KDPW_CCP Clearing House Files Application for Authorisation under EMIR
On 28 June 2013, the clearing house KDPW_CCP filed with the Polish Financial Supervision Authority an application for the authorisation of the clearing house under EMIR*, the European Regulation which sets out, among others, single requirements for clearing houses in the European Union. The authorisation will confirm KDPW_CCP’s capacity of providing services in compliance with EU standards across the EU and allow parties required to clear specific classes of OTC derivatives to fulfil the obligation.
In the last few months, the clearing house KDPW_CCP has been working to prepare its procedures, regulations and technologies for the authorisation which, under the Regulation, is to be granted by a college comprised of representatives of the Polish Financial Supervision Authority, the European Securities and Markets Authority (ESMA) and the National Bank of Poland.
“The key modifications which we have put in place in the clearing house and in its legal environment included our efforts to introduce novation into the Polish legal system, to increase the own capital of KDPW_CCP adequate to the size of the served markets, to change the default system waterfall, and to set up a Risk Committee,” said KDPW_CCP President and CEO Iwona Sroka.
The introduction of novation into the Polish legal system, following the efforts of KDPW_CCP, allows the clearing house to take over the rights and obligations of the original counterparties to a trade upon its acceptance for clearing. With an adequate own capital and clearing guarantee system, KDPW_CCP has taken over a material part of investment risks involved in potential default of a trade party.
As of December 2012, the clearing house KDPW_CCP also offers the service of clearing derivatives from the interbank market. The obligation to clear specific classes of such derivatives in a CCP clearing house is imposed by EMIR.
In preparation for the authorisation, KDPW_CCP has increased its own capital to PLN 209.5 million. Equipping KDPW_CCP with a capital adequate to the served market and the requirements set out among others in EMIR is an important step in the implementation of the KDPW_CCP service for the banking sector and in the preparation of the company for the status of qualifying central counterparty under the Capital Requirements Directive (CRD).
The Risk Committee appointed on 12 June 2013 provides opinion and advice on all matters which could impact risk management. The Risk Committee also gives opinions on transaction clearing rules and detailed rules of transaction clearing. The Risk Committee is comprised of the key organisations of brokerage houses, banks and investors, who thus have direct impact on the activity of the clearing house in the key areas of its operation.
The authorisation under EMIR at the same time allows our clearing house to become a qualifying CCP under the draft Capital Requirement Regulation (CRR). “Under CRR, central counterparties which comply with the requirements of EMIR may benefit from a reduced risk weight for trades to which they become a counterparty following novation,” said KDPW_CCP President and CEO Iwona Sroka.
On 2 May 2013, the Central Securities Depository of Poland (KDPW) filed with ESMA an application for the registration of its Trade Repository under EMIR.
* Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (EMIR).