Polish clearing members will undergo a compulsory audit of their procedures in default situations. By Marta Boboryk, Relationship Manager, GSS Poland.
On 25 November the KDPW_CCP is planning to conduct mandatory testing of the key aspects of the procedure in the event of a default of transactions accepted by the KDPW_CCP to clear in the clearing system for transactions concluded on the organised market and in the OTC clearing system.
The main aim of the test is to verify the solutions and procedures applicable under KDPW_CCP rules in the event of critical situations which lead to the inability to clear transactions. The test should also check whether all clearing members are properly prepared to implement the emergency procedures in the event of default in transaction clearing.
The test is one of the measures taken by KDPW lately in order to increase the safety of trade in financial instruments. In August 2015, KDPW_CCP and the Warsaw Stock Exchange (WSE) made available the Risk Management Access (RMA) application for all entities clearing on-exchange transactions. The application facilitates risk management and improves the safety of transactions concluded on the exchange. Each clearing member and broker providing clearing services can now define maximum limits on the value of exchange orders placed by a WSE Member whose transactions it clears, thus it may ensure the improvement of effective risk management.
One of the most powerful functionalities of RMA is the “Kill Switch”, which enables clearing members to block the placement of orders of its WSE Member and the existing orders already placed by the WSE Member can be cancelled from the list of orders (the order book). The solution has been available as part of the Direct Market Access functionality of the WSE trading system UTP.
The new service reinforces the safety of trade at the highest world-class technology standard and follows the practice of many global markets where such solutions become more and more popular.
In addition, KDPW Group (both institutions, KDPW and KDPW_CCP) has already extended the insurance contract with AIG Europe Limited that insures the Group against financial consequences of operational risk of its activity to a sum of PLN 100 million. The new contract is valid until 30 June 2016. The insurance covers, amongst others:
- events of embezzlement of financial instruments and cash held by KDPW and KDPW_CCP or other entities kept in the accounts of KDPW and KDPW_CCP and the accounts of the entities operated by KDPW and KDPW_CCP
- potential losses caused by computer crime, as well as risks of professional liability of financial institutions such as interest or damages for non-performance, delayed or undue performance of obligations by KDPW and KDPW_CCP