National Depository for Securities (KDPW)
Warsaw, 25 October 2011
.
Overview of the Polish Capital Market
Polish Financial Supervision Authority (KNF)
Markets
National Depository for
Securities (KDPW)
Warsaw Stock Exchange,
Bondspot, Catalyst,
New Connect, OTC
KDPW_CCP
National Bank
of Poland
(Clearing Bank)
Institutional
investors
Financial
institutions &
Intermediaries
Issuers
Individual
investors
2
KDPW – Introduction
 Responsibilities:





Central securities depository
Clearing house
Settlement
Custody
Risk management
 Clients:
 Issuers (foreign & domestic)
 Intermediaries (custodian banks & brokers)
3
KDPW – Ownership
 1991 - 1994
An integral part of the Warsaw Stock Exchange
 1994 - Present
Independent joint - stock company
 Current shareholders
 KDPW (CSD) - (since 1999)
 The State Treasury
 The Warsaw Stock Exchange
 The National Bank of Poland
- 1/3
- 1/3
- 1/3
 KDPW_CCP - (from 1 July 2011 )
 KDPW
- 100%
4
Main KDPW Responsibilities
KDPW_CCP


Clearing of transactions executed on:
 Regulated markets: Warsaw Stock Exchange, BondSpot
 Non-regulated markets: New Connect, Treasury BondSpot-Poland, OTC
Risk management –management of:
 Settlement Guarantee Fund covering regulated markets & ATS
 Margaining for cash and derivatives market
 Collateralisation of security loans in automatic securities lending - borrowing
system
KDPW (CSD)






Safekeeping and custody of all securities admitted to trading following public issue
Reconciliation and monitoring
Asset management
Settlement of transactions executed on:
 Regulated and non-regulated markets
 OTC
Processing of corporate actions
Assigning ISIN codes for Polish issues (National Numbering Agency)
5
Separation of functionality between
KDPW CSD and KDPW_CCP
KDPW (CSD)
KDPW_CCP
Clearing of
guaranteed
trades
Safekeeping
Settlement
Risk
Management
Collateral
Management
Corporate
Actions
Asset
Management
Database
Administration
6
Securities registered in KDPW

All securities admitted to trading in the regulated market
must be registered in KDPW

Currently, the following securities are recorded in the KDPW system:
 Shares (foreign and domestic)
 Bonds (Treasury, Central Bank, Corporate, Municipal, Convertible, EIB,
with priorities rights, non-public bonds, mortgage bonds)
 Exchange Traded Funds (ETFs)
 Investment Fund Certificates
 Derivatives
 Futures Contracts (WIG20 index, currency, share)
 Index Participation Units
 Options (European style), (WIG20 index, share)

Exception: Treasury bills - custody, clearing and settlement
in the National Bank of Poland system
7
Capitalisation of securities
140
120
EUR bln
100
80
60
40
20
0
12-2002
12-2003
12-2004
12-2005
shares
12-2006
bonds
12-2007
12-2008
12-2009
12-2010
09-2011
other securities
Capitalisation of shares, bonds and other securities registered in KDPW
(bln. EUR)
8
Regulated market trades turnover
160
EUR bln (single count)
140
120
100
80
60
40
20
0
2002
2003
2004
2005
cash market
2006
2007
2008
2009
2010
2011.01 2011.09
derivatives market
Regulated market cash and derivatives turnover
(bln. EUR)
9
OTC trades turnover
EUR bln (single count)
2 500
2 000
1 500
1 000
500
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011.01 2011.09
interbank transactions
repo transactions - between the NBP and a bank
Treasury BondSpot Poland transactions
Alternative Trading System
10
Number of transactions settled
20
Milions (single count)
18
16
14
12
10
8
6
4
2
0
2002
2003
2004
2005
2006
derivatives market
2007
2008
2009
2010
2011.01 2011.09
cash market
11
Foreign investors in Polish market
Foreign investors in Polish market (share of cash market turnover) –
Stock Exchange (H1 2011)
Individual investors
18%
Institutional investors
48%
34%
Foreign investors
Source: Warsaw Stock Exchange
Foreign investors in Polish market (ownership) –
Treasury bonds (August 2011)
36.3 billion EUR
30%
Foreign investors
121.5 billion
EUR
70%
Domestic Investors
Source: Polish Ministry of Finance
12
The National Depository for Securities (KDPW)
Clearing & Settlement
13
Clearing & Settlement (until Q1 2011)
Trade
execution
Markets (regulated & OTC)
Clearing
Clearing &
Settlement
Guarantee system
KDPW_CLEARPOOL
Settlement
Custody
Central Bank system
14
Clearing & Settlement (from July 2011)
Trade
execution
Markets (regulated & OTC)
Clearing
Clearing
Risk Management system
KDPW_LEARPOOL
Settlement
Central Bank system
Settlement
Custody
15
Basic principles
 All securities cleared and settled in KDPW are dematerialised
 All securities transfers are made by book-entry in KDPW depository, clearing
& settlement system
 Transfers are made between KDPW participant accounts
- Mandatory asset segregation (own assets, client assets)
 Change of ownership at the moment of book-entry
 Clearing & Settlement service for transactions from:
- WSE, BondSpot, New Connect (ATS), Treasury BondSpot Poland
 DvP Settlement model:
- BIS model I, BIS model II
 Settlement :
- T+2, T+3 - for regulated - market trades – SE, BondSpot
- T+0 to T+n - for non-regulated market transactions – OTC
 Two settlement channels:
- RTGS DVP 8.00-17.00, FOP 8.00-18.30
- multiple batch system 7.30-18.45
16
Basic principles
 Daily settlement schedule : multibatch and RTGS
 6 settlement sessions a day with intra-day finality
after each session
RTGS
8.00
BATCHES
7.30
Technical
10.30
DVP
FOP
FOP
13.00
DVP
FOP
17.00
15.30
18.30
18.30
FOP
18.45
Technical
17
Basic principles
 Cash leg settlement
 Central Bank Money - in the National Bank of Poland for
PLN and Euro
 Commercial Bank Money for other currencies
 Settlement liquidity facilities
 securities L&B automatic and on-request
 repo
 buy-in, sell-out
 transactions from regulated market guaranteed by the
Settlement Guarantee Fund, by the collateral system (for
derivatives only) and KDPW_CCP
 transactions from ATS (unregulated market) guaranteed
by special ATS guarantee fund
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Cash settlement side (CBM)
 Agreement between Central Bank (CB) and KDPW
 Authorisation for KDPW to debit Payment Bank (PB) accounts

Cash Settlement on PB accounts in CB

Payment banks: banks having status of KDPW participant and holding
cash account in CB PAYMENT SYSTEM

Payment bank responsible for settlement of:

its own and its clients transactions

transactions executed by Clearing Members (CMs) which are not
allowed to have a cash account in CB
 KDPW informs PB about net cash positions to be paid on S
 KDPW sends payment instructions to CB using CB interface
19
KDPW in the Polish capital market
Post-trading processing flow
Seller
Buyer
Trade
Trade execution
Securities accounts
of the Seller / seller’s
custodian
Cash accounts of the seller/
seller’s custodian cash clearer
in NBP
Markets
Trade feed = Already
matched for settlement
Trade
Trade execution
Securities accounts
of the Buyer /
buyer’s custodian
Cash accounts of the
Buyer/ buyer’s custodian
cash clearer in NBP
20
Life cycle of settlement instruction
T
S
T
WSE
CLEARING
VALIDATION
INPUT
BondSpot
(KDPW_CCP)
New Connect
S
T+3
INPUT
VALIDATION
MATCHING
CLEARING
MATCHING
SETTLEMENT
VALIDATION
INSTRUCTIONS
POST- TRADE
SETTLEMENT
T+2
Locked-in
TRADES
Treasury
BondSpot
Poland
SETTLEMENT
T+2
T+n
TRADES
Bilateral cancellation
Unilateral cancellation
INPUT
VALIDATION
MATCHING
CLEARING
T+n
INSTRUCTIONS
SETTLEMENT
INPUT
OTC
S
INSTRUCTIONS
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Order that funds in the guarantee system are
initiated in KDPW_CCP
Credits due to insolvent CM
Margins (cash and derivatives)
Standard contributions of insolvent CM
Standard contributions of remaining CMs
Guarantee
Fund
50% max additional contributions (limited to110% of the standard
contribution)
20 million PLN from KDPW_CCP assets
Decision of the KDPW Management Board
50% max additional
contributions (limited to110%
KDPW_CCP assets
Total
KDPW_CCP
capital:
PLN 100 million
of the standard contribution)
Decision of the KDPW Management
Board
22
kdpw_stream – System architecture - August 2009
Clearing
banks
Participants
Markets
WWW
SWIFT
External communication
Processing of
cash market
MB
RTGS
Processing of
derivatives
market
Risk module
Asset
Management
Data flow
Collateral
register
Corporate
actions
Transfer
payments
Static data
23
The National Depository for Securities (KDPW)
Cross Border Settlement
24
Links with foreign CSDs
Links created with foreign CSDs (FOP links) in connection with the
dual listing of shares on the WSE. Currently there are 8 direct links
and 9 indirect links into 20 foreign markets
Euroclear
Sweden
EVK
Principles of cross-border transfers
• Transfer executed between investor’s account in one country and
the same investor’s securities account in the second country before
trading can take place – there is no change of ownership,
• Shares need to be registered on KDPW account in foreign
intermediary to be traded on the WSE,
• Transfers are free of payment (FOP),
• Foreign shares quoted on WSE in PLN,
• Clearing and settlement in KDPW in PLN,
• Dividends paid to Polish shareholders in foreign currency or PLN
following f/x conversion,
• Transfer based on SWIFT (ISO 15022 messaging standards),
• The transfer may be settled intra-day (RTGS in KDPW).
26
Free of Payment cross-border links
between KDPW and foreign CSD – Share transfer
Transfer of shares prior to a Warsaw Stock Exchange transaction executed between
a Polish and foreign investor using a FOP link
Foreign investor wishing to
sell shares on the
Warsaw Stock Exchange
2
Transfer order
Instruction to receive shares
Entity managing foreign investor’s
securities account in Poland
1
Instruction to deliver
shares FOP
3
5
Matching of instructions (1&4)
in Foreign CSD
Foreign CSD
6
4
Instruction to receive shares FOP (MT540)
KDPW
Account
Investor’s
Account
Instruction to
receive shares
Receive FoP Transfer confirmation (MT544)
Transfer of shares to KDPW omnibus account
following matching
7
27
National Depository for Securities (KDPW)
Strategy 2010 - 2013
28
KDPW Group corporate values
Innovation in technology and operations with the aim of introducing new
services, providing a rapid response for to the needs of the market while
providing cost efficient clearing and settlement
Reliability built on its daily business operations that grow the Polish financial
market
Compliance with international clearing and settlement standards and a world
class IT infrastructure
Efficiency ensuring the safety, business continuity, high standards and timely
execution of clearing and settlement services
29
KDPW Group – Strategic Goals
(1) Strengthening the new KDPW Group business model
(2) Positioning the KDPW Group in the region and integration with European
infrastructures
(3) Introduction of new services to increase the value of the KDPW Group
(4) Raising the standard and scope of services currently provided
(5) Promotion and sale of KDPW Group services
30
KDPW - New Strategy, New Services
New services for foreign financial intermediaries:



Omnibus accounts
Separation of Clearing Member and Settlement Agent status
Hold-Release mechanism
Other future services:
 KDPW_CCP
 SPAN methodology
 Netting in securities
 CCP for OTC
 KDPW (CSD)
 Partial settlements
 TARGET2
 TARGET2-Securities
 Lending and borrowing system (in cooperation with KDPW_CCP)
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www.kdpw.pl/en
www.kdpwccp.pl/en
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