Poland Prepares for Centralized Swaps Clearing
Financial firms can soon rely on one of two service providers to link with Poland's central clearinghouse for swaps contracts.
KDPW_ CCP says it has signed agreements with swaps data and processing giant Markit and messaging network provider SWIFT to offer participants connectivity to the clearinghouse to process their swap deals.
Brokerages and banks trading in over-the-counter derivatives can match up their trades using SWIFT's Accord platform or Markit's MarkitServ before clearing instructions are sent to KDPW_CCP. The links capitalize on European regulations requiring swap trades to be processed through central clearinghouses.
"Under the signed agreements, participants of OTC trade clearing -- local and international banks -- will get business and communication solutions necessary to participate in clearing OTC instruments via KDPW_CCP," says KDPW_CCP's chief executive Iwona Sioka. The new clearinghouse will phase in swap clearing as of January 2013. First up will be forward rate agreements, and interest rate swaps cleared in Polish zloty. The following year, foreign exchange swaps; foreign exchange options; and currency interest rate swaps will be added.
In a statement issued by KDPW_CCP, Markit and SWIFT tout the merits of their alternative routes to the clearinghouse which leverage their respective strengths. In the case of Markit, that amounts to linking participants to multiple swaps clearinghouses while SWIFT's network and message types are a defacto industry standard for communicating post-trade instructions on the continent. "Providing our clients with a simple point of access to multiple clearinghouses and reporting repositories is an important part of how we are helping the financial industry adapt to changing market structures," says Jeff Gooch, Markit's chief executive officer.
The agreement with KDPW_CCP marks the first for SWIFT among swap clearinghouses and expands on the use of the Accord platform in Poland. The Polish clearinghouse will initially accept instructions on matched trades from the Accord platform using legacy ISO 15022 message types but aims to eventually send participants status reports on cleared trades using upgraded ISO 20022 message types. "By choosing this option [Accord matching application] KDPW_CCP members can take advantage of SWIFT's industry standard messaging and its matching solution to further reduce risks and costs by reusing existing SWIFT connection," says Alain Raes, head of SWIFT's EMEA operations.
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com)