The National Bank of Poland (NBP), the Polish Ministry of Finance and the Custodian Banks’ Council in Warsaw have agreed with bond trading platform MTS and the National Depository for Securities (NDS) a new way of settling trades executed by foreign clients on MTS Poland.
Due to the lack of individual accounts at the NDS, custodians will continue to instruct NDS in the case of T-bonds and NBP in the case of T-bills. “This will help to avoid the risk that settlement will occur by using other clients’ assets,” says Dariusz Domaradzki, head of custody at Bank BPH in Warsaw.
In addition, instructions issued by the custodians will be based on settlement confirmations which will in future include trade execution details provided by MTS. These confirmations will be sent by MTS to the local custodians on a real-time basis using SWIFT MT541 or MT543 message formats.
“Clients will not be required to instruct their local custodians,” adds Domaradzki. “This new system allows local custodians to keep control of clients’ assets and to mitigate the risk of other clients’ assets being used – due to the obligatory settlement from the pool. Custodians will be able to verify clients’ positions and to stop settlement in the case of a lack of securities. At the same time, this procedure will relieve clients from the obligation to instruct trades executed on MTS Poland. From the clients’ point of view, this will make trading on the Polish market very similar to other European MTS markets.”
The new settlement model is expected to start at the end of February 2005.