Existing regulations will be modified by introducing the Settlement Agent function. According to the new solution, a KDPW_CCP clearing member will not be required to hold a depository account with KDPW. In this case, the member’s transactions will be settled in the depository account of the member’s Settlement Agent. This means that KDPW_CCP clearing members need not be KDPW direct members.
The introduction of the Settlement Agent functionality will broaden the scope of services and entities active in the business area of the clearing house KDPW_CCP and increase the volume of trading on the regulated market. Foreign financial institutions were previously unable to operate directly as clearing members and their operation via local representatives was very limited, mainly due to the latters’ concern with excessive risks of participation in the clearing guarantee system.

With the Settlement Agent functionality and the operation of the KDPW_CCP clearing house equipped with the necessary capital and an effective risk management system based on recognised methodology, foreign financial institutions can become KDPW_CCP clearing members directly as of 1 June 2011.

Foreign investment firms:

• are KDPW_CCP members with clearing member (“UR”) status;
• are not KDPW (CSD) members – cannot operate securities accounts (need not open a branch in Poland);
• sign an agreement with one entity acting as Settlement Agent (“AR”) in KDPW;
• indicate AR’s account to KDPW_CCP and present a declaration indicating the Settlement Agent and the Agent’s declaration of acceptance;
• execute cash payments under current market settlements;
• are exclusive members of the clearing guarantee system (“SGR”) (pay contributions via the payer bank; securities credited to SGR are contributed in KDPW from UR’s account operated by AR).

 

The proposed solution will enable local custodians to enjoy the benefits of operating accounts without incurring risks. Foreign financial institutions will be able to operate freely on the Polish market in full compliance with FSA (UK’s Financial Service Authority) regulations.

In the absence of such solutions, foreign entities were previously forced to incur costs of the operation of a branch in Poland or the services of a local clearing member.