IMPLEMENTATION OF THE WSE GROUP’S STRATEGY

The development of the Exchange in 2015 and beyond will be mainly driven by the implementation of the WSE Group’s updated strategy for 2014-2020. WSE will take active measures to unlock the full potential and to develop its core markets: the markets in shares, debt, derivatives, and information products. As a result, WSE wants to be the exchange market of first choice for investors and issuers in Central and Eastern Europe.

Development will be based on reinforcement of the existing key business segments of the Exchange and development of areas where WSE has a competitive advantage and may effectively leverage the potential of its employees and assets. WSE’s updated strategy turns the Exchange to clients understood broadly as issuers, investors and brokers.

The key issues include the level of fees charged by the Company. WSE analyses on an on-going basis the situation with respect to fees as well as the impact of fees on the competitive edge of its services and products.

Another goal under the updated strategy, which will have a major impact on the development of the Company in 2015 and beyond, is to improve efficiency, among others by reducing the Company’s operating expenses. This is the purpose of the implemented savings programme. According to the strategy, savings will mainly include real estate, external services, IT services, and other services.

ACTIVATING DEVELOPMENT OF THE DEBT MARKET

In 2015, the WSE Group is planning to implement important projects supporting further development of the TBSP market, including cash and conditional transactions, among others using transaction clearing guarantee mechanisms based on services of the clearing house KDPW_CCP. The planned implementation of a clearing guarantee system based on the CCP will cover both cash market transactions and repo/BSB transactions. In the opinion of the WSE Group, further development of the repo segment is important to the development of Poland’s financial market. Therefore, BondSpot S.A. will actively participate in work necessary to eliminate barriers hindering fast development of the segment and take actions to offer organised trading in the segment.

In 2015, steps will be taken to stimulate the activity of participants of BondSpot markets, including new participants holding the status of TBSP institutional investor.

On the Catalyst market, modifications are planned to the trading model including among others changes to the terms of listing and introducing bonds to trading, development and implementation of rules for market makers and a market maker activation programme, changes to the fee policy.

In 2015, the WSE Group will take further steps to support legislative changes aimed at eliminating barriers on the debt market, especially to allow banks to perform certain brokerage operations in debt instruments (single banking licence).

NEW PRODUCTS AND SERVICES ON THE COMMODITY MARKET

Launch of the Commodity Derivatives Market

The factors key to the development of the WSE Group include the launch of a financial market (market in electricity and gas derivatives) planned in 2015. It will offer trade in financial instruments based on PolPX-listed commodities as the underlying. Futures based on spot electricity prices will be launched in the first place. The market start date depends on a permit from the Minister of Finance to operate a regulated market within the meaning of the Act on Trading in Financial Instruments and in conjunction with the Commodity Exchange Act.

The launch of a financial market is a natural part of strategic growth of the Polish Power Exchange aimed to strengthen its competitive position on the European markets. The launch of the market will ensure product diversification, address the expectations of market participants, and represent a step towards a broader group of market participants including players interested in financial instruments. In addition, the launch of the commodity derivatives market will ensure product diversification of the PolPX Group and increase the turnover on the Day-Ahead Market. The launch of the financial market will also add domestic and international financial institutions to the group of trading participants.

Launch of OTC Electricity Trade Clearing

The launch of OTC electricity clearing by WCCH is a natural addition to the range of clearing services offered to participants of the Polish commodity market. WCCH considers the development of an OTC offer to be complementary to the services for the exchange market. The main advantage of the launch of OTC clearing by WCCH is the netting of margins for positions opened on PolPX and the trading platform. This allows for diversification of trading options available to participants without a significant increase of the cost of collateral.

Offering a Reporting Service for Trade of Market Participants in ACER

On 8 January 2015, PolPX opened registration with the Agency for the Co-operation of Energy Regulators (ACER) to get the status of Registered Reporting Mechanism (RRM) which will allow it to report trade of market participants under the requirements of REMIT. Following the registration with ACER, PolPX-RRM will offer the reporting service to exchange members and other interested parties. The RRM status allows to fulfil the trade reporting obligation of any market participant via the exchange.

Registration as RRM will allow PolPX to report trades of market participants under the requirements of the Regulation on Wholesale Energy Market Integrity and Transparency (REMIT). Under the REMIT implementing regulation published by the European Commission on 18 December 2014, the start date of the obligation to report exchange orders and transactions to ACER is 7 October 2015.

WCCH Harmonisation with EMIR Requirements

In order to clear financial instruments traded on the regulated market after 3 January 2017, WCCH is preparing to get the status of Central Counterparty (CCP) in line with the guidelines laid down in Regulation No 648/2012 (EMIR), the EMIR Regulatory Technical Standards (RTS) and the Regulation of the European Parliament and of the Council of 15 May 2014.

The CCP status is necessary to continue the operation of the clearing and settlement system following the effective date of the applicable EU regulations.