Poland Launches Negotiated Securities Lending and Borrowing System

The central securities depository, KDPW, in co-operation with KDPW_CCP, has launched a negotiated securities lending and borrowing system in order to improve the liquidity of clearing and settlement of securities in the systems operated by KDPW_CCP and KDPW.
By Jake Safane(2147484770)
The central securities depository, KDPW, in co-operation with KDPW_CCP, has launched a negotiated securities lending and borrowing system in order to improve the liquidity of clearing and settlement of securities in the systems operated by KDPW_CCP and KDPW.

The system adds to KDPW’s existing automatic securities lending system, as the negotiated system will offer enhanced flexibility of the terms of loan agreements negotiated by the parties. Through this system, KDPW’s role is to match entities interested in securities lending and to perform settlement, while KDPW_CCP clears loan agreements and organizes a collateral system covering return of securities by the borrower and return of contractual collateral by the lender guaranteed with KDPW_CCP’s own funds.

The negotiated lending system is designed to prevent the suspension of settlement and ensure the return of securities loaned in the automatic lending system.

The system supports the functions of posting the need for a loan, negotiating the terms of loan agreement such as the duration and lender fee, and concluding securities loan agreements. Certain parameters of loan agreements are negotiated including among others the duration of the loan and the fee for the lender. Loans in the system can either be for a fixed or non-fixed term.

In addition, the system operates with the parties to a loan being mutually anonymous prior to the conclusion of a loan agreement, as KDPW_CCP guarantees the return of the loan.

Only KDPW participants that hold clearing member status in KDPW_CCP’s transaction clearing system or who act as a settlement agent for entities holding such status in the system can be eligible as lenders, while borrowers need to hold clearing member status in the KDPW_CCP transaction clearing system or have a representative in the clearing system.

KDPW_CCP is also likely to see an increase in activity going forward, as this week, Poland’s Monetary System Council, an opinion-giving and advisory body closely tied with the management board of the National Bank of Poland, recommended that banks clear OTC derivatives trades and repo transactions at an authorized CCP clearing house.

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