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)
Date: 2006-11-16
Institutions: European Central Bank
Subjects: Poland, financial stability, financial supervision, national law, payment system, securities

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  amending  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 indents 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 Bank 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 number 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  instruments  (hereinafter  the  ‘draft  law’),  which 
implements the Directive on markets in financial instruments (MiFID)3 and the Capital Adequacy 

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The proposed amendments affect the Law of 29 July 2005 on trading in financial instruments (Dz.U. 2005, No 183, Item 
1538, as amended), the Law of 29 July 2005 on public offerings 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). 
OJ L 189, 3.7.1998, p. 42. 
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  and  93/6/EEC  and  Directive  2000/12/EC  of  the  European 
Parliament and of the Council and repealing 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). 

 
 
 
 
 
                                                 
Directive4.  Furthermore,  this  opinion  is  limited  to  those  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 requirements for banks conducting 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 Wartościowych, KDPW)7; and (ii) 
NBP, for certain types of securities8. The draft law proposes to introduce a system of licensing and 

supervision for other clearing and settlement operators in Poland. This proposal relates indirectly to 

the requirements laid down in Article 34(2) and Article 46 of MiFID, which effectively allow the 

Polish  operators  of  regulated  securities  markets  and  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 designation 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  new  clearing  and  settlement  operators  to  be 
established in Poland and be designated as providers 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 

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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).  
Article 1(22)-(35) of the draft law. 
Article 1(70)-(73) of the draft law. 
KDPW is owned in equal parts by the State Treasury, the Warsaw Stock Exchange and NBP.  
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 (Article 49 of the Law on trading in financial instruments; cf. Article 45c of the 
Law on trading in financial instruments following the amendments introduced by Article 1(24) of the draft law).  
Cf. the explanatory memorandum to the draft law, p. 2. 
Article 45b of the Law on trading in financial instruments, as added by Article 1(24) of the draft law. 

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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 settlement11.  

(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’. This definition should also reflect the purpose 

of securities settlement as the final step in a transaction or in the processing within a transfer 

system,  the  aim  of  which  is  to  discharge  participants  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  confirms  the  validity  of  remarks  made  in  its  report 
entitled  ‘Assessment  of  accession  countries’  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 legal entities to manage the risk of securities clearing 

and  securities  settlement.  The  idea  is  to  create  a  legal  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 relating to ensuring the proper operation of the clearing 

and  settlement  process.  The  ECB  recommends  that  such  tasks  should  also  apply  to  other  system 
operators  which  may  be  established  in  Poland15.  Relevant  clarification  may  also  be  needed  to 

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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  settlement  systems  in  the 
European Union’, June 2001, pp. 729 and 749; publication available on the ECB’s website at www.ecb.int.  
Cf.  European  Central  Bank,  ‘Business  continuity  oversight  expectations  for  systematically  important  payment  systems 
(SIPS)’, June 2006, p. 13; publication available on the ECB’s website at www.ecb.int.  
Article 68a(11) of the Law on trading in financial instruments, as added by Article 1(35) of the draft law. 
January 2004, p. 17. Report available on the ECB’s website at www.ecb.int. 
To that end, Article 68a(1)-(2) of the Law on trading in financial 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). 

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ensure  the  proper  functioning  of  the  investor  compensation  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  plausible  risk  scenarios.  At  the  same  time,  appropriate 

arrangements  for  business  continuity  training  for  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 supervising clearing and settlement systems (the Financial 
Supervision Commission)18; and (ii) NBP holding a substantial share in KDPW’s registered capital, 

allowing  NBP  to  exercise  control  pursuant  to  the  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 fund19. 

2.8  The  ECB  further  notes  that  NBP’s  supervisory  role  in  relation  to  other  clearing  and  settlement 

systems which may be established in Poland will obviously be limited to public supervisory powers 

(as  opposed  to  rights  stemming  from  the  ownership  of  shares).  The  ECB  therefore  welcomes  the 

NBP’s President’s power to issue an opinion: (i) before 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 

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See  Article  48(1)(6)  of  the  Law  on  trading  in  financial  instruments  (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 amended by Article 1(86)-(91) of 
the draft law). 
Article 68c(2) and (3) of the Law on trading in financial instruments, as added by Article 1(35) of the draft law. 
Article 5(2) of the Law of 21 July 2006 on supervision of the financial market (Dz.U. 2006, No 157, Item 1119). 
Articles 50(2) and 66(2) of the Law on trading in financial instruments, as amended by Article 1(28) and (32) of the draft 
law. 
Articles 68a(4) and 68c(1) of the Law on trading in financial instruments, as added by Article 1(35) of the draft law. 
See paragraphs 4.1-4.3 of ECB Opinion 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. 

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the need to ensure NBP’s responsibility for the oversight 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  the  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 clearing 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 measures 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  the  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 participant with the system, and this should be clarified 

in the draft law.  

2.10   The  ECB  notes  the  amendments  introduced  by  the  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 clearing 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  reference  to  the  NBP  President’s  power  to  issue  an 
opinion  before  licensing  a  new  settlement  system25.  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  interpreted  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 streamline the special supervisory regime relating to 

banks conducting brokerage activities.  The proposed amendment will discontinue the two sets of 

separate  supervisory  requirements  applied  in  relation  to  banking  and  brokerage  activities  of  such 

22  

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24  

25  

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  implementing  Directive  98/26/EC  on  settlement  finality  in 
payment  and  securities  settlement  systems  in  the  law  of  5  April  1993, as  amended,  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  Systems,  ‘Central  Bank  Oversight  of  Payment  and  Settlement 
Systems’, May 2005, p. 1; publication available on the BIS website at www.bis.org.  
Article 45e(1) of the Law on trading in financial instruments, as added by Article 1(24) of the draft law. 
Article  15(2)  of  Law  of  24  August  2001  on  settlement  finality  in  the  payment  and  settlement  systems  and  on  the 
supervision of such systems (Dz.U. 2001, No 123, Item 1351, as amended), 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). 
To be included in Article 16(2) of the Law on settlement finality, as amended by Article 3(4) of the draft law. 

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banks26.  This  will  imply,  inter  alia:  (i)  discontinuing  the  requirement  to  make  initial  capital  for 

brokerage  activities  separate  from  initial  capital  for  banking  activities;  (ii)  discontinuing  the 

requirement to prepare two sets of separate accounting records and financial statements; and (iii) 

limiting  the  capital  adequacy  requirements  for  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  consistent  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  safety  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  under  MiFID  to  provide  investment  services  or  perform  investment 

activities. When a credit institution decides to provide investment services or perform investment 

activities, the competent authorities  should verify that it complies  with the relevant provisions of 

MiFID before granting an authorisation. 

3.3  However, although there is no requirement to obtain 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 provisions 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  
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29  

Article 1(70)-(73) of the draft law, amending Articles 111-113 of the Law on trading in financial instruments. 
See the explanatory memorandum to the draft law, p. 7. 
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 institutions (recast) (OJ L 177, 30.6.2006, p. 1). 
The following provisions of MiFID apply to credit institutions: (i) Article 2(2), 11, 13 and 14; (ii) Chapter II of Title II, 
excluding  the  second  subparagraph  of  Article  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).  

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