In its efforts to optimise the trade settlement process, the Central Securities Depository of Poland offers the automatic partial settlement functionality.
Automatic partial settlement enables the settlement of an instruction in part depending on the balance available in a registration account
in the settlement system as at the settlement date and the settlement of the remaining part on subsequent days.
It is a standard service offered by settlement institutions in order to optimise the settlement process. Automatic partial settlement enhances the liquidity of settlement by optimising the settlement of trade in KDPW and improving the liquidity of clearing in KDPW_CCP.
The functionality helps to reduce the volume of suspensions of settlement in the absence of a sufficient quantity of securities of a given type in a depository account necessary for full settlement, and consequently it helps to reduce suspensions of settlement at the record date of payments from securities.
Partial settlement is particularly relevant to those clearing houses which provide KDPW with netted settlement instructions based on multiple instructions from the markets. In case of a shortage of securities necessary to settle an order, partial settlement reduces clearing credits and debits in relations between a clearing house and its participants.
KDPW_CCP service: Netting for the cash market
- partial settlement applies to instructions settled on a DvP (Delivery versus Payment) basis. EXCEPTION: FoP post-trade transfers and instructions sent by KDPW_CCP which are generated as a result of securities netting are subject to partial settlement if they result in a transfer of securities between accounts: DvP, RvP, DFP, RFP, DWP, RWP;
- partial settlement applies to instructions which are not part of complex instructions and do not concern conditional trade;
- the service is optional for operations settled on the basis of settlement instructions which are to be matched as both parties to settlement must allow partial settlement. For operations settled on the basis of settlement instructions which are not to be matched, in particular trades covered by the guarantee system, the service is obligatory for the party which receives securities as only the party which delivers securities allows partial settlement;
- automatic partial settlement is performed as part of batch settlements in every settlement session with payment;
- for transactions concluded outside of organised markets, including transactions on Treasury BondSpot, a threshold value will apply, i.e., a fixed settlement value (PLN 20,000,000) below which a settlement instruction is not covered by partial settlement, where the value of the first settlement leg is at least PLN 5,000,000;
- if the sender allows partial settlement in an instruction for an OTC trade not covered by partial settlement, the instruction will not be rejected but it will be settled without the use of partial settlement.