Detailed Rules of Transaction Clearing (organised trading)

The amendments to the Detailed Rules of the OTC Clearing System approved by Resolution No.16/25 of the KDPW_CCP S.A. Management Board of 11 February 2025, entered in to force on 28 February 2025, subject to the transitional period, which is in force from 28 February 2025 until 28 May 2025.

During the period from 28 February 2025 to 28 May 2025, i.e. until the termination of the SWI agreements as a result of their termination by Krajowy Depozyt Papierów Wartościowych S.A. to the clearing participants:

• until the participant joins the SEI System by concluding a new agreement with KDPW_CCP S.A. in that system, but no later than 28 May 2025, the transmission by KDPW_CCP S.A. to that participant or by that participant to KDPW_CCP S.A. of information and declarations in the SWI System, operating under the SWI agreements concluded with Krajowy Depozyt Papierów Wartościowych S.A., is governed by the existing Detailed Rules of the OTC Clearing System;
• as of the time the participant joins the SEI System by concluding a new agreement with KDPW_CCP S.A. in that system, the transmission by KDPW_CCP S.A. to that participant or by that participant to KDPW_CCP S.A. of information and declarations in the SEI System, operating under the agreements concluded with KDPW_CCP S.A., is governed by the Detailed Rules of the OTC Clearing Systemin the new wording referred to in this letter.

Communication between KDPW_CCP S.A. and clearing members during the transitional period:

• under the SWI agreements concluded with Krajowy Depozyt Papierów Wartościowych S.A. until such time that the participant switches to the new solution (SEI System), but no longer than until the expiry of those SWI agreements by notice given by Krajowy Depozyt Papierów Wartościowych S.A.;
• under the new agreement with KDPW_CCP S.A., in the SEI System, and the start-up of a new A2A connection. As of the time the participant concludes a new agreement with KDPW_CCP S.A., communication will operate using the new A2A connection and not under the SWI agreement concluded with Krajowy Depozyt Papierów Wartościowych S.A.;
• under agreements already concluded by participants with KDPW_CCP in the GUI system.

After the end of that period, communication will only operate under the new rules, i.e. under the agreements concluded with KDPW_CCP S.A., in the SEI System and in the GUI System.


The amendments to the regulations and the adoption of the new regulations aim to: 
 

• modify the rules of communication with participants

Communication has to date operated under SWI agreements concluded by clearing members with Krajowy Depozyt Papierów Wartościowych S.A. (SWI System). The SWI agreements currently in place in the SWI system, concluded by clearing members with Krajowy Depozyt Papierów Wartościowych S.A., will be terminated with effect from 28 May 2025. Clearing members’ communication with KDPW_CCP will operate under the existing Agreements on access to KDPW_CCP’s services via the GUI application and under Agreements on access to KDPW_CCP services through established system connections (SEI System). The new agreements should be concluded by 28 May 2025. For more details on modifications to the rules for communicating with participants, guidance on how to establish a new A2A connections, see the tab A2A Certificates - KDPW_CCP
 

• addition of new provisions to the Detailed Rules of the OTC Clearing System which authorise KDPW_CCP to withhold instructions relating to a request made by the participant for KDPW_CCP to return assets posted by that participant as a margin or a contribution to a clearing fund or other guarantee fund in the event that KDPW_CCP becomes aware of credible information about specific restrictive measures in accordance with the relevant legislation in connection with inclusion on sanction lists, issuance of a decision on the imposition of administrative sanctions on a participant or its client for breach of the legal provisions applicable to it in connection with the provision of financial services, or the imposition of such measures on an entity acting as a settlement agent or paying agent for that participant.

The amendments to the Detailed Rules of Transaction Clearing (organised trading) approved by Resolution No. 9/25 of the KDPW_CCP S.A. Management Board of 13 January 2025, entered in to force on 30 January 2025.

The amendments to the Detailed Rules of Transaction Clearing (organised trading) extended the cut-off time for KDPW_CCP to accept cash in PLN in the transaction clearing liquidity guarantee system to 18:00. The extension of the cut-off time for posting cash from 17:15 to 18:00 aimed to ensure that clearing members can access the clearing system to replenish the required collateral during the day, particularly where KDPW_CCP requests the replenishment of collateral in connection with exceeding the transaction limit (margin call).

In connection with the amendments to the Rules of Transaction Clearing (organised trading), the Detailed Rules of Transaction Clearing (organised trading) have also been amended under Resolution No. 10/24 of the KDPW_CCP S.A. Management Board of 2 July 2024.

The amendments entered in to force on 16 July 2024 and consisted of introducing:

• setting out a requirement of participants which have obtained the participation status but have not yet commenced activities in the clearing system to carry out tests confirming their readiness to commence such activities,
• setting out the obligation of participants to comply with the requirements set out in the relevant anti-money laundering and counter-terrorist financing legislation in relation to the business relationships they undertake. A requirement has been set out for entities seeking the participant status and for participants to provide information necessary to identify money laundering and terrorist financing risks associated with the business relationships they undertake. They will be required to provide KDPW_CCP S.A. with an up-to-date Correspondent Banking Due Diligence Questionnaire (CBDDQ, template published by the Wolfsberg Group).

Amendments of the Detailed Rules of Transaction Clearing (Organised Trading) adopted in Resolution No. 13/22 of the KDPW_CCP S.A. Management Board dated 11 April 2022 entered into force on 25 April 2022.

The amendments to the Detailed Rules of Transaction Clearing (Organised Trading) are designed to support the following:

• alignment of regulation in connection with the start of the clearing of repos. which will be concluded in organised trading. KDPW_CCP S.A. will accept for clearing classic repo transactions in Treasury securities registered in KDPW, excluding index-linked bonds;
• start of buy-ins/auctions in the GUI system. KDPW_CCP S.A. will take actions in this process in order to buy securities subject to a transaction affected by a settlement fail by buying such securities. KDPW_CCP S.A. will carry out the process within, respectively, four business days after the expected settlement date of the transaction (where the transaction is in shares) or seven business days after the expected settlement date of the transaction (where the transaction is in securities other than shares). If a buy-in fails or is not possible, the participant affected by default may request KDPW_CCP S.A. to defer the buy-in until an appropriate later date calculated in accordance with Commission Delegated Regulation (EU) 2018/1229 of 25 May 2018 supplementing Regulation (EU) No 909/2014 of the European Parliament and of the Council with regard to regulatory technical standards on settlement discipline (OJ L 230 of 13 September 2018, p. 1).

KDPW_CCP S.A. will carry out the buy-in primarily by way of auctions (i.e., by sending a proposal to buy securities to clearing members within the GUI system). The securities will be delivered within, respectively, four business days after the expected settlement date of the transaction (where the transaction is in shares) or seven business days after the expected settlement date of the transaction (where the transaction is in securities other than shares).

If a buy-in is not possible or fails, KDPW_CCP S.A. will calculate and collect compensation from the defaulting participant and pay it to the participant affected by default. The compensation will also constitute a substitute benefit paid in accordance with the Act on Trading in Financial Instruments;

• introduction of additional buyer protection. Accordingly, a clearing member responsible for a settlement fail will be obliged to pay a cash benefit in the amount and on the terms set out in the Rules of Transaction Clearing (Organised Trading) in respect of the lost benefit of a participant affected by default or its client which it would have obtained as a result of the exercise of the property right attached to the affected securities provided that, among others, the right was exercised in direct connection with an optional corporate action (an event, other than a general meeting, such as a tender offer or an offer to exchange shares or an optional profit distribution). As a condition to use the additional buyer protection, clearing members are required to deliver in due time an appropriate declaration, in accordance with the template defined by KDPW_CCP S.A., of its or its client’s intention to exercise a property right attached to securities in connection with such optional corporate action and to use the additional buyer protection (if the exercise of such right requires that it or its client expresses its intention to exercise such right and it or its client has such intention). If a clearing member does not present the declaration, it or its client will be deemed to have waived the additional buyer protection and KDPW_CCP will not be obliged to provide the benefit in respect of the lost pecuniary benefit in connection with the optional corporate action;
• introduction of the processing of auctions to close the positions of a defaulting participant resulting from transactions concluded in securities trading The operation will be carried out in the event that KDPW_CCP S.A. terminates the participation agreement with the defaulting participant with immediate effect upon identification of an event of participant default. KDPW_CCP S.A. will, upon termination of the participation agreement with a clearing member with immediate effect, send to the other clearing members a proposal to open positions in order to close the position of the defaulting participant (KDPW_CCP S.A. may limit the number of clearing members to which it sends a proposal to open positions). A clearing member which has received a proposal to open positions will be entitled (but not obliged) to submit to KDPW_CCP S.A. an offer to conclude a transaction and will be bound by the offer until the end of the auction. Upon receipt of an offer, KDPW_CCP S.A. will either accept the terms of the received offer to conclude the transaction, and subsequently send a settlement order to the settlement institution to settle the transaction, or reject the offer;
• adjusting the scope of actions taken by KDPW_CCP S.A. in case of clearing member default. In particular, the regulations have been amended with a view to the planned start of the clearing of repo transactions, the introduction of buy-ins and auctions, as well as the obligation to pay compensation, refund the difference in the price of securities or pay a cash benefit under the additional buyer protection;
• the introduction of mandatory communications with clearing members via the GUI system in cases specified in the Rules of Transaction Clearing (Organised Trading) and the Detailed Rules of Transaction Clearing (Organised Trading). This will be additional communication, which is ultimately to be used by participants for certain activities in clearing systems;
• payment agents’ obligation to ensure the execution of payments to clearing members during the availability of the systems within which such function is performed;
• changes to the margining model. As part of initial margins, add-ons will be determined for wrong way risk (WWR) and liquidity and concentration risk (LCR). The concentration of positions and concentration limits will no longer be determined. The add-ons will be calculated on an ongoing basis, at clearing account level, separately for cash and derivatives positions. Accordingly, the initial margins required from clearing members will be determined using the risk parameters determined in accordance with the Detailed Rules of Transaction Clearing (Organised Trading) in respect of the members’ exposures including the following components:
  • a requirement covering the member’s potential future exposure following the identification of an event of member default (SPAN® margin),
  • a requirement reflecting the member’s current exposure as a result of actual market price movements (marking-to-market),
  • a requirement covering risks arising from the liquidity of financial instruments and the concentration of positions to the extent of the member’s exposure (Liquidity and Concentration), and
  • a requirement covering the risk arising from the correlation between a member’s exposure and its credit risk (Wrong Way Risk).

Amendments to the Detailed Rules of Transaction Clearing (organised trading) approved in Resolution No. 50/2020 of the KDPW_CCP S.A. Management Board dated 8 December 2020 came into force on 22 December 2020.

The amendments adjusted the calculation formula of marking to market (which is a part of the margin requirement) to the extent of uncleared balances of cash transactions where securities are bought/sold with the right to dividend/coupon which is netted in the current reference price because the transaction executed today will be settled and the holding balances of securities will change after the record date. In that case, marking to market should additionally include the value of bought rights as at the payment date. This follows from the fact that KDPW mitigates the risk of such rights by adjusting the credits and debits of the settlement counterparties resulting from suspended transactions which are to be settled on or before the record date with the payment amount of such rights. This solution eliminate sharp changes of margin requirements caused by marking to market as a result of changes of the coupon amount after the record date.

Amendments of the Detailed Rules of Transaction Clearing (organised trading) under Resolution No 31/2020 of the KDPW_CCP S.A. Management Board dated 21 September 2020 entered into force on 5th October 2020.

The Detailed Rules of Transaction Clearing (Organised Trading) are amended by adding clearing operation attributes relating to the planned clearing of Treasury BondSpot Poland transactions and by aligning the standard clearing operation attributes with those defined by KDPW.