Settlement Agent

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