Opinion of the European Central Bank of 22 May 2012 on the introduction of legal framework for the operation of central counterparties (CON/2012/41)
Date: 2012-05-22
Institutions: European Central Bank
Subjects: Poland, financial instrument, financial stability, national law, payment system, securities

EN 

ECB-PUBLIC 

OPINION OF THE EUROPEAN CENTRAL BANK 

of 22 May 2012 

on the introduction of legal framework for the operation of central counterparties 

(CON/2012/41) 

Introduction and legal basis 

On 10 April 2012, the European Central Bank (ECB) received a request from the Marshal of the Polish 

Parliament (Sejm) for an opinion on a draft law amending the Law on trading in financial instruments and 
certain other laws (hereinafter the ‘draft law’). A modified version of the draft law1, as developed in the 

parliamentary  legislative  procedure,  was  made  public  following  the  original  consultation  request.  This 

opinion takes these modifications into account.  

The ECB’s competence to deliver an opinion is based on Articles 127(4) and 282(5) of the Treaty on the 

Functioning  of  the  European  Union  and  the  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  law  relates  to  payment  and  settlement 

systems and to 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.  

Purpose of the draft law 

1.1  The draft law amends the Law of 29 July 2005 on trading in financial instruments3 inter alia with a 

view  to  adapting  its  provisions  to  the  requirements  to  be  introduced  by  the  proposal  for  a 

Regulation  of  the  European  Parliament  and  of  the  Council  on  OTC  derivatives,  central 
counterparties  and  trade  repositories4.  The  aim  of  this  adaptation  is  to  enable  the  clearing  of 
transactions in financial instruments through a central counterparty (CCP)5. 

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The draft law amending the Law on trading in financial instruments and the Law on public offering, conditions governing 
the  introduction  of  financial  instruments  to  organised  trading,  and  public  companies  (version  of  24  April  2012, 
parliamentary print no. 337).  
OJ L 189, 3.7.1998, p. 42. 
Consolidated text published in Dziennik Ustaw (Dz. U) of 2010 No 211, item 1384. 
COM(2010) 484 final. 
See explanatory memorandum to the draft law, p. 1. 

 
 
 
 
                                                 
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1.2  To this end, the draft law introduces clearing novation, a mechanism where the CCP assumes the 

rights  and  obligations  of  the  original  parties  to  the  transaction.  This  is  done,  inter  alia,  by: 

(a) modifying  the  legal  definitions  of  clearing  and  settlement  and  the  parties  involved  in  the 
clearing process6; (b) extending the protection against insolvency and similar proceedings of funds 

available in a counterparty’s account and necessary for settling the transaction, to cover those over-
the-counter (OTC) transactions with mandatory central clearing7; (c) introducing an obligation for 

counterparties  to  clear  their  transactions  through  clearing  members  together  with  corresponding 
rules  on  granting  and  revoking  authorisation  to  clear  such  transactions8;  (d)  defining  contractual 

rules for a CCP to assume the rights and obligations of the original parties to a transaction, with a 

separate  set  of  steps  for  those  transactions  executed  by  clearing  members  directly  and  for  those 
executed by counterparties required to execute their transactions through clearing members9. 

1.3 

In addition, the draft law provides that a trade repository may be established and operated by the 
National Depository for Securities (KDPW)10. 

2. 

Specific observations 

2.1  Article 45e(1) of the Law on trading in financial instruments as amended by the draft law specifies, 

inter alia, that where a counterparty has designated funds on its account to settle OTC transactions 

subject  to  mandatory  central  clearing,  availability  of  such  funds  for  settlement  shall  be  protected 

against effects of insolvency of the counterparty providing such funds. The ECB understands that 

this provision extends the protection of parties to transactions in financial instruments against the 

effects  of  a  counterparty’s  insolvency  in  specific  cases  not  covered  by  the  relevant  provisions  of 
Polish  law11,  which  transpose  the  Settlement  Finality  Directive12  and  the  Financial  Collateral 
Directive13.  The  ECB  further  understands  that  transactions  not  subject  to  mandatory  central 

clearing,  including  repo  transactions,  would  not  be  covered  by  this  extended  protection.  In  this 

context,  the  ECB  notes  that  repo  transactions  are  covered  within  the  scope  of  ‘title  transfer 
financial  collateral  arrangements’  protected  under  the  Financial  Collateral  Directive14  and  would 

therefore  welcome  extending  the  protection  offered  by  amended  Article  45e(1)  of  the  Law  on 

trading in financial instruments to cover repo transactions not subject to mandatory central clearing. 

Indeed, broad protection of repo transactions is encouraged as they constitute an effective tool for 

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14 

See Article 45b of the Law on trading in financial instruments as amended by the draft law. 
See Article 45e of the Law on trading in financial instruments as amended by the draft law. 
See new Article 45g of the Law on trading in financial instruments inserted by the draft law. 
See new Article 45h of the Law on trading in financial instruments inserted by the draft law. 
See new Article 48(5a) of the Law on trading in financial instruments inserted by the draft law. 
See Article 22(1)(4), 66-67, 77(4), 80, 84(3), 85, 85a, 127(4), 135-137,  333(2) and 498(4) of Law on bankruptcy and 
rehabilitation of 28 February 2003 (consolidated text published in Dz.U. of 21 October 2009 No 175, item 1361). 
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). 
Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements 
(OJ L 168, 27.6.2002, p. 43). 
See Article 4(1) together with Article 2(1) points (b) and (l) of the Financial Collateral Directive. 

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mitigating  counterparty  credit  risk,  while  stable  repo  markets  are  an  important  source  of  funding 

for the financial sector. 

2.2 

In  the  context  of  amended  Article  45e  of  the  Law  on  trading  in  financial  instruments,  the  ECB 

notes that this provision currently includes paragraph 3, which extends its application to securities 

registration systems operated by Narodowy Bank Polski. This provision is, however, missing from 

Article  45e  as  amended  by  the  draft  law.  The  text  currently  included  in  Article  45e(3)  should 

therefore be reintroduced. 

2.3  The ECB also notes that to allow for KDPW’s participation in T2S, the Law on trading in financial 

instruments  should  be  further  adapted  in  the  future  so  that  it  cannot  be  interpreted  as  preventing 

KDPW from outsourcing certain functions related to securities settlement to the Eurosystem acting 

as operator of the T2S platform. Particular attention in this regard needs to be paid to Article 48(7) 

and Article 150(1)(13a) of the Law on trading in financial instruments, which may be interpreted as 

allowing KDPW to transfer information related to securities settlement solely to its subsidiaries to 
which  it  has  delegated  operation  of  the  central  securities  depository15.  The  ECB  recommends 

adequately amending or supplementing the above provisions to allow KDPW to outsource certain 

securities settlement functions to a third-party service provider, and to transfer relevant information 

to  them.  In  this  respect,  the  attention  of  the  Polish  authorities  is  also  drawn  to  Article  28  of  the 

proposal for a Regulation of the European Parliament and of the Council on improving securities 

settlement  in  the  European  Union  and  on  central  securities  depositories  (CSDs)  and  amending 
Directive 98/26/EC16. 

This opinion will be published on the ECB’s website. 

Done at Frankfurt am Main, 22 May 2012. 

[signed] 

The President of the ECB 

Mario DRAGHI 

15 

16 

See also paragraph 4 of Opinion CON/2008/20, paragraph 2.2 of Opinion CON/2009/55 and paragraph 2.2 of Opinion 
CON/2011/63. All ECB opinions are published on the ECB’s website at www.ecb.europa.eu. 
COM(2012) 73 final. 

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