Amendments to IRGIT Regulations – amendment to the Regulations of the Exchange Clearing House and new organization of Guarantee Funds
- Warsaw Commodity Clearing House (“IRGiT”) has amended the Regulations of the Exchange Clearing House (“Regulations”) and has introduced new regulations allowing for the operation of a single common Guarantee Fund for spot and forward markets for electricity and natural gas
- The amended Regulations will allow IRGiT to launch clearing operations for the new Agricultural Commodity Market, which the Polish Power Exchange (“POLPX”) intends to launch early next year
- The amendment to the Regulations will make it possible to implement new netting arrangements for initial margins: cross-product netting and cross-period netting
The implementation of the package of regulations including new versions the Regulations as well as other IRGiT regulations will complete the next stage of work in the program of optimizing the clearing guarantee system and is the first step in the process of launching the Agricultural Commodity Market of the commodity exchange operated by POLPX.
IRGiT has been collaborating with POLPX and the Warsaw Stock Exchange to implement the Food Platform Project under a public order granted by the National Agriculture Support Center. One of the conditions for executing the project is to make appropriate changes to the Regulations that would allow IRGiT to provide financial service of transactions concluded on the commodity exchange on the new category of exchange commodities, i.e. agricultural commodities.
In order to facilitate access to the Agricultural Commodity Market, an amendment to the Regulations has reduced the equity requirements for brokerage houses and commodity brokerage houses operating solely on the Agricultural Commodity Market or on the Property Rights Market.
The Regulations now also allow IRGiT to carry out netting of initial margins. IRGiT intends to introduce cross-product netting (for the forward electricity market) and cross-period netting (for the forward gas and electricity markets). When implemented, these changes will not only increase the appeal of IRGiT’s offering in terms of the collateral model used, but also increase the capacity of market players to develop more advanced trading strategies.
In order to optimize the operating costs of the Guarantee Fund for the market players and at the same time capture more precisely the risk generated by the House Members, IRGiT has introduced changes involving the creation of a single common Guarantee Fund for spot and forward markets for electricity and natural gas. The redesigned Guarantee Fund will make it possible to adjust the level of the required contributions to the variable level of risk generated by the individual House Members, while reducing the negative effect of the changing sum total of the Guarantee Fund on the level of profits on the investment of money accumulated in the fund.
Additionally, in order to ensure safety of transaction clearing, IRGiT has decided to implement a new tool supporting liquidity risk management in the clearing guarantee system, i.e. the use of credit facilities from commercial banks. This instrument will be used together with the pool of dedicated own funds set aside by the House in order to mitigate the risk of shortage of liquid funds in the clearing guarantee system.
The above changes will come into effect as of 4 November 2019.