At ARM’s length
As regulatory reporting requirements become more onerous, Poland’s central securities depository, KDPW, is stepping up to assist, says CEO Iwona Sroka
Poland has the biggest and most developed financial market in Central and Eastern Europe. The capital market accounts for 60 percent of exchange trades in this part of Europe, boasts a stable investor pool, a diversified range of instruments, and a well-developed post-trade infrastructure. The KDPW Group has implemented a range of development projects and, as a result, offers a comprehensive package of settlement, clearing, corporate actions processing, data maintenance and numbering agency services, which ensure a complete and attractive offering for Polish investment firms and investors, as well as foreign companies active on the Polish financial market.
KDPW_TR was one of the first trade repositories in Europe to be registered by the European Securities and Markets Authority (ESMA) in confirmation of compliance with all international standards, which guarantee the highest quality of service. It has participated in the implementation of the European Market Infrastructure Regulation (EMIR) from the very beginning, and is engaged in active dialogue with regulators, other trade repositories, and reporting participants. KDPW_TR aligns its services with the legal requirements and the ESMA guidelines and follows the needs of market players covered by the reporting obligation.
This includes: secure certified access, including an intuitive website interface with reporting functionalities and direct access to maintained data; global communication standards such as XML messages; easy access to support from our highly qualified experts; and procedures applicable in the event of contingencies, high security standards, and continuity in data collection and maintenance, including a back-up site.
KDPW_TR offers the reporting of derivative trades via a user-friendly, secure website interface or through automatic direct connections. Derivatives trades are reported in messages developed in line with the scope of information required under the EMIR technical standards, and include all data necessary for the trade repository to identify trades and process reports as required by ESMA.
Our online application supports: reporting and modification of trades; viewing and browsing reported data; filtering and downloading reported data; and tracking the reporting process. It is authorised to accept reports for commodity derivatives, credit derivatives, currency derivatives, equity derivatives and interest rate derivatives.
KDPW_TR offers two communication interfaces for users. The first is application to application (A2A), an interface supporting automatic data exchange between the KDPW Trade Repository application and participant applications. A2A is implemented on the basis of exchange of defined XML messages via IBM WebSphere MQ.
The second is user-to-application (U2A), a graphical user interface supporting manual exchange of data with the trade repository application. Users can report trades in the graphic application by entering trade details in a template or importing XML files.
User authentication in the application based on the electronic certificates issued by the main guarantor, a KDPW employee, in accordance with the main guarantor regulations. Access to functionalities is authorised and controlled based on access rights defined in the roles and access rights module.
Data maintained in KDPW_TR is available online for all active derivatives trades. Trade data is retained for 10 years after termination, and remains online for 30 months after termination. Data of archived derivatives trades is available on written request of an authorised entity within five business days, and data maintained by KDPW_TR is processed only for the purposes of operating the trade repository and providing access to authorised entities.
KDPW_TR publishes on its website generally accessible public information about maintained data in the form of weekly aggregate reports. It also supports data reconciliation between counterparties to derivatives trades by pairing and comparing the details of trades reported separately by the counterparties. Data reconciliation has been agreed by trade repositories and approved by ESMA.
KDPW has also taken steps to launch its Approved Reporting Mechanism (ARM) service, becoming an entity to provide reporting details of transactions to competent authorities, or to ESMA, on behalf of investment firms, under the Markets in Financial Infrastructure Regulation (MiFIR) and Directive (MiFID) II. The initiative stems from the extended scope of information subject to reporting obligations defined in MiFID II. The concept has been developed in co-ordination with the Warsaw Stock Exchange, which currently reports under MiFID I, and approved by the Polish Financial Supervision Authority.
Under MiFIR, investment firms are responsibie for the completeness, accuracy and timely submission of reports to the competent authority. Where an investment firm reports through an ARM, that responsibility is attributable to the ARM. KDPW, which has operated a trade repository for more than two years under EMIR, has the experience and a range of technological and procedural solutions necessary to accept, maintain, and validate trade reports. KDPW’s ARM service will be developed on the basis of a rational business model, which relies on the existing collaboration with domestic and foreign supervision authorities, in particular KNF, the Polish financial standards authority, in the processing, disclosure, quality assurance of reported data.
With automated, secured communication interfaces and KDPW’s existing model of relations with supervision authorities and participants, the selection of KDPW as the ARM will help entities subject to the reporting obligation to properly comply without interruption. The solution will be particularly advantageous to KDPW trade repository participants because all trade reports sent to the repository containing details of transactions required under MiFIR will be provided to the competent authority, ensuring compliance with the obligation of the reporting entity under MiFIR.
KDPW is currently working to develop the target business model and the relations with participants in the ARM service.