDM, DAMg, PRM, CFIM and EAM markets; 21) the settlement report it should be understood as a report available in the clearing system and including the balance of payments by the right of the Transactions entered into on the exchange; 22) DAM it should be understood as the Day-Ahead Market run by the Exchange; 23) IDM it should be understood as the Intraday Market run by the Exchange; 24) DAMg it should be understood as the Gas Day-Ahead Market run by the Exchange; 25) PRM it should be understood as the Property Rights Market run by the Exchange; 26) CFIM it should be understood as the Commodity Forwards Instruments Market with Physical Delivery run by the Exchange; 27) EAM it should be understood as the Emission Allowance Market run by the Exchange; 28) the POLPX Regulations it should be understood as the Trading Regulations of the Exchange Commodity Market of the Polish Power Exchange; 29) the clearing system it should be understood as a set of hardware and software components, and in particular the specialized computer software, clearing of the Transactions, entered into on the exchange, is conducted by means of that; Page 18

19 30) the Transaction it should be understood as an exchange commodity sale contract closed on the exchange, the Clearing Member of the House is a party of clearing of that; 31) OTC deal it should be understood as an exchange commodity sale contract concluded outside the session on the Exchange, the Clearing Member of the House is a party of clearing of that; 32) the Order it should be understood as an exchange commodity purchase or sale offer submitted on the exchange by the Exchange Member; 33) the Transaction Limit maximum total value of purchase transactions possible to enter into on given day on DAM, IDM, DAMg, PRM and EAM markets by given Clearing Member of the House; 34) NCEBM it should be understood as the National Center of Emission Balancing and Management, an entity responsible for keeping records of the Emission Allowances in the Republic of Poland, assigned by the minister responsible for environmental issues; 35) NREA the National Register of Emission Allowances - it should be understood as the system of recording of the emission allowances, run by NCEBM in accordance with applicable regulations; 36) the recording accounts it should be understood as recording devices for recording of positions of exchange commodities, kept by the WCCH, according to the ID of Clearing Member of the House, client ID, exchange commodity series ID, type of activity ID and portfolio ID; 37) the accounting accounts it should be understood as recording devices serving for determination of liabilities and receivables resulting from clearings of exchange transactions, collateral margins as well as for recording of the means being lodged into the margins - kept by the WCCH according to the ID of the Clearing Member of the House as well as the client ID; 38) the Portfolio it should be understood as positions of the exchange commodities, registered in the recording accounts marked by the same House Member's ID and the same portfolio ID; 39) N-Day it should be understood as the day, clearing of the transaction was conducted by the House on which. The days preceding or following the N- Day are marked as N-1 or N+1, respectively; 40) the foreign clearing house it should be understood as an entity, acting independently towards the House, that conducts clearing of electricity trading transactions being entered into on the exchanges and executed outside the system mentioned in Article 3 item 23 of the Power Law Act; 41) the Non-pecuniary Collaterals Register it should be understood as a register, kept by the WCCH, serving for recording of the Property Rights, the CO2 Emission Allowances, the Bank Guarantees composing covering of the liabilities of the Clearing Members of the House as well as their Page 19

20 clients (respectively) by the right of the collateral margins and the transaction margins; 42) the Scheduling Unit it should be understood as a basic object of the balancing market in the understanding of TNCe, allocated to given power company by the TSOe or made available for the House member or a House member s client by the power company in order to execute physical delivery of electricity; 43) the nomination it should be understood as the nomination defined in the TNCg, allocated to given House Member by the TSOg or made available for the House member or a House member s client pursuant to the regulations being in force on the Exchange within that scope; 44) the Shipper code it should be understood as the code designed for identification of the Shipper defined in the TNCg. Page 20

21 Part I Collateralization of the clearings 1. The Transaction clearing collateralization system. 1.1st The House shall establish and manage the system of collateralization of session transactions and OTC deals entered into on the exchange, basing on financial means accumulated in the Bank Accounts kept in the Clearing Bank for the Clearing Members of the House as well as on recognized non-pecuniary means registered in the Non-pecuniary Collaterals Register kept by the House. 1.2nd In the Clearing System each Clearing Member of the House has got its Accounting Account, the collateral account (that reflects current status of collaterals of its Transactions) is a component of which. 1.3rd On each day after accomplishing of quotations on DAM, IDM, DAMg, PRM, CFIM and EAM, till 4:00 p.m., the account balance is updated by receivables and liabilities reckoned during the clearing and settlement processes. 1.4th On each working day, after accomplishing of the clearing process, till 6:30 p.m., the account balance is updated on the grounds of the operations carried out in the Bank Account kept in the Clearing Bank for given Clearing Member of the House. Information pieces concerning the operations carried out in the Bank Account are received by the House from the Clearing Bank. 1.5th Updating of the collaterals shall be carried out in accordance with the following principle: a) payment into the Bank Account kept in the Clearing Bank shall increase collateral value in the collateral account, b) withdrawal from the Bank Account kept in the Clearing Bank shall reduce collateral value in the collateral account. 1.6th Before each Trading Day the House shall send to the Exchange the current Transaction Limit of the Clearing Member of the House, calculated as current holdings of the pecuniary resources deposited on the bank Account of given Clearing Member of the House, kept in the Clearing Bank, increased by recognized collaterals in non-pecuniary form, decreased or increased by balance of liabilities or receivables by the right of the Transactions, which have been entered into on the exchange as well as decreased by the Collateral Margins for the Commodity Forwards Instruments Market with Physical Delivery (CFIM). 1.7th The Transaction Limit that allows placing of the Order that shall be executed outside the system, mentioned in Article 3 item 23 of the Power Law Act, shall be established through relevant resolution of the WCCH Management Board. 2. The record-keeping devices. 2.1st The House keeps separate sets of the Recording accounts for individual Clearing Members of the House and if given Clearing Member of the House clears clients also for the clients of that Member as well as for individual markets Page 21

22 being cleared by the House, the Clearing Member of the House is participant of which. 2.2nd The Recording accounts set for the markets, electricity is object of trading on which, consists of recording accounts for delivery hours grouped into Portfolios assigned to the Scheduling Units. 2.3rd The Recording accounts set for the Property Rights Market consists o: a) The recording accounts for the PMOZE Certificates of Origin, b) The recording accounts for the PMOZE_A Certificates of Origin, c) The recording accounts for the PMMET Certificates of Origin, d) The recording accounts for the PMGM Certificates of Origin, e) The recording accounts for the PMEC Certificates of Origin, f) The recording accounts for the PMBG Certificates of Origin. 2.4th For the Emission Allowance Market (EAM) the House keeps one Recording account for the CO2 Emission Allowances for each Clearing Member of the House as well as for each client of that Member. 2.5th The Recording accounts set for the markets, gas is object of trading on which, consists of recording accounts for delivery hours or delivery days, grouped into Portfolios assigned to the Shipper Codes. 3. The collateral margins for the Commodity Forwards Instruments Market with Physical Delivery. 3.1st The value of the collateral margin is reckoned every day for each Clearing Member of the House. 3.1st1st The value of liabilities for the collateral margin is reckoned for each Clearing Member of the House and it is registered on control accounts of the initial margins and variation margins, kept within the framework of the accounting account. 3.1st2nd If given Clearing Member of the House clears its clients, the value of collateral margins, reckoned for the Clearing Member of the House, composes sum of the collateral margins, reckoned separately for each client, as well as the collateral margins for own positions of given Clearing Member of the House. 3.2nd In order to determine value of the collateral margins (the initial-and the variation margins), mentioned in paragraph 39 of the Regulations of the Exchange Clearing House, the positions taken by given Clearing Member of the House as well as by its clients are allocated to two baskets created according to the delivery periods, taking compensation of the positions within the framework of the delivery periods into consideration. 3.2nd1st The initial collateral margins a) The initial margins for electricity forward instruments with physical delivery are reckoned starting from the day on that the transaction is entered into, till the day before last Day of Delivery. Page 22

23 The margins are calculated according to the following algorithm: Where: Dw the initial margin value [zloty], LKi amount of electricity that has not been delivered and that falls to the purchase contracts for the i th delivery period [MWh], LSi amount of electricity that has not been delivered and that falls to the sale contracts for the i th delivery period [MWh], Kri the clearing price for the i th delivery period, i the delivery period, Pi risk parameter for the last day of the i th delivery period, N number of forward instruments with physical delivery delivery periods. b) The initial margins for Gas forward instruments with physical delivery are reckoned starting from the day on that the transaction is entered into, till the day before last Day of Delivery. The margins are calculated according to the following algorithm: Where: Dw the initial margin value [zloty], LKi amount of Gas that has not been delivered and that falls to the purchase contracts for the i th delivery period [MWh], LSi amount of Gas that has not been delivered and that falls to the sale contracts for the i th delivery period [MWh], Kri the clearing price for the i th delivery period, i the delivery period, Pi risk parameter for the last day of the i th delivery period, N - number of forward instruments with physical delivery delivery periods. 3.2nd2nd The variation margins a) The variation margins for electricity forward instruments with physical delivery are reckoned starting from the day on that the transaction is entered into, till the day before last Day of Delivery for given contract. The margins are calculated according to the following algorithm: Where: Du the variation margin value, ( ) ( ) Page 23

24 LKi amount of electricity that has not been delivered and that falls to the purchase contracts for the i th delivery period [MWh], LSi amount of electricity that has not been delivered and that falls to the sale contracts for the i th delivery period [MWh], Kri the clearing price for the i th delivery period, Kki average weighed price of purchase transactions of the contracts for the i th delivery period [zloty/mwh], Ksi average weighed price of sale transactions of the contracts for the i th delivery period [zloty/mwh], i the delivery period, N - number of forward instruments with physical delivery delivery periods. b) The variation margins for Gas forward instruments with physical delivery are reckoned starting from the day on that the transaction is entered into, till the day before last Day of Delivery for given contract. The margins are calculated according to the following algorithm: ( ) ( ) Where: Du the variation margin value, LKi amount of Gas that has not been delivered and that falls to the purchase contracts for the i th delivery period [MWh], LSi amount of Gas that has not been delivered and that falls to the sale contracts for the i th delivery period [MWh], Kri the clearing price for the i th delivery period, Kki average weighed price of purchase transactions of the contracts for the i th delivery period [zloty/mwh], Ksi average weighed price of sale transactions of the contracts for the i th delivery period [zloty/mwh], i the delivery period, N - number of forward instruments with physical delivery delivery periods If given Clearing Member of the House clears its own transactions only the collateral margin value is reckoned according to the following algorithm: ( ) Where: total value of the collateral margin, - the initial margin for electricity contracts, - the variation margin for electricity contracts, - the initial margin for Gas contracts, - the variation margin for Gas contracts In case when given Clearing Member of the House clears transaction of its clients the rule presented in item above shall Page 24

25 be applicable on the level of individual clients, while total value of the collateral margin reckoned for given Member of the House is equal to the sum of the collateral margins reckoned for individual clients and the collateral margins for own positions of the Clearing Member of the House. 3.3rd The electricity delivery periods 3.3rd1st The initial margin shall be calculated separately for each delivery period. One day shall be recognized as the delivery period if the delivery takes place within the period from one day to: a) 16 days, if Friday is the day the margin is reckoned on that, b) 15 days, if Saturday is the day the margin is reckoned on that, c) 14 days, if Sunday is the day the margin is reckoned on that, d) 13 days, if Monday is the day the margin is reckoned on that, e) 12 days, if Tuesday is the day the margin is reckoned on that, f) 11 days, if Wednesday is the day the margin is reckoned on that, g) 10 days, if Thursday is the day the margin is reckoned on that. 3.3rd2nd The week delivery periods, being in line with the deadlines for execution of the week contracts being under quotation, are created for the consecutive days. 3.3rd3rd The days, which are included in the week contract encompassing turn of two months, are allocated between two baskets: the days of the month coming to the end are allocated to the fist basket, while the days of the starting month are allocated to the second basket. 3.3rd4th If the delivery period of the last week contract being under quotation does not finish on the last day of the month the basket is created for the days starting from the first day after the last Delivery Day for the last week contract being under quotation, till the last day of that month. 3.3rd5th Consecutive delivery periods are created for days, which fall in line entirely with the month contracts being under quotation and create the month baskets. 3.3rd6th If the delivery period of the last month contract being under quotation does not finish on the last day of the quarter the basket is created for the days starting from the first day after the last Delivery Day of the last month contract being under quotation, till the last day of that quarter. 3.3rd7th Consecutive days, which are not encompassed by the delivery periods of the month contracts being under quotation, are grouped in quarter baskets. 3.3rd8th If the delivery period of the last quarter contract being under quotation does not finish on the last day of the year the basket is created for the days starting from the first day after the last Delivery Day of the last quarter contract being under quotation, till the last day of that year. Page 25