Żaneta Skorupska – Świrska, KDPW_CCP Preparation of the Polish Market for Implementation of EMIR Requirements

1.EMIR Implementation Timetable 1.Harmonisation of KDPW_CCP with EMIR Requirements 2.Start of OTC Derivatives and Repo Clearing Using Clearing Novation 3.Participation in KDPW_CCP Agenda 2

1.EMIR publication – by end of July EMIR effective date (t+20) – by end of August Draft technical standards for CCPs and trade repositories (ESMA) – by end of September Effective date of technical standards (European Commission, approval process max. 3 month, by end of December 2012 ) – early January Start of KDPW_CCP authorisation process 6.Start of KDPW trade repository registration process 7.Draft technical standards for a class of derivatives (ESMA, max. 6 months ) 8.Clearing obligation for a class of derivatives (European Commission, approval of clearing obligation for a class of derivatives max. 3 months) EMIR Implementation Timetable 3

EMIR - 20 days after publication in the Official Journal of the European Union – likely publication date of EMIR: July 2012, effective date: August application of regulatory technical standards drafted by ESMA and approved by the European Commission – technical standards to set out detailed obligations of sending derivatives to a central counterparty (CCP) and the obligation to authorise CCPs for OTC derivatives clearing. 4 Harmonisation of KDPW_CCP with EMIR Requirements

Effective date of technical standards 1. drafting: - draft technical standards for CCPs and trade repositories – by 30 September 2012; - draft technical standards for a class of derivatives subject to the obligation of clearing in a CCP (referred to in Article 4.2 of EMIR) – following authorisation of a CPP by a local regulator (i.e., within 6 months after ESMA’s receipt of a notification from a local regulator which has authorised a CCP to clear a class of derivatives) 5 Harmonisation of KDPW_CCP with EMIR Requirements

Effective date of technical standards 2. approval: European Commission approves technical standards under Regulation No. 1095/2010 and makes a relevant decision within 3 months Regulatory technical standards for CCPs and trade repositories are likely to take effect at the latest in early January Regulatory technical standards for a class of derivatives are likely to take effect at the earliest in H Harmonisation of KDPW_CCP with EMIR Requirements

EMIR harmonisation period – clearing services - EMIR provisions on clearing services take effect upon approval of technical standards for CCPs; - clearing houses should request authorisation within 6 months of the approval of technical standards; Harmonisation period for clearing houses which fulfil the following conditions before the approval of technical standards for CCPs: - fulfilment of the criteria of the definition of CCP; - holding an authorisation to provide clearing services under national legislation in the country of seat before the approval of technical standards for clearing services (except standards for a class of derivatives) Harmonisation of KDPW_CCP with EMIR Requirements 7

Harmonisation period – sending derivatives trades to CCPs - technical standards for a class of derivatives to be drafted by ESMA ater the authorisation of a CCP under EMIR - obligation to send a class of derivatives to CCPs effective only after the period of CCP authorisation by market regulators to clear a class of derivatives 8 Harmonisation of KDPW_CCP with EMIR Requirements

KDPW_CCP activity before approval of technical standards for CCPs and trade repositories - publication and effective date of the amendment to the Act on Trading in Financial Instruments introducing novation in clearing (expected effective date of the amendment: mid-July 2012) - drafting amendments to the transaction clearing rules in order to apply clearing novation to trading on organised markets, and amendments to OTC transaction clearing rules 9 Harmonisation of KDPW_CCP with EMIR Requirements

10 Participant AParticipant B 1a.Trade KDPW_CCP BUYSELL BUYSELL 2a. Trade Harmonisation of KDPW_CCP with EMIR Requirements

KDPW_CCP activity before requesting authorisation of clearing services under EMIR - capital requirements – increase of the share capital of KDPW_CCP prior to start of OTC trade clearing - authorisation application to PFSA, continuation of existing activity 11 Harmonisation of KDPW_CCP with EMIR Requirements

12 KDPW Trade clearing KDPW Trade clearing KDPW_CCP Trade settlement KDPW_CCP Trade settlement Securities settlement 1. Registration of trades (transfers of open positions) in the clearing system 1. Registration of trades (transfers of open positions) in the clearing system Cash settlement 2. Determining contributions to the guarantee system: Margins Mark-to-market CRR/Premium Clearing Fund Guarantee Fund 2. Determining contributions to the guarantee system: Margins Mark-to-market CRR/Premium Clearing Fund Guarantee Fund 3. Sending instructions for settlement 3. Sending instructions for settlement 4. Collateral management

KDPW activity before approal of technical standards for trade repositories: - launch of central trade repository services - registration of trade repository under EMIR within 6 months from approval of technical standards 13 Harmonisation of KDPW_CCP with EMIR Requirements

14 Harmonisation of KDPW_CCP with EMIR Requirements BondSpot Repo POP3 SMTP/ES DI MQ Message ESDK SWIFT ISO15022 XML/SWIF T Public network kdpw_stream Cash settlement Securities settlement Internal repository Clearing fund Central database Collateral management Sentinel Risk Manager Internal repository Trade simulation module Trade repository KDPW_CCP web portal KDPW_CCP web portal Internal repository Communication hub XML/MQ Message Conversion module Banks/Clients

Start of OTC Derivatives and Repo Clearing 15 Phase 1 – 1 January 2013 Forward Rate Agreements Interest Rate Swaps REPO Phase 2 – 1 January 2014 (according to market expectations) FX Swaps FX Options Interest Rate Options CIRS

Start of OTC Derivatives and Repo Clearing 16 Trading Participant A Client External trade acknowledgement platform MarkitWire SWIFT Accord Trade validation Trade acknowledgement Trade matching Trading Participant B Client KDPW_CCP Trade clearing Clearing risk and position management Operation of the clearing guaratee system Sending trade for settlement in external systems KDPW Cash settlement Collateral in securities Clearing Participant B KDPW Participant A NBP PLN settlement Payer Bank A PFSA Clearing Participant A Terminatio n Platform (TriOptima) KDPW Paticipant B additionally with payer bank function Thomson Reuters market data transfer

Start of OTC Derivatives and Repo Clearing 17 Participant Credits and debits: contributions to the clearing guarantee system NBP KDPW_CCP PLN settlement Managing collateral SECURITIES KDPW COLLATERAL REGISTER Transfer to KDPW_CCP account in KDPW Accepted securities: a)Treasury bonds b)W20 index stocks (up to 90% in Clearing Funds and 60% in Guarantee Funds) Collateral valuation Securities haircut ŚRODKI PIENIĘŻNE CASH

Start of OTC Derivatives and Repo Clearing 18 Requirements for Participants Price monitoring Exposure / concentration monitoring Margins MTM Clearing Fund Back Testing Stress Testing CCP equity

Participation in KDPW_CCP 19 Current requirements: GUR (general clearing member) -BANK: PLN 50 mn and multiple of PLN 5 mn for each entity represented in KDPW_CCP -BROKER: PLN 15 mn and multiple of PLN 2 mn for each entity represented in w KDPW_CCP BUR (direct clearing member) - BANK: PLN 25 mn - BROKER: PLN 4 mn Conditions of participation in the OTC trade clearing system – draft OTC rules – June 2012 (GUR – PLN 100 mn, BUR – PLN 50 million)

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