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KDPW_CCP Clearing House started clearing conditional repos traded on the Treasury BondSpot Poland platform

The clearing house KDPW_CCP, a member of KDPW Group, started clearing conditional transactions (repos) concluded on the Treasury BondSpot Poland platform as of 25 April 2022. The new service is one of the projects under the Capital Market Development Strategy.

A repurchase transaction (repo) is a financial transaction where a security is sold with a commitment to repurchase it at a fixed date in the future.

Acting together with BondSpot and market participants, KDPW_CCP has developed a model for clearing TBSP repo transactions in KDPW_CCP with settlement in KDPW, a risk management model, a model for reporting repos to a trade repository (SFTR), and rules for exchanging post-clearing messages.

The launch of central clearing of repo transactions makes them safer and brings the Polish capital market closer to the world’s most developed markets in terms of infrastructure. I expect that the new solution will encourage financial institutions to participate in the repo market, which will in the future enable the creation of interest-rate benchmarks based on repos. I thank KDPW_CCP for another milestone in the implementation of the Capital Market Development Strategy,” said Katarzyna Szwarc, Plenipotentiary of the Minister of Finance for the Capital Market Development Strategy.

We worked in 2020 together with KDPW_CCP to develop and successfully roll out a mechanism securing the clearing of transactions based on the central counterparty service on the TBSP spot market. In 2021, together with the clearing house, we continued to work on similar solutions for the clearing of transactions in the repo market (for classical repo transactions). The goal of the project is to provide a clearing model which meets the standards established in most of the developed electronic markets and to activate and standardise repo transactions,” said Mariusz Bieńkowski, President of BondSpot S.A.

Maciej Trybuchowski, President of KDPW_CCP, said: “The clearing of repo transactions is yet another step in the development of the services of the KDPW_CCP clearing house. The safety of clearing will be significantly improved for market participants, improving liquidity on the market. Clearing transactions in a clearing house ensures full anonymity of trade on the market and helps to considerably mitigate clearing risks of transactions and eliminate the problem of counterparty risk limits.

The extended activity of KDPW_CCP will include clearing of conditional repo transactions concluded in organised trading (TBSP alternative trading system). The clearing house will accept for clearing classical repo transactions in Treasury securities registered in KDPW, excluding index-linked bonds.

Integrated processes applied by CCPs will cover the clearing of repo transactions, including novation, clearing, exposure monitoring, risk management, and settlement support. With its mechanisms and resources, KDPW_CCP guarantees the clearing of transactions to which it is a counterparty from the moment of their acceptance into the KDPW_CCP clearing system.

In connection with the new service, KDPW_CCP has developed regulations which in particular define the terms of repo settlement, risk management, handling of trade settlement fails and clearing member defaults.

According to the requirements of EMIR, KDPW_CCP has applied to the Polish Financial Supervision Authority (KNF) to extend its authorisation for the new clearing segment. The Polish Financial Supervision Authority authorised KDPW_CCP to clear repo transactions on 3 March 2022.