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Novation in Clearing: New Addition to the Polish Legal System

4 August 2012 is the effective date of new provisions of the Act on Trading in Financial Instruments which for the first time introduce the concept of novation in clearing to the Polish legal system. Thanks to novation, the clearing house becomes the central counterparty, i.e., the buyer for every seller and the seller for every buyer, taking over the mutual rights and obligations of the original parties to a trade. This applies to all trades cleared by KDPW_CCP.

Novation allows the clearing house KDPW_CCP to enter the rights and obligations of the original parties to trades made on the market (organised market, e.g., WSE, Catalyst, NewConnect, and OTC market) once a trade is accepted for clearing. The clearing house KDPW_CCP will be directly liable for the clearing of a trade: it must ensure clearing even from its own capital. With an adequate own capital (PLN 200 million) and a clearing guarantee system (adequate risk measurement, maintenance margins, clearing fund), KDPW_CCP can take over a material part of investment risks of default of a party to a trade. This will improve the safety of trading and mitigate clearing risk for investors and consequently the risk of default of financial institutions.

Typical trade


CCP as a party to a trade


"This is a turning point in the history of KDPW_CCP, impacting the operating formula of the clearing house and its ability to become a fully recognised central counterparty in the light of the draft Regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories (EMIR)," said KDPW_CCP President and CEO Iwona Sroka. EMIR will make a strong impact on the financial markets in Europe. It requires the authorisation of CCP clearing houses by local regulators under the requirements of the legislation and the European Securities and Markets Authority (ESMA). Thanks to the introduction of novation to Polish law, the Polish clearing house KDPW_CCP can be authorised under the EU requirements.

"Harmonisation with the requirements of European regulations and international standards makes the Polish financial market more competitive and more attractive to Polish and international investors. It is crucial to continued growth and increased safety of the local financial market," said Iwona Sroka.

The National Depository for Securities (KDPW) and the clearing house KDPW_CCP have for a number of years implemented projects which enhance the safety and competitiveness of the Polish market. Already in 2010, KDPW created the Clearing Guarantor and equipped with PLN 60 million of capital to support the clearing liquidity system. In 2011, the clearing house KDPW_CCP was created on the basis of the Guarantor and equipped with a new clearing guarantee system and PLN 100 million of own capital. In 2012, the capital of the clearing house was increased by 100 percent to PLN 200 million. Thanks to novation, KDPW_CCP will apply to the Polish Financial Supervision Authority for authorisation under EMIR in January 2013 (after the publication of relevant European regulations).

From Guarantor to Authorised CCP



Increase of the KDPW_CCP Capital

On 28 June 2012, the Polish Sejm passed the Act amending the Act on Trading in Financial Instruments and the Act on Public Offering and the Conditions of Introducing Financial Instruments to an Organised Trading System, and on Public Companies which introduced the concept of novation to the Polish legal system. The Act was published in the Journal of Laws (Dziennik Ustaw) No. 137 of 20 July 2012 (item 836) and takes effect 14 days from publication, i.e., on 4 August 2012.


Last modified: 03-08-2012 Go up