Introduction of securities netting to cash market clearing
The securities netting mechanism on the cash market introduces a new service to be offered by KDPW_CCP. Thanks to the mechanism, only one settlement instruction (covering both securities and cash settlement) can be generated by KDPW_CCP for the National Depository or another settlement institution including all credits and debits for a registration account operated by the National Depository or another settlement institution.
The introduction of the netting mechanism raises the standards of the clearing process. Thanks to a significant reduction of the number of instructions sent for settlement, the cost of trade settlement will be much lower.
The timetable of the project “Introduction of securities netting on the cash market” is comprised of two-staged implementation:
1. Work in the first phase of the project will prepare the kdpw_stream system and KDPW_CCP Participant systems for later implementation of netting in parallel with the work harmonising the systems with the WSE’s new trading system. Implementation materials and dates for the functionalities introduced in the first phase of the project (calculating clearing positions and reporting to KDPW_CCP Participants, generating ISO 20022 CCP Clearing messages for KDPW_CCP processes) were presented in March 2011. The first phase of the project will be completed in October 2012.
2. The second phase of the project will begin in Q2 2012. Materials including the detailed specification of netting process requirements will be presented to KDPW_CCP Participants at that time.
The expected deadline of the implementation of the project “Introduction of securities netting to cash market clearing” is Q3 2013. The implementation of the netting mechanism will be co-ordinated with KDPW’s simultaneous project “Introduction of partial automatic settlement.”
Target date: Q3 2013
KDPW_CCP OTC clearing
The proposed Regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories introduces mandatory clearing of OTC transactions in derivatives subject to potential standardisation via CCPs.The advantages of CCP clearing of OTC transactions include the security of the solution and the guarantee of clearing of transactions thanks to CCP functionalities such as the CCP being a party to each transaction, a multi-tier clearing guarantee system, as well as risk management mechanisms. The key advantage of the project is that banks can release credit limits set for counterparties and lower capital requirements for counterparty risk, which may improve liquidity on the market. In addition, the STP model will be put in place thanks to process standardisation and automation, reducing operational risk and enhancing efficiency.
Given the existing structure of the Polish capital market, only KDPW_CCP may aspire to set up a CCP and ensure safe, state-of-the-art solutions based on its clearing technology, system of communication with banks, and clearing in PLN and EUR.
The project phase involving the preparation of detailed concept documentation including the clearing model, the risk management model, the list of cleared instruments and their validation model, was completed at the end of March 2011. The complete documentation was developed through effective project co-operation between KDPW_CCP and the banking community.
KDPW_CCP has now initiated the Design Study phase with the selected IT system vendor.
Target date: Q4 2012
Presentation