settlement agent. general provisions addressees of the new functionality: foreign clearing members...
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Settlement Agent
Settlement Agent
General provisions
Addressees of the new functionality:
Foreign clearing members (CM)
Beneficiaries:
Foreign CM and entities playing the role of Settlement Agents
Purpose:
To enable foreign investment firms to apply for KDPW_CCP CM status without having to open and maintain a KDPW account.
separation of clearing and settlement
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Settlement Agent
Main principles (1)
Settlement Agent (SA) KDPW direct participant (participation type: representative/settlement agent)
authorised to operate a securities accout, a derivative instruments account or a depository account
CM’s financial instruments are registered and CM’s transactions are settled in KDPW depository account operated by the settlement agent.
Settlement agent performs the function of payer bank for CM or indicates to KDPW an entity which performs this function for CM – it performs cash settlement of CM’s transactions; SA and CM must indicate the same payer; the Settlement Agent may indicate another default payer for its other functions
Liable for tax issues – the final responsibility for covering tax costs to be defined in the bilateral agreement between SA and CM.
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Settlement Agent
Settlement Agent and Clearing Member
SA and CM market position
WSE
KDPW_CCP
CM
KDPW
SA
instructions
Securities, margins
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Settlement Agent
Main principles (2)
Foreign investment firmKDPW_CCP participant with clearing member (CM) status
Not a KDPW participant – cannot operate securities accounts (need not open a branch in Poland)
Signs an agreement with one entity performing SA function in KDPW
Indicates SA account to KDPW_CCP and presents a declaration indicating the entity to perform this function and the entity’s declaration of consent.
Pays cash liabilities following marking-to-market.
Is the only participant of the settlement guarantee system (contributes cash via the payer bank; securities contributed to the SGS are transferred to KDPW from CM account operated by SA)
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Settlement Agent
Main principles (3)
Cont’d.
Foreign entity submits an application for a participation agreement to KDPW_CCP and SA submits a representation agreement with CM to KDPW CM receives a participant ID within a formal account operated by SA in KDPW.
Entity performing SA function does so under its existing KDPW participant ID (e.g. XXXX) while being a CM account operator (e.g. YYYY) SA manages accounts under different IDs (both XXXX and YYYY).
Relation between SA and CM identified in the system by means of a new type of activity for a CM, a new type of participant status: Representative/Settlement Agent and an agreement between CM and SA.
CM ensures participation in the securities lending system via its SA.
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Settlement Agent
Settlement Agent and Clearing Member
SA in relation to KDPW and CM in relation to KDPW_CCP
KDPW_CCP
CM YYYY
CM ZZZZ
KDPW
XXXX
SA XXXX for CM YYYY
SA XXXX for CM ZZZZ
m
argi
ns
posi
tions
, DvP
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Settlement Agent
KDPW message flow chart
Example: SA assigned to two foreign CMsre
KDPW
Message to inbox XXXX, but Rcvr: ZZZZ
Message to inbox XXXX, but Rcvr: YYYY
Message re SA to inbox XXXX, Rcvr: XXXX
SA CM ZZZZ
SA CM YYYY SAXXXX
SA XXXX
Settlement Agent
KDPW_CCP message flow chart
KDPW_CCP
Message to inbox ZZZZ, Rcvr: ZZZZ
Message to inbox YYYY, Rcvr: YYYY
CM ZZZZ
CM YYYY
CM ZZZZ
CM YYYY
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Settlement Agent
Timetable
Next project phases
By 04.03.2011 – request for preliminary declaration of KDPW participants’
interest in performing the Settlement Agent function for foreign Clearing
Members in order to participate in tests
2nd half of March 2011 – tests with participants
Implementation of the SA functionality when KDPW_CCP goes live