Dear Client,
Update on System Modernization Program (SMP)
In mid-2012 KELER launched the SMP with the aim of replacing its almost 20 year old account management system, ensuring that the new application is fully compliant with Target2Securities (T2S) functionalities by September 2016 when KELER will join T2S as part of the 3rd migration waive. In line with the plan, in the first phase of the implementation plan, KELER selected the respective service provider, Tata Consultancy Services, as a result of an extensive multistage selection process. The system specification phase has been closed and service document has been published describing the main new features and products that will be available in the new system (BANCS). The specification with the technical details is expected to be published in July 2014. According to the current schedule, testing for KELER’s clients ( i.e.: local custodians) shall take place in November/December 2014. Market wide testing will follow in January/February 2015 with expected live date of the system being 02 March 2015.
The July edition of our monthly Newsletter includes the details of the service description document, featuring the new/amended services available in the new system. Among others these are: handling of basic data, central depository services, local and cross border settlement, handling of corporate actions, collateral management, securities lending, communication/reporting.
One of the expected changes is that the format of the securities account number will be changed in the new system to an eleven-digit number starting with "1", followed by the main account number and the subaccount numbers that are currently used. We will provide further information on this on an individual client basis.
Wide Application Routing Platform (WARP)
WARP is an integrated platform for investment funds providing a direct link for fund managers, distributors, custodians and KELER. The new platform 2.0 was implemented in December 2013. KELER has decided to introduce this platform for the entire market, under which, from December 2014, WARP will be the basic channel for issuance and cancellation of investment fund notes. The daily processing in relation to distribution and settlement of investment fund notes will be handled entirely within WARP.
Client satisfaction survey
In order to improve its services, KELER conducted a client satisfaction survey online and via personal interviews last year. The results of the latter were shared at the forum. Generally, clients appreciate the innovation, flexibility and the ongoing system development project. KELER has put together an action plan which, among others, provides for the redesign of KELER’s web page and the continuation of the KID and system modernisation project.
Update on KELER CCP
EMIR licensing
KELER CCP submitted its application for EMIR compliant CCP license to the applicable supervisory authority, the Central Bank of Hungary, in mid-September 2013, in order to be able to continue providing services under EMIR. The application was approved on 25 October 2013 by issuing the "Confirmation of Readiness" document. ESMA is currently assessing the documentation, in order to issue the EMIR licence. The General Meeting of KELER Ltd. decided to extend the joint and several liability provided to KELER CCP until the EMIR license is received, but not later than the day of the 2015 Annual General Meeting.
Changes in clearing fee structure
In 2014, KELER CCP reviewed its clearing fee structure to provide more favourable conditions for its clients handling relatively high turnover. Accordingly, the fix monthly clearing fees have been increased for general and individual clearing members, while on the other hand, the CCP has introduced a turnover-based tiered pricing in order to offer discounts for larger clearing members. In regards to penalty fees, the fees have been modified to sanction the defaults carried over to the next day(s) more heavily, than the ones resolved within the day.
T+2
In line with the EU level harmonization, KELER CCP will shorten the equities settlement cycle from T+3 to T+2 with effective date 06 October 2014. There will be one net position on 08 October 2014 for all trades with trade date 03 October and 06 October 2014. For the time being, KELER CCP is not intending to extend the clearing deadline from the current 2:00 pm.
T2S
KELER will join T2S in the third wave in September 2016. With regards to KELER’s readiness, from technical/functional side, the new system BANCS with features for T2S will ensure compliance with the harmonization standards. As to service provider for communication, KELER signed an agreement with SIA-Colt in February 2014, and testing with them has begun in June. In regards to testing, KELER will take part in communication testing from November and business tests after March 2015, after which, it will obtain ECB certification, followed by the multilateral tests in June 2015. Finally, KELER will participate in the clients test in February 2016. KELER is planning further NUG workshops in September 2014, along with initiation of education and assistance for preparation for T2S of the market participants.
Impact on investors: At the latest Custodian Forum, KELER Group described its recent system developments and future plans. Participants discussed the major market changes that affect them and their clients.