Polish case: Electronic Trading Platform for Treasury securities

Transcription

1 Polish case: Electronic Trading Platform for Treasury securities 4th Annual WB Government Bond Market Conference and Technical Workshop March 12-14, 2014 Bucharest, Romania

2 Content 1. Polish Primary Dealership System in short 1) Treasury Securities Dealers in ) Duties of Treasury Securities Dealers 3) Rights of TSDs 4) Selection of TSDs 2. Electronic trading platform 1) History 2) Market structure and segments 3) Participants 4) Settlement 5) Statistics 2

3 Treasury Securities Dealers in 2014 The title of Treasury Securities Dealer for the year 2014 was awarded to the following banks (the alphabetical order, in the competition held from October 31st, 2012 to September 30th, 2013): 1. Bank Handlowy w Warszawie S.A. (Citibank) 2. Bank Millennium S.A. (BCP) 3. Bank PEKAO S.A. (UniCredit) 4. Bank Zachodni WBK S.A. (Santander) 5. Barclays Bank plc 6. BNP Paribas S.A. 7. Deutsche Bank Polska S.A. (Deutsche Bank AG) 8. Erste Group Bank AG 9. Goldman Sachs International 10. HSBC Bank plc 11. ING Bank Śląski S.A. 12. mbank S.A. (Commerzbank) 13. PKO BP S.A. 14. Société Générale S.A. Oddział w Polsce. 3

4 Duties of TSDs Participation in auctions of Treasury bonds and bills Purchase each quarter no less than minimum required share (50% divided by the number of TSDs selected for a given year) of the total weighted face value of Treasury Securities sold at auctions (weights: for TS with maturity less than 4 years 0.5, for TS with maturity equal or above 4 years 1.5) Submitting bid and offer prices for benchmark TS on the electronic market for at least 5 hours per day Participation in everyday fixing sessions of TS Quoting bid/offer TS prices at any request of the Minister of Finance Cooperation with the Minister towards further development of the transparent, liquid and efficient TS market Undertaking actions aimed at widening of the investor base. Promotion of the TS market Duly fulfilment of duties resulting from the participation in the depository/clearing systems. 4

5 Rights of TSDs Exclusive right to submit bids at all auctions (including switching and buy-back auctions) of Treasury Securities Purchase of TS at non-competitive auctions Exclusive rights or preferences in concluding individual transactions with the Minister of Finance, including: repo and buy-sell back transactions hedging transactions private placement transactions securities issuances on foreign markets other financial transactions defined by the Minister Exclusive right to use the title of a Treasury Securities Dealer in a given year (during the term of the Agreement on fulfilling the function of TSD) Regular meetings with representatives of the Minister of Finance in order to discuss issuance policy, plans for financing state budget borrowing needs and financial market conditions and to solve material, organizational and technical problems connected with functioning of the TS market (Market Participants Council) 5

6 Selection of TSDs Competitive process rules of candidates performance evaluation defined in The Rules and Regulations Governing the Activities of the Treasury Securities Dealers (updated annually) Competition organized every year, lasting 12 months (4 quarterly assessments) Competition for TSDs in the year T starts in October of the year T-2 and ends in September of the year T-1 Example Competition for TSDs in 2015 Beginning date: 1 October 2013 End date: 30 September 2014 Results announced: October/November Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 TSD C O M P E T I T I O N 1 October September 2014 Final results / Signing of agreements 6

7 Selection of TSDs details Criteria used for evaluation of TSDs and candidates performance: 1. Activity on the primary TS market (40%) Percentage share of total (weighted) face value of TS sold at auctions within a given Competition period Positive or negative scoring possible 2. Activity on the secondary TS market (40%) Quality quotation index - evaluation of the activity on the interbank market, calculated as weighted mean of spread (75%) and volume (25%) and of quoting time 3. Co-operation with the Minister (20%) Consultations on issuance policy (market preferences, expected demand on auctions) Consultations on current financial markets situation Quality of quotations of TS and other financial instrument provided at the Minister s request Other activities (duly participation in the depository systems, cooperation towards further development of the transparent, liquid and efficient TS market, widening the TS investor base and promoting the government TS market). 7

8 Further assessment of TSDs 1. Three additional measures of TSDs performance, linked to the TSDs requirements listed before 2. Measures are binary, i.e. requirement fulfilled or requirement not fulfilled 3. If any of the requirements is not fulfilled in two consecutive quarters, TSD looses its status Meeting the minimum required share a TSD is obliged to purchase in each quarter Performance for TS benchmark quotation not lower than 90% Performance for TS fixings not lower than 90% 8

9 Electronic trading platform Treasury BondSpot Poland is an electronic secondary trading market for Treasury Securities and has become an integral part of the Primary Dealership system which was developed by the Ministry of Finance in cooperation with the National Bank of Poland, the National Depository for Securities, and banking environment in 2002 (former Electronic Treasury Securities Market by 2004, then MTS Poland and since 2009 under the present name). Domestic Treasury bonds turnover structure in Jan 2014 OTC market (93.3%) TBS Poland (6.7%) Warsaw Stock Exchange (0.01%) 9

10 Electronic trading platform history The TBSP platform is operated by BondSpot S.A. Jan 1996 Centralna Tabela Ofert S.A. (CeTO) April 26, st transaction on the electronic market ING Bank Śląski bought TS-bonds of PLN 5mio from Raiffeisen Bank Polska Jun 2001 new CeTO due to consolidation of CeTO and Polska Giełda Finansowa (Polish Financial Exchange) mid-2001 Creation of Electronic Treasury Securities Market 2005 Foreign banks entered the market for the 1st time May 2004 MTS CeTO S.A. due to alliance with MTS group Sep 2009 BondSpot S.A. as WSE increased its shares to 92.47% (May 2009) Recently: Feb 2011: Treasury BondSpot Poland Index (TBSPIndex) - Poland s first official T-bonds index, universal market tool and benchmark for retail and institutional investors to measure their investment decisions; portfolio comprises of 3 zero coupon bonds and 14 fixed rate bonds of 5Y, 10Y, 20Y maturity; denominated in PLN) Jan 21, 2013: EUR denominated T-bonds on TBSP (12 bonds maturing from 2014 to 2025) 10

11 Electronic market structure BONDSPOT S.A. WSE TREASURY BONDSPOT POLAND Organized, non-regulated market CATALYST wholesale markets Regulated market Alternative Trading System CATALYST retail markets Regulated market Alternative Trading System 11

12 Catalyst Launched together with the Warsaw Stock Exchange on Sept 30, 2009 Electronic trading platform for debt securities: Corporate bonds Municipal bonds Mortgage bonds Treasury bonds (less popular) Operates on 4 transaction platforms: Regulated market operated by BondSpot (wholesale market) Regulated market operated by WSE (retail market) Alternative Trading System operated by BondSpot (wholesale market) Alternative Trading System operated by WSE (retail market) Operated by 22 domestic brokerage houses and banks (BondSpot platforms) Dedicated to institutional and individual investors - adapted to all issuers needs seeking for financing their capital needs via private placement or public offering for securities of different size and parameters As of Jan 2014 over 240 series of 90 local and foreign issuers have been listed on two markets operated by BondSpot with turnover value of almost PLN 90mio and outstanding value reaching over PLN 500bn (0.02%).. 12

13 Electronic trading platform - segments TREASURY BONDSPOT POLAND CASH market (2002) REPO market (2003) TS Fixing Sell/Buy Back TBSP.Index Repo General Collateral (2009) 13

14 Electronic market participants TREASURY BONDSPOT POLAND Market Maker (TSDs) Market Makers (non-tsds) Market Takers Institutional Investors 1. Bank Handlowy w Warszawie S.A. 2. Bank Millennium S.A. 3. Bank PEKAO S.A. 4. Bank Zachodni WBK S.A. 5. Barclays Bank plc 6. BNP Paribas S.A. 7. Deutsche Bank Polska SA 8. Erste Group Bank AG 9. Goldman Sachs International 10. HSBC Bank plc 11. ING Bank Śląski S.A. 12. mbank S.A. 13. PKO BP S.A. 14. Société Générale S.A. Oddział w Polsce. 15. Banco Espirito Santo de Investimento S.A. 16. Bank BPH S.A. 17. Bank Gospodarki Żywnościowej S.A. 18. Bank Gospodarstwa Krajowego 19. FM Bank PBP S.A. 20. JPMorgan Securities plc 21. Raiffeisen Bank Polska S.A. 22. UBS Ltd 1. Deutsche Bank AG 2. Getin Noble Bank S.A. 3. Merrill Lynch International 4. Morgan Stanley & Co. International plc 5. Nomura International plc 6. Standard Bank plc 7. Unicredit Bank AG 1. Alior Bank S.A.* 2. Bank Pocztowy S.A.* 3. Bank Polskiej Spółdzielczości S.A.* 4. OFE PZU "Złota Jesień" * Repo market only 14

15 Electronic market participants cash market Market Makers Eligible financial institutions designated as TSDs by the MoF and other institutions willing to participate as MM Must have net worth of at least EUR 50mio Must commit to market making obligations for assigned securities with a defined maximum spread and a minimum size according to the market rules Market Takers Eligible financial institutions Must have net worth of at least EUR 30mio Cannot enter quotes into the system but can place orders against quotes provided by Market Makers Institutional Investors: Must fulfil two from the following: Balance sheet total of at least EUR 20mio Annual net turnover of at least EUR 40mio Must have net worth of at least EUR 2mio Allowed to trade on the repo market as well as on the cash market in a separate institutional segment (B2C) or act via RFQ. 15

16 Electronic market participants MM Market Makers obligations: Two way proposals must be displayed for benchmark securities for at least 5 hours per day with a defined maximum spread and a minimum size Maturity Max B/A spread Min quantity Short term up to 1yr - - Bucket A +1yr 2.5yrs 20 ticks PLN 10mio Bucket B +2.5yrs 6yrs 30 ticks PLN 10mio Bucket C +6yrs 11 yrs 45 ticks PLN 10mio Bucket D +11yrs 60 ticks PLN 10mio 16

17 Electronic market traded securities SERIES ISIN CODE MATURITY COUPON FIXING BENCHMARK OK0714 PL % X WZ0115 PL floating X PS0415 PL % X X OK0715 PL % X DS1015 PL % X X OK0116 PL % X PS0416 PL % X X OK0716 PL % X IZ0816 PL % X PS1016 PL % X X WZ0117 PL floating X PS0417 PL % X X DS1017 PL % X X WZ0118 PL floating X PS0418 PL % X X PS0718 PL % X X WZ0119 PL floating X DS1019 PL % X X DS1020 PL % X X WZ0121 PL floating X DS1021 PL % X X WS0922 PL % X X IZ0823 PL % X DS1023 PL % X X WZ0124 PL floating X WS0429 PL % X 17

18 Electronic market repo market Market Makers Repo transactions: Classic repo BSB/SBB T-bonds subject to repo transaction: individual traded securities (excluding indexed bonds) baskets of traded securities under General Collateral transactions (TS subject to fixing excluding indexed bonds and T-bills, 4 series max) Minimum trading quantity on the Repo Market is PLN 2.5mio for securities denominated in PLN EUR 0.5mio for securities denominated in EUR The conditional (repo) transactions may be concluded through: anonymous Proposals and Applications non-anonymous Proposals, Applications and RFQ (collectively called proposal on the repo market) made by Participants Conclusion of transaction is made by the Participants manual acceptance of the whole or partial order and its manual confirmation by the other party of the contract. 18

19 Electronic market trading and settlement Trading hours: 9.00 a.m. - 5 p.m. Monday to Friday, excluding holidays Real-time information on current offers and transactions concluded on TBS Poland (distributed via MTS and WSE) and the fixing on bonds are presented in the news bulletins Bloomberg and Reuters Daily market data and statistics are published after a trading day is finished Settlement All trades executed on BondSpot markets are settled by the National Depository for Securities (T-bonds and other debt instruments) and the National Bank of Poland (T-bills) Cash market transactions in traded securities are settled: at T+2 time, where T is the date of the transaction. at T+3 time for securities denominated in EUR Conditional (repo) transactions are settled: at T+0 time or another time agreed by the parties of transaction in case of the opening transaction at time agreed by the parties of transaction, after the day of settlement of opening transaction but no later than 365 days after the opening transaction settlement day in case of the closing transaction. 19

20 Electronic market statistics monthly average turnover Significant change since Nov 2011 when new regulations were introduced The highest increase in TBSP market share in the T-bonds market; in 2012 above the level of 12%, by 2013 at the level of 9%. * Turnover single counted. 20

21 Electronic market statistics annual turnover * Turnover single counted. 21

22 Electronic market statistics effects of new TSD rules on volumes 22

23 Electronic market statistics effects of new TSD rules on volumes 23

24 Electronic market statistics effects of new TSD rules on spreads Significant contraction in bid-ask spread since the new regulations were introduced 24

25 Thank you for your attention Ministry of Finance Bloomberg: PLMF <GO> Reuters: PLMINFIN

26 Selection of TSDs previous rules Criteria used for evaluation of TSDs and candidates performance until the competition in 2012: Market share in OTC outright inter-bank transactions on TS Market share in OTC outright transactions on TS with non-banking clients Market share in outright transactions on the Electronic Market (calculated for own price and another entity s price separately) Market share in repo, sell-buy back and buy-sell back transactions on TS Share in the turnover on FRA and IRS market (in Polish Zloty) Market share in transactions on Polish government securities denominated in euros Other (location of dealing activities, quality of TS quotations submitted at the request of the Minister of Finance, cooperation with the Minister of Finance with regard to issuance policy and financial market functioning). 26

27 Selection of TSDs rationale for changes Preservation of the stimulating mechanism of TS market development and selection of banks with the greatest potential and activity on the market Preservation & strengthening of the mechanism that ensures safety of financing of State borrowing requirements Preservation of the mechanism promoting Electronic market transactions as the one significantly increasing transparency of the TS market Simplification of rules that used to be in force and elimination of redundant criteria Eliminating as much as possible those elements that might distort proper evaluation of banks Taking into account propositions submitted by current TSDs Taking advantage of practices of other European countries with TSD system. 27