LCH Consultation on PLN PAI/PAA and discounting transition

Dear SwapClear participant,

Further to LCH Circular number 4386 [1], LCH is pleased to announce the outcome of the consultation on the proposed PLN PAI/PAA and discounting transition [2].

The consultation asked three questions in relation to: (i) the transition from POLONIA daily fixings to POLSTR daily fixings with respect to the determination of the price alignment interest (PAI) and price alignment amount (PAA) payable in relation to PLN-denominated SwapClear Contracts [3] and (ii) the transition from WIBOR (IRS) to POLSTR (OIS) for the purpose of determining the daily net present value (NPV) of such PLN-denominated SwapClear Contracts (PLN discounting regime). 

LCH got active engagement from both members and clients, for which we are grateful. We outline the consultation outcome below.

Summary of Consultation Outcome 

1. Use of the historical POLONIA/POLSTR spot fixing spread

The majority of respondents agreed that, in the absence of projected POLONIA rates, the use of the historical POLONIA/POLSTR spot fixing spread is the most appropriate alternative to quantify the impact of the PLN PAI/PAA switch.

2. Application of a zero POLONIA/POLSTR spread leading to cash compensation equal to zero

The majority of respondents agreed with the application of a 0 (zero) POLONIA/POLSTR spread leading to cash compensation amounts equal to 0 (zero) in relation to the PLN PAI/PAA switch.

3. Timing

The majority of respondents did not object to the proposed transition date of 12 December 2026 [4].

Next Steps 

Based on the feedback received, LCH intends to move forward with the PLN PAI/PAA and discounting transition in line with the approach and timing articulated above. 

Implementation of the above approach remains subject to ongoing risk governance, legal and regulatory review, and may be subject to further change.

If you have any questions, please contact PLNtransition@lseg.com.

Kind regards,

Sales & Relationship Management, Rates Service