EN 
 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 16 November 2006 
at the request of the Polish Minister for Finance on  
a draft law amending the Law on trading in financial instruments 
(CON/2006/53) 
 
Introduction and legal basis  
On 29 September 2006 the European Central Bank (ECB) received a request from the Polish Minister for 
Finance for an opinion on a number of draft laws am ending Polish laws in the area of capital markets 
regulation1.  
The ECB’s competence to deliver an  opinion is based on Article 105(4) of the Treaty establishing the 
European Community and the third, fifth and sixth in dents of Article 2(1) of Council Decision 98/415/EC 
of 29 June 1998 on the consultation of the European Central Bank by national authorities regarding draft 
legislative provisions2, as the draft laws relate to Narodowy Ba nk Polski (NBP), payment and settlement 
systems and rules applicable to financial institutions insofar as they materially influence the stability of 
financial institutions and markets. In accordance with the first sentence of Article 17.5 of the Rules of 
Procedure of the European Central Bank, the Governing Council has adopted this opinion.  
 1.  Scope of the consultation and purpose of the draft law 1.1 The aim of the draft laws is to transpose a numb er of Community directives into the Polish legal 
system and to make certain other amendments that do not directly relate to implementation 
requirements.  
1.2 This opinion is limited to one of the draft laws  submitted for consultation, namely the draft law 
amending the Law on trading in financial instru ments (hereinafter the ‘draft law’), which 
implements the Directive on markets in financial instruments (MiFID)
3 and the Capital Adequacy 
                                                 
1  The proposed amendments affect the Law of 29 July 2005 on trading in financial instrume nts (Dz.U. 2005, No 183, Item 
1538, as amended), the Law of 29 July 2005 on public offeri ngs and the conditions for admitting financial instruments 
into the organised system of trading and on public companies (Dz.U. 2005, No 184 , Item 1539, as amended) and the Law 
of 24 May 2004 on investment funds (Dz.U. 2004, No 146, Item 1546, as amended). 
2  OJ L 189, 3.7.1998, p. 42. 
3 Directive 2004/39/EC of the European Parliament and of  the Council of 21 April 2004 on markets in financial 
instruments amending Council Directives 85/611/EC a nd 93/6/EEC and Directive 2000/12/EC of the European 
Parliament and of the Council and repe aling Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1). Directive as last 
amended by Directive 2006/31/EC  (OJ L 114, 27.4.2006, p. 60). 
2 Directive4. Furthermore, this opinion is limited to t hose provisions of the draft law that do not 
directly relate to the implementation of Community  directives. Such provisions of the draft law 
primarily involve: 
(i) the introduction of a system for licensing and supervising the entities operating in the field of 
securities clearing and settlement5; and 
(ii) the streamlining of supervisory requir ements for banks conduc ting brokerage activities6.  
 
2. Provisions relating to securities clearing and settlement  2.1 Currently, the sole securities clearing and settlement operators in Poland are: (i) the state-controlled 
National Depository for Securities ( Krajowy Depozyt Papierów Warto ściowych , KDPW)
7; and (ii) 
NBP, for certain types of securities8. The draft law proposes to intro duce a system of licensing and 
supervision for other clearing and se ttlement operators in Poland. This  proposal relates indirectly to 
the requirements laid down in Article 34(2) and Ar ticle 46 of MiFID, which effectively allow the 
Polish operators of regulated securities markets a nd participants in such markets to designate 
qualified entities established in other Member States as providers of clearing and settlement 
services. Under the current Polish regime, such d esignation could only relate to KDPW or clearing 
and settlement operators established in Member States other than Poland. As a result of the 
proposed amendments, it will be possible for ne w clearing and settlement operators to be 
established in Poland and be designated as pr oviders of clearing and settlement services9. KDPW 
will remain exclusively entitled to register the securities and to act as the central securities 
depository.  
2.2 The ECB welcomes this proposal to broaden the category of entities entitled to offer clearing and 
settlement services in Poland and makes a number of  comments below on the specific provisions of 
the draft law in this regard. 
2.3 Definition of clearing and settlement services  
The ECB recommends adding certain new elements in the definitions of clearing and settlement 
services proposed by the draft law10: 
(i) The definition of ‘clearing’ in the current version of the draft law includes the phrase 
‘determining the value of monetary and non-monetary obligations resulting from the 
                                                 
4 Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of 
investment firms and credit institutions  (recast) (OJ L 177, 30.6.2006, p. 201).  
5  Article 1(22)-(35) of the draft law. 
6  Article 1(70)-(73) of the draft law. 
7  KDPW is owned in equal parts by the State Tr easury, the Warsaw Stock Exchange and NBP.  
8  NBP may register and settle transactions in securities (i) issued by itself or by the State Treasury; or (ii) incorporating 
derivative rights based on such securities (A rticle 49 of the Law on trading in financial instruments; cf. Article 45c of the 
Law on trading in financial instruments following the amendm ents introduced by Article 1(24) of the draft law).  
9  Cf. the explanatory memorandum  to the draft law, p. 2. 
10  Article 45b of the Law on trading in financial instru ments, as added by Articl e 1(24) of the draft law. 
3 transactions entered into [by the parties]’. The definition should be expanded to include 
essential elements such as transmitting, reconciling and, in some cases, confirming payment or securities transfer orders prior to settlement , possibly including the netting of orders and 
the establishment of final positions for settlement
11.  
(ii) The definition of ‘settlement’ in the current version of the draft law includes the phrase 
‘debiting or crediting the [securities] deposit account or securities account … in connection 
with, respectively, disposal or acquisition of financial instruments, as well as debiting or 
crediting the bank account specified by the clearing participant, with the relevant values of 
liabilities determined as part of the clearing’. Th is definition should also reflect the purpose 
of securities settlement as the final step in a tr ansaction or in the processing within a transfer 
system, the aim of which is to discharge pa rticipants from their obligations through the 
transfer of securities and/or funds12.  
2.4 Operation of securities clearing and settlement 
The draft law allows a single entity to provide both clearing and settlement services13. Although the 
draft law does not specifically mention central counterparty (CCP) clearing services, in relation to any case where CCP clearing services and settlement services are provided by the same legal entity, which bears the credit risk, the ECB confir ms the validity of remarks made in its report 
entitled ‘Assessment of accession count ries’ securities settlement systems’
14: ‘for the sake of 
financial stability, a [securities settlement system  (SSS)] ought as far as possible to be designed as 
a service provider free of credit risk. The most  effective way to ensure a credit risk-free 
environment is the establishment of distinct lega l entities to manage the risk of securities clearing 
and securities settlement. The idea is to create a le gal structure which prevents any spillover of 
risks from the entity providing CCP services to the entity providing SSS services. This may also 
take the form of a holding structure with the CCP and SSS as affiliates, provided that the SSS’s own capital remains unaffected if the CCP defaults’.  
2.5 The draft law lists in detail KDPW’s tasks rela ting to ensuring the proper operation of the clearing 
and settlement process. The ECB recommends that su ch tasks should also apply to other system 
operators which may be established in Poland
15. Relevant clarification may also be needed to 
                                                 
11  The proposed reformulation of the definition follows the wording developed by the Committee on Payment and 
Settlement Systems of the Bank for International Settlements (BIS), as most recently referred to in ‘Payment and 
settlement systems in selected countries’, April 2003, p.  485; publication available on the Bank for International 
Settlements’ website at www.bis. org. Cf. European Central Bank, ‘Payment and securities settlem ent systems in the 
European Union’, June 2001, pp. 729 and 749; publication available on the ECB’s website at www.ecb.int.  
12  Cf. European Central Bank, ‘Business continuity oversight expectations for systematically important payment systems 
(SIPS)’, June 2006, p. 13; publication available on the E CB’s website at www.ecb.int.  
13  Article 68a(11) of the Law on trading in financial inst ruments, as added by Articl e 1(35) of the draft law. 
14  January 2004, p. 17. Report availabl e on the ECB’s website at www.ecb.int. 
15  To that end, Article 68a(1)-(2) of the Law on trading in fina ncial instruments (as amended by  Article 1(35) of the draft 
law) should make reference to the relevant provisions of Article 48 of the Law on trading in financial instruments  
(as amended by Article 1(26) of the draft law). 
4 ensure the proper functioning of the investor comp ensation scheme, as currently administered by 
KDPW in addition to its clearing and settlement tasks16. 
2.6 The amended provisions of the Law on trading in financial instruments17 should require that in 
order to mitigate operational risk the system operator should include rules on business continuity 
measures and secondary sites as a prerequisite for obtaining a licence. Such measures should in 
particular include: (i) contingency procedures to ensure the sustainability of critical functions, 
particularly in the event of disruption of the telecommunications network; (ii) arrangements for 
information dissemination in the event of a crisis; and (iii) other business continuity arrangements, 
including a second processing site with independent critical infrastructure components to those used 
at the primary site. Applicant operators should be expected to have a well-defined business 
continuity strategy in place, including plausibl e risk scenarios. At the same time, appropriate 
arrangements for business continuity training fo r the staff of system operators and system 
participants should be ensured. Business continuity  processes and test results should be subject to 
periodic updates and security reviews by auditors. 
2.7 Supervision and insolvency protection  
NBP’s supervisory role is currently exercised in relation to KDPW through: (i) the participation of 
an NBP representative in the authority supervisi ng clearing and settlement systems (the Financial 
Supervision Commission)18; and (ii) NBP holding a substantial sh are in KDPW’s registered capital, 
allowing NBP to exercise control pursuant to th e relevant corporate law provisions (such as 
representation on KDPW’s supervisory board). The draft law retains and even strengthens NBP’s 
position in relation to KDPW in this respect, inter alia by introducing a requirement to obtain the NBP President’s opinion in relation to proposed changes to KDPW’s rules and the rules of the 
settlement guarantee fund
19. 
2.8 The ECB further notes that NBP’s supervisory ro le in relation to other clearing and settlement 
systems which may be established in Poland will obvi ously be limited to pub lic supervisory powers 
(as opposed to rights stemming from the ownershi p of shares). The ECB therefore welcomes the 
NBP’s President’s power to issue an opinion: (i) be fore a licence for operating a system is granted; 
and (ii) before the system rules are adopted or amended20. Such powers will not, however, be 
sufficient to maintain the level of supervisory powers currently exercised by NBP in relation to 
KDPW. Hence, the ECB reiterates the observation made in ECB Opinion CON/2006/1521 regarding 
                                                 
16  See Article 48(1)(6) of the Law on trading in financial inst ruments (as amended by Article 1(26) of the draft law),  
in conjunction with Articles 133-146 of the Law on trading in financial instruments (as ame nded by Article 1(86)-(91) of 
the draft law). 
17  Article 68c(2) and (3) of the Law on trading in financial in struments, as added by Article 1(35) of the draft law. 
18  Article 5(2) of the Law of 21 July 2006 on supervisi on of the financial market (D z.U. 2006, No 157, Item 1119). 
19  Articles 50(2) and 66(2) of the Law on trading in financial inst ruments, as amended by Article 1(28) and (32) of the draft 
law. 
20  Articles 68a(4) and 68c(1) of the Law on trading in financial instruments, as added by Article 1(35) of the draft law. 
21  See paragraphs 4.1-4.3 of ECB Opini on CON/2006/15 of 9 March 2006 at the request  of the Polish Minister of Finance 
on a draft law on the supervision of financial institutions. 
5 the need to ensure NBP’s responsibility for the ove rsight function in relation to securities clearing 
and settlement. An oversight function is inherent in the central banks’ task of promoting a sound 
market infrastructure, in order to safeguard th e effectiveness of monetary policy and the overall 
stability of the financial system22. Hence, the ECB recommends that NBP is expressly made 
responsible for the oversight of all securities clear ing and settlement systems operating in Poland, 
including the systems’ rules, and given access to  all information and data relevant to the 
performance of such oversight tasks.  
2.9  The non-exhaustive list of insolvency-related measu res that, under the terms of the draft law, do not 
affect the ability to pay or transfer securities23 should include an express reference to moratoria on 
payments imposed on supervised entities by th e supervisory authority. The ECB further 
understands that such insolvency-related measures have  no effect on either instruments or cash held 
as collateral in the accounts of the affected particip ant with the system, and this should be clarified 
in the draft law.  
2.10  The ECB notes the amendments introduced by th e draft law into the Law on settlement finality, 
which implements the Settlement Finality Directive in Poland24. The amended provisions of the 
Law on settlement finality should expressly cover cl earing systems as well as settlement systems. 
The main aim of expressly extending the settlement finality rules to clearing systems would be to 
protect the transfer orders and netting that take place in those systems. Further, the Law on settlement finality should make an express referen ce to the NBP President’s power to issue an 
opinion before licensing a new settlement system
25. It would be appropriate for this provision to 
exclude KDPW, for the sake of clarification, from the duty to apply for such a licence (as, taken 
literally, the proposed provision could be inte rpreted as requiring the suspension of KDPW’s 
activities until an appropriate licence is issued). 
 3. Provisions relating to banks conducting brokerage activities 3.1 The ECB notes that the draft law also aims to str eamline the special supervisory regime relating to 
banks conducting brokerage activities. The proposed amendment will discontinue the two sets of 
separate supervisory requirements applied in rela tion to banking and brokerage activities of such 
                                                 
22  Cf. paragraph 3.2 of ECB Opinion CON/2006/20 of 25 April 2006 on the Dutch draft law concerning financial sector 
supervision and ECB Opinion CON/99/19 of 20 January 2000 at the request of the Luxembourg Ministry for the 
Treasury and the Budget on a draft legislative proposal im plementing Directive 98/26/EC on settlement finality in 
payment and securities settleme nt systems in the law of 5 April 1993, as am ended, relating to the financial sector and 
completing the law of 23 December 1998 creating a commission in charge of the prudential supervision of the financial 
sector; cf. BIS Committee on Payment and Settlement System s, ‘Central Bank Oversight of Payment and Settlement 
Systems’, May 2005, p. 1; publ ication available on the BI S website at www.bis.org.  
23  Article 45e(1) of the Law on trading in financial instru ments, as added by Article 1(24) of the draft law. 
24  Article 15(2) of Law of 24 August 2001 on settlement fina lity in the payment and se ttlement systems and on the 
supervision of such systems (Dz.U. 2001, No 123, Item 1351, as ame nded), as amended by Article 3(3) of the draft law. 
The provisions implement Directive 98/ 26/EC of the European Parliament and of the Council of 19 May 1998 on 
settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45). 
25  To be included in Article 16(2) of th e Law on settlement finality, as amended by Artic le 3(4) of the draft law. 
6 banks26. This will imply, inter alia: (i) discontinuing  the requirement to make initial capital for 
brokerage activities separate from initial capital fo r banking activities; (ii) discontinuing the 
requirement to prepare two sets of separate accoun ting records and financial statements; and (iii) 
limiting the capital adequacy requirements fo r banks conducting brokerage activities to 
requirements relating to the banking activity of such banks. The explanatory memorandum to the 
draft law justifies these measures as being consis tent with supervisory practice, since banks 
conducting brokerage activities are subject to rigorous  prudential supervision in relation to their 
banking activity27. Hence, rather than increasing the saf ety of banks’ customers, the current 
duplicated supervisory functions have been deemed to create unnecessary impediments to banks’ 
conduct of brokerage activities. The explanatory memorandum further notes that the duplication of 
supervisory requirements in such cases is not required under Community law.  
3.2 The ECB recognises that credit institutions authorised under the Banking Directive28 should not 
require another authorisation u nder MiFID to provide investment services or perform investment 
activities. When a credit institution decides to provi de investment services or perform investment 
activities, the competent authorities should verify that it complies w ith the relevant provisions of 
MiFID before granting an authorisation. 
3.3 However, although there is no requirement to obtai n a separate authorisation, certain provisions of 
MiFID still apply to credit institutions when providing one or more investment services or 
performing investment activities29. The streamlining of the capital market supervision of credit 
institutions conducting brokerage activities does not reduce the need to ensure the proper 
implementation and application of MiFID pr ovisions relating to credit institutions.  
 This opinion will be published on the ECB’s website.   Done at Frankfurt am Main, 16 November 2006. 
 
[signed] 
The President of the ECB 
Jean-Claude TRICHET 
                                                 
26  Article 1(70)-(73) of the draft law, amending Articles  111-113 of the Law on trading in financial instruments. 
27  See the explanatory memorandum  to the draft law, p. 7. 
28  Directive 2006/48/EC of the European Parliament and of  the Council of 14 June 2006 relating to the taking up and 
pursuit of the business of credit instituti ons (recast) (OJ L 177, 30.6.2006, p. 1). 
29  The following provisions of MiFID apply to credit instituti ons: (i) Article 2(2), 11, 13 and 14; (ii) Chapter II of Title II,  
excluding the second subparagraph of Artic le 23(2); (iii) Chapter III of Title II, excluding Articles 31(2) to 31(4) and 
32(2) to 32(6), 32(8) and 32(9); (iv) Articles 48 to 53, 57, 61 and 62; and (v) Article 71(1).