KDPW: One Group, one post-trade solution

Looking at the financial market and its infrastructure, it is worth noticing how the KDPW Group built Central Europe’s leading clearing and settlement infrastructure.

KDPW Group offers a full package of post-trade services. With the European authorisations and registrations KDPW is open to international clients. Our strengths include a range of complementary services, state-of-the-art technologies, as well as professional customer service which ensures customer satisfaction.

Looking at the financial market and its infrastructure, it is worth noticing how the KDPW Group built Central Europe’s leading clearing and settlement infrastructure. Thanks to services offered by KDPW (the Polish CSD) and KDPW_CCP (the clearing house), the quality and safety of the Polish financial market and its attractiveness to international investors were strongly improved. KDPW Group offers the services of an authorised CCP, including over-the-counter (OTC) clearing, a registered Trade Repository, a Global Numbering Agency (ISIN, CFI, FISN) as well as LEI assignment and is in the process of CSD authorisation.

But the post-trade solutions are not only offered to the domestic financial market. Through the European authorisations and registrations, KDPW Group is open to foreign clients. Raiffeisen Bank International has opened an omnibus account direct in KDPW. ABN AMRO Clearing Bank N.V., KDPW_CCP’s first foreign participant, has also started to clear transactions on GPW’s cash and derivatives market in June 2016. As a general clearing member of the KDPW_CCP, ABN AMRO opens access to the Polish capital market for investors using the bank’s global post-trade services. KDPW Trade Repository also has participants from UK, Italy, Czech Republic, Bulgaria or Romania.

Clearing services

KDPW_CCP is authorised under EMIR (PLN and EUR) and has experience in extending the scope of its services. In view of its current levels of trade clearing and taking into account future volume growth and the potential to offer its services in the CEE Region, KDPW_CCP holds the necessary level of its own capital, which currently stands at €55 million. CCP’s own capital is the last line of defence in the face of member insolvency and the higher the capital of the CCP, the lower the risk exposure of the remaining members.

The clearing house performs a broad range of services in the financial market. For the regulated market, KDPW_CCP clears equities, fixed income and other cash market instruments, as well as derivatives such as futures and options based on indices, currencies and interest rates. It also offers clearing of securities lending and borrowing, and derivatives from interbank market (FRA, IRS, OIS, Basis Swaps and Repos).

As of December 2012, KDPW_CCP started to provide the clearing and guarantee of OTC derivatives and repo trades (OTC_CLEARING), processing interbank trades, mainly aiming to reduce the risk of default by trading counterparties and, consequently, to generate growth in this market sector.

KDPW_CCP hasn added new types of acceptable collateral to the collateral management service, including collateral posted as margins or contributions to funds, both in organised and non-organised trade. The new functionalities added to the existing collateral management structure include contributing cash in EUR, as well as bonds denominated in EUR as collateral.

The Polish clearing house offers a netting mechanism, which allows KDPW_CCP to generate one settlement instruction sent to KDPW or another settlement institution (for securities and/or cash settlement) for all operations which credit and/or debit a designated settlement account. The implementation of netting and aggregation (directional netting) of debits and credits in securities arising from cleared transactions concluded on the regulated market or in an alternative trading system, implies improved operating standards of the clearing process, resulting in a significant reduction of the number of instructions sent for settlement while reducing the cost of trade settlement.

Trade repository services

KDPW_TR was one of the first trade repositories in Europe to be registered by the European Securities and Markets Authority (ESMA) in confirmation of compliance with all international standards which guarantee the highest quality of service.

KDPW_TR has participated in the implementation of EMIR from the very beginning and is engaged in active dialogue with all market participants, such as regulators, other trade repositories, as well as reporting participants. KDPW_TR aligns its services with the legal requirements and the ESMA guidelines and follows the needs of market players covered by the reporting obligation.

The strengths of KDPW_TR are: secure certified access to the application; a user-friendly intuitive website interface with reporting functionalities and direct access to maintained data; global communication standards (XML messages, dedicated message queues MQ); easy access to support of our highly qualified experts; existing procedures applicable in the event of contingencies, solutions ensuring the highest security standards and business continuity in data collection and maintenance (including a back-up site).

KDPW_TR offers the reporting of derivative trades via a user-friendly secure website interface or over automatic direct connections. Derivatives trades are reported in messages developed in line with the scope of information required under the EMIR Technical Standards. They include all data necessary for the Trade Repository to identify trades and process reports as required by ESMA.

The ARM service

On 3 January 2018, KDPW launched its Approved Reporting Mechanism (ARM) service. The ARM service consists of sending trade data to the relevant supervisory authority on transactions executed as part of trading in financial instruments on behalf of entities obliged to report such data under EU Regulation No. 600/2014 (MIFIR). Owing to delays in the implementation of EU Directive No. 2014/65 (MIFID II), KDPW will be offering ARM services on the basis of provisions of national law incorporated in legislation on the distribution of insurance services, until KDPW obtains official authorisation from the Polish Financial Supervision Authority.

An ARM is authorised to provide services throughout the whole EU. Reports are sent by the ARM to the relevant supervisory authorities, depending on the domicile of the entity with the obligation to submit reports.

KDPW currently performs the role of intermediary in sending reports to the following supervisory authorities: The Polish Financial Supervision Authority, The Malta Financial Services Authority, The Portuguese Securities Market Commission, and The Financial Conduct Authority (UK). KDPW will enter into agreements with other supervisory authorities, depending on client demand.

LEI assigning

According to the ROC’s decision of 27 December 2013, KDPW became an LOU authorised to issue LEIs. Since then, KDPW has issued approximately 16. thousand codes to entities.

The main advantages of the KDPW LEI service include: customer service in English and Polish; very competitive fees for the issuance and renewal of LEIs; prompt processing of orders; individually dedicated account manager for each order, available to the client at every step of the application verification process; automatic communicating of all events in the processing of orders; highly competent staff dedicated to customer service and an excellent understanding of the specificity of the Polish capital market including local legal requirements.

Access to LEI management services: filing applications for the issuance or transfer of an LEI with KDPW; review and processing of issued LEIs, including data updates and corporate actions; review of order history including payment details; downloading invoices; and user account management.