OTC Clearing in KDPW_CCP. Warsaw, October 2013

Transcription

1 Warsaw, October 2013

2 Agenda Market Infrastructure in Poland About KDPW_CCP OTC Clearing in KDPW_CCP 2

3 Market Infrastructure in Poland KDPW_CCP and KDPW 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

4 Market Infrastructure in Poland Clearing and Settlement Trading Warsaw Stock Exchange BondSpot OTC KDPW_CCP Clearing Clearing Risk Management System Settlement KDPW Settlement CSD Trade Repository National Bank of Poland 4

5 About KDPW_CCP Ownership Structure History of KDPW (the CSD) 33% WSE NBP ST 33% Integral part of the Warsaw Stock Exchange 33% present 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 100 % KDPW_CCP (July 2011) KDPW 100% of shares KDPW_CCP own capital: PLN 218 M (ca. EUR 52 M) 5

6 About KDPW_CCP International Cooperation KDPW_CCP: Membership of international organisations and working groups EACH European Association of Central Counterparties Clearing Houses EACH Policy and Risk Committee EACH Derivatives Working Group CCP12 Global Association of Central Counterparties CCP12 Working Group 2 Review of CPSS-IOSCO Standards and key recent regulatory publications CCP12 Working Group 3 Default Contact List and Information Sharing ISDA The International Swaps and Derivatives Association 6

7 About 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, SWIFT Accord) 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 7

8 About KDPW_CCP Advantages The most important clearing corporation on the Polish financial market Central counterparty (CCP) functionality through novation Harmonisation with the capital requirements (CCP capital: PLN 218M, EUR ca 52M) Order of using the resources of the clearing guarantee system compliant with EMIR OTC clearing service Application for Authorisation of KDPW_CCP with the Polish Financial Supervision Authority (28 June 2013) Additional service: Reporting to a Trade Repository (service offered by KDPW, non mandatory) Application for registration of Trade Repository with the European Securities and Markets Authority (2 May 2013) Designated capital for Trade Repository service (PLN 4M, ca. EUR 1M) LEI assigning 8

9 About KDPW_CCP Risk Management SPAN Methodology regulated market & ATS Value at Risk OTC market 9

10 About KDPW_CCP Basic Statistics* Number of KDPW_CCP s Participants: 41 Number of KDPW_CCP s Participants in OTC clearing: 8 Cleared transactions in 2012: Number of cleared transactions cash market: 12,360,541 Value of cleared transactions cash market: EUR 45,398,029,457 (PLN 189,879,742,876) Number of cleared transactions derivatives market: 3,201,151 Value of cleared transactions derivatives market: EUR 51,708,724,706 (PLN 216,632,191,159) 10

11 Why KDPW_CCP? Access to the Polish market Clearing performed in PLN in central bank money across member accounts in the National Bank of Poland Collateral in Polish Treasury bills, bonds and local currency Effective collateral management Stable banking system Effective and efficient clearing system High risk management standards Reduced risk for cash, derivatives and OTC trades Standard default procedures 11

12 Cleared instruments (1) List of instruments cleared or planned to be cleared in KDPW_CCP: Phase 1: January 2013 Forward Rate Agreements Interest Rate Swaps Overnight Index Swaps Basis Swaps REPO PLN Phase 2: beginning of EURIBOR/EONIA contracts: FRA OIS Basis Swap IRS FX instruments PLN and EUR 12

13 Cleared instruments (2) Phase 3: middle of 2014 (in line with market demand) 1. Interest rate derivatives cleared in currencies other than PLN and EUR: FRA OIS Basis Swap IRS 2. Cross-currency derivatives: CIRS FX Forward FX Swap 13

14 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 14

15 System Functions (1) Communication with KDPW_CCP is possible through the information exchange system (SWI) operated by KDPW based on proprietary or SWIFT solutions. KDPW_CCP clears trades in central bank money using clearing member accounts in the National Bank of Poland. Trades cleared by KDPW_CCP can be reported on behalf of a clearing member to the trade repository operated by KDPW or another registered trade repository. Daily reporting to KDPW_CCP participants. 15

16 System Functions (2) Bank A Confirmation platforms* Communication National Bank of Poland Trade repository (KDPW or other) SWIFT or SWI Bank B CSD (KDPW) settlement for repo collateral safekeeping * Repo transactions confirmation in KDPW_CCP 16

17 Segregation of positions and assets Compliance with EMIR Art. 39 Segregation and portability KDPW_CCP keeps separate records and accounts for: its own assets clearing members assets clients assets KDPW_CCP offers 3 levels of segregation on clearing and collateral accounts: clearing members own positions and assets positions and assets of a group of clients (omnibus client segregation) positions and assets of individual clients (individual client segregation) The choice of a given segregation level entails no additional costs for clearing members or clients 17

18 Clearing Day Timetable (CET) Day 1: 09:00-17:00 input of derivative and repo trades for clearing; - risk monitoring input of repo trades for clearing settlement in T+0 17:15 netting session - calculating debits and credits for each clearing member Day 2: 08:00-08:45 transfers to and from clearing members as a result of the calculations from the preceding day 18

19 Instruments Valuation Rules Methods broadly used by market participants 4 separate forecasting curves which correspond to instrument tenor OIS curve (OIS contracts) 1M curve (FRA, IRS, Basis Swap) 3M curve (FRA, IRS, Basis Swap) 6M curve (FRA, IRS, Basis Swap) Master curve 3M - for discounting future cashflows Floatleg bootstrapping The final floating coupon is derived from all known fixed coupons and floating coupons for the swap Forward rates source fixing performed by ACI Polska* (the Polish Financial Markets Association) from 21 January The biggest banks based in Poland have announced their participation in the fixing. * ACI Polska is an organization of people with a professional interest in the international and domestic monetary-currency. Affiliated with the Financial Markets Association. 19

20 KDPW_CCP Clearing Guarantee System Participant financial and prudential requirements Margins OTC Default Fund KDPW_CCP own capital 20

21 Margins Historical simulation model 5-day 99,5% VaR 10-year observation window 21

22 Acceptable Collateral Polish Treasury Bonds Polish Treasury Bills Cash PLN Shares (WIG20) Planned: Eurozone Treasury Bonds Cash EUR 22

23 Default Waterfall Credits of defaulting entity Individual margins of the defaulting entity OTC Default fund contributions of the defaulting entity KDPW_CCP own capital (proportionate part of 25% of the min. required capital*) OTC Default fund contributions of the non-defaulting members Remaining KDPW_CCP own capital to the point of 110% of the minimum capital requirement Additional contributions of non-defaulting members (maximum 50% of the last basic contribution) * According to EMIR Regulation 23

24 Close-out netting For limiting mutual risk in the OTC market close-out netting used in the case of default of KDPW_CCP or its clearing member In the case of KDPW_CCP default event (i.a. failure to make a payment, bankruptcy, opening of liquidation), a clearing member is entitled to terminate its membership with immediate effect A clearing member calculates the close-out netting value into a single net payable or receivable Close-out netting provisions in KDPW_CCP rules and regulations to be soon in force pending formal approval of the Polish Financial Supervision Authority 24

25 Client Clearing / NCM trade in KDPW_CCP Trade status Clearing status Transaction execution Confirmation Trade status Clearing status 25

26 KDPW_CCP s services for Members KDPW_CCP s offer for CM includes: trade status reporting margin information what if trades assets and trade valuation easy trade termination flexible reporting tool segregated accounts KDPW_CCP s offer for NCM includes: segregated accounts clearing reporting margins reporting positions and assets transfer in case of default of CM

27 How to Become a Clearing Member Preliminary (test) phase Possibility to conduct tests before becoming participant Concluding membership agreement Membership application (with required documents enclosed) Meeting financial requirements (maintaining adequate levels of equity and prudential requirements) Meeting technical requirements (e.g. setting up connection with KDPW_CCP IT system used to clear OTC trades, signing contract with SWIFT or MarkitSERV) After signing membership agreement Contributions to OTC Default Fund Payment of initial margin Opening clearing account in OTC clearing system All information regarding membership you can find on our website: Rules OTC trading 27

28 Types of Participation The following types of participation status are admitted: 1. General clearing member where the clearing member is responsible in the OTC clearing system for trades executed and confirmed: a/ by itself on an electronic platform, on its own account or on its clients account, and b/ by another entity, including another participant, on an electronic platform, on the own account of that entity or on its clients account; 2. Individual clearing member where the clearing member is liable in the OTC clearing system for trades executed or confirmed by itself on an electronic platform, on its own account or on its clients account; 3. Clearing house 4. Non-clearing member - where the participant executes trades outside organised trading which are cleared in the OTC clearing system, while at the same time not being a clearing member acting with the participation type referred to in point 1, 2 or 3. 28

29 Conditions and Capital Requirements Main conditions for KDPW_CCP clearing members: to hold a depository account or securities account with a settlement institution responsible for the settlement of transactions, or to have a settlement agent with the settlement institution (applicable to foreign financial institutions); to hold a bank account with the relevant settlement bank in the currency of the planned clearing of transactions handled by KDPW_CCP or to have a payment agent holding such an account with the settlement bank. Capital requirements for KDPW_CCP Participants in OTC clearing: General clearing member PLN 100 M (ca. EUR 25 M) Individual clearing member PLN 50 M (ca. EUR 12.5 M) Clearing house PLN 100 M (ca. EUR 25 M) 29

30 Fees Participation fees: One-off fee for an entry in the register of participants: PLN 50,000 (ca. EUR 12,000) Annual participation fee (50% of the fee for NCM): PLN 20,000 (ca. EUR 5,000) Fees for transaction clearing: charged on a monthly basis calculated as the relevant rate (for a given transaction type and maturity bracket) multiplied by the sum of nominal amounts of transactions sent within the relevant period Forward Rate Agreement: (0;6M] %; (6M;1Y] %; (1Y;2Y] % Interest Rate Swap : (0;6M] %; (6M;1Y] %; (1Y;2Y] %; (2Y;5Y] %; (5Y;10Y] %; (10Y;15Y] %; (15Y;20Y] % Repo transactions: (0;1W] %; (1W;2W] %; (2W;1M] %; (1M;3M] %; (3M;6M] %; (6M;12M] %; (12M;5Y] % Other fees (including for additional services) 30

31 Contact: Marcin Truchanowicz Managing Director E: T: Żaneta Skorupska-Świrska Deputy Managing Director E: T: Further information, documents and regulations you can easily find on our website: HelpDesk: