national depository for securities (kdpw)

.

National Depository for Securities (KDPW)

Warsaw, 25 October 2011

2

Overview of the Polish Capital Market

National Depository for Securities (KDPW)

KDPW_CCP

Polish Financial Supervision Authority (KNF)

MarketsWarsaw Stock Exchange,

Bondspot, Catalyst, New Connect, OTC

Financial institutions & Intermediaries IssuersInstitutional

investors

Individual investors

National Bank of Poland

(Clearing Bank)

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KDPW – Introduction

Responsibilities:

Central securities depository Clearing house Settlement Custody Risk management

Clients:

Issuers (foreign & domestic) Intermediaries (custodian banks & brokers)

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KDPW – Ownership 1991 - 1994 An integral part of the Warsaw Stock Exchange

1994 - PresentIndependent joint - stock company

Current shareholders

KDPW (CSD) - (since 1999) The State Treasury - 1/3 The Warsaw Stock Exchange - 1/3 The National Bank of Poland - 1/3

KDPW_CCP - (from 1 July 2011 ) KDPW - 100%

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Main KDPW ResponsibilitiesKDPW_CCP Clearing of transactions executed on:

Regulated markets: Warsaw Stock Exchange, BondSpot Non-regulated markets: New Connect, Treasury BondSpot-Poland, OTC

Risk management –management of: Settlement Guarantee Fund covering regulated markets & ATS Margaining for cash and derivatives market Collateralisation of security loans in automatic securities lending - borrowing

system

KDPW (CSD) Safekeeping and custody of all securities admitted to trading following public issue Reconciliation and monitoring Asset management Settlement of transactions executed on:

Regulated and non-regulated markets OTC

Processing of corporate actions Assigning ISIN codes for Polish issues (National Numbering Agency)

Separation of functionality between KDPW CSD and KDPW_CCP

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Clearing of guaranteed

trades

KDPW (CSD)

Risk Management

Safekeeping

KDPW_CCP

Settlement

Collateral Management

Corporate Actions

Asset Management

Database Administration

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Securities registered in KDPW

All securities admitted to trading in the regulated market must be registered in KDPW

Currently, the following securities are recorded in the KDPW system: Shares (foreign and domestic) Bonds (Treasury, Central Bank, Corporate, Municipal, Convertible, EIB,

with priorities rights, non-public bonds, mortgage bonds) Exchange Traded Funds (ETFs) Investment Fund Certificates Derivatives

Futures Contracts (WIG20 index, currency, share) Index Participation Units Options (European style), (WIG20 index, share)

Exception: Treasury bills - custody, clearing and settlement in the National Bank of Poland system

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Capitalisation of securities

Capitalisation of shares, bonds and other securities registered in KDPW (bln. EUR)

12-2002 12-2003 12-2004 12-2005 12-2006 12-2007 12-2008 12-2009 12-2010 09-20110

20

40

60

80

100

120

140

shares bonds other securities

EUR

bln

9

Regulated market trades turnover

Regulated market cash and derivatives turnover(bln. EUR)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011.01 - 2011.09

0

20

40

60

80

100

120

140

160

cash market derivatives market

EUR

bln

(sin

gle

coun

t)

10

OTC trades turnover

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011.01 - 2011.09

0

500

1,000

1,500

2,000

2,500

interbank transactions repo transactions - between the NBP and a bank

Treasury BondSpot Poland transactions Alternative Trading System

EUR

bln

(sin

gle

coun

t)

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Number of transactions settled

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011.01 - 2011.09

0

2

4

6

8

10

12

14

16

18

20

derivatives market cash market

Mili

ons

(sin

gle

coun

t)

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Foreign investors in Polish market (share of cash market turnover) – Stock Exchange (H1 2011)

Foreign investors in Polish market (ownership) – Treasury bonds (August 2011)

Foreign investors in Polish market

Source: Warsaw Stock Exchange

Source: Polish Ministry of Finance

121.5 billion EUR

18%

34%

48%

Individual investors

Institutional investors

Foreign investors

30%

70%

Foreign investorsDomestic Investors

36.3 billion EUR

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Clearing & Settlement

The National Depository for Securities (KDPW)

Clearing & Settlement (until Q1 2011)

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Trade execution

Clearing & Settlement

Markets (regulated & OTC)

Clearing

Guarantee system KDPW_CLEARPOOL

Settlement

Custody Central Bank system

Clearing & Settlement (from July 2011)

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Trade execution

Clearing

Markets (regulated & OTC)

Clearing

Risk Management systemKDPW_LEARPOOL

Settlement

Custody

Central Bank systemSettlement

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Basic principles

All securities cleared and settled in KDPW are dematerialised All securities transfers are made by book-entry in KDPW depository, clearing

& settlement system Transfers are made between KDPW participant accounts

- Mandatory asset segregation (own assets, client assets) Change of ownership at the moment of book-entry Clearing & Settlement service for transactions from:

- WSE, BondSpot, New Connect (ATS), Treasury BondSpot Poland DvP Settlement model:

- BIS model I, BIS model II Settlement :

- T+2, T+3 - for regulated - market trades – SE, BondSpot- T+0 to T+n - for non-regulated market transactions – OTC

Two settlement channels:- RTGS DVP 8.00-17.00, FOP 8.00-18.30- multiple batch system 7.30-18.45

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Daily settlement schedule : multibatch and RTGS 6 settlement sessions a day with intra-day finality

after each session

Basic principles

BATCHES

7.30

10.30

13.00

15.30

18.30

18.45

RTGS

8.00

Technical

DVPFOP

FOP

FOP

Technical

17.00

18.30

DVPFOP

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Cash leg settlement Central Bank Money - in the National Bank of Poland for

PLN and Euro Commercial Bank Money for other currencies

Settlement liquidity facilities securities L&B automatic and on-request repo buy-in, sell-out transactions from regulated market guaranteed by the

Settlement Guarantee Fund, by the collateral system (for derivatives only) and KDPW_CCP

transactions from ATS (unregulated market) guaranteed by special ATS guarantee fund

Basic principles

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Cash settlement side (CBM)

Agreement between Central Bank (CB) and KDPW

Authorisation for KDPW to debit Payment Bank (PB) accounts

Cash Settlement on PB accounts in CB

Payment banks: banks having status of KDPW participant and holding

cash account in CB PAYMENT SYSTEM

Payment bank responsible for settlement of:

its own and its clients transactions

transactions executed by Clearing Members (CMs) which are not

allowed to have a cash account in CB

KDPW informs PB about net cash positions to be paid on S

KDPW sends payment instructions to CB using CB interface

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KDPW in the Polish capital market

Seller Buyer

Trade feed = Already matched for settlement

Cash accounts of the seller/ seller’s custodian cash clearer

in NBP

Cash accounts of the Buyer/ buyer’s custodian

cash clearer in NBP

Trade Trade

Trade execution

Markets

Trade execution

Post-trading processing flow

Securities accounts of the Seller / seller’s

custodian

Securities accounts of the Buyer /

buyer’s custodian

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Life cycle of settlement instruction

INPUT VALIDATIONCLEARING

(KDPW_CCP)

T S

Locked-in TRADES

WSE

BondSpot

New Connect

INPUT

INPUT

TRADES

Treasury BondSpot

Poland

POST- TRADE SETTLEMENT

MATCHIN

G

MATCHING

VALIDATION

VALIDATIONOTC

INSTRUCTIONS

ST+2T+3

T+2T+n

T+n

Bilateral cancellationUnilateral cancellation

T

MATCHING

VALIDATION

INPU

T

INSTRUCTIONS

INSTRUCTIONS

S

SETTLEMENT

CLEARING SETTLEMENT

CLEARING SETTLEMENT

Order that funds in the guarantee system are initiated in KDPW_CCP

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Guarantee Fund

TotalKDPW_CCP

capital:PLN 100 million

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kdpw_stream – System architecture - August 2009

Processing of cash market

Data flow

Processing of derivatives

market

External communication

Risk module Asset Management

Transfer payments

Collateral register

Corporate actions

Static data

RTGSMB

Clearing banks

MarketsParticipants

WWW SWIFT

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Cross Border Settlement

The National Depository for Securities (KDPW)

Links with foreign CSDsLinks created with foreign CSDs (FOP links) in connection with the dual listing of shares on the WSE. Currently there are 8 direct links and 9 indirect links into 20 foreign markets

EVK

Euroclear Sweden

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Principles of cross-border transfers

• Transfer executed between investor’s account in one country and the same investor’s securities account in the second country before trading can take place – there is no change of ownership,

• Shares need to be registered on KDPW account in foreign intermediary to be traded on the WSE,

• Transfers are free of payment (FOP),• Foreign shares quoted on WSE in PLN,• Clearing and settlement in KDPW in PLN,• Dividends paid to Polish shareholders in foreign currency or PLN

following f/x conversion,• Transfer based on SWIFT (ISO 15022 messaging standards),• The transfer may be settled intra-day (RTGS in KDPW).

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Free of Payment cross-border links between KDPW and foreign CSD – Share transfer

Transfer of shares prior to a Warsaw Stock Exchange transaction executed between a Polish and foreign investor using a FOP link

Foreign investor wishing to sell shares on the

Warsaw Stock Exchange

Entity managing foreign investor’s securities account in Poland

Instruction to receive shares

Instruction to receive shares

Investor’sAccount

KDPWAccount

Foreign CSD Instruction to receive shares FOP (MT540)

Transfer order

1

2

3

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Instruction to delivershares FOP

6 Transfer of shares to KDPW omnibus account following matching

Receive FoP Transfer confirmation (MT544)

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Matching of instructions (1&4) in Foreign CSD

Strategy 2010 - 2013

National Depository for Securities (KDPW)

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KDPW Group corporate values

Innovation in technology and operations with the aim of introducing new services,

providing a rapid response for to the needs of the

market while providing cost efficient clearing and

settlementReliability built on its daily business operations that grow the Polish financial

market

Compliance with international clearing and

settlement standards and a world class IT infrastructure

Efficiency ensuring the safety, business continuity, high standards and timely execution of clearing and

settlement services

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KDPW Group – Strategic Goals

(1) Strengthening the new KDPW Group business model

(2) Positioning the KDPW Group in the region and

integration with European infrastructures

(3) Introduction of new services to increase the value

of the KDPW Group

(4) Raising the standard and scope of services currently

provided

(5) Promotion and sale of KDPW Group services

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KDPW - New Strategy, New Services

Omnibus accounts Separation of Clearing Member and Settlement Agent status Hold-Release mechanism

New services for foreign financial intermediaries:

KDPW_CCP SPAN methodology Netting in securities CCP for OTC

KDPW (CSD) Partial settlements TARGET2 TARGET2-Securities Lending and borrowing system (in cooperation with KDPW_CCP)

Other future services:

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www.kdpw.pl/en

www.kdpwccp.pl/en