Cboe Clear Europe, wholly owned by derivatives and securities exchange network Cboe Clear Markets, will introduce a central counterparty (CCP) clearing service for securities financing transactions (SFTs).
The Amsterdam-based clearing house is set to launch the new service in Q3 2024, which will introduce matching, CCP clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and exchange-traded funds (ETFs).
The clearing house claims to be the only pan-European CCP offering these consolidated services for SFTs in European cash equities and ETFs.
Agent lenders and borrowers can secure settlement of trades within 19 European Central Securities Depositories (CSDs). The new service aims to help bring improved capital efficiencies, enhanced risk management and streamlined operational procedures to the market.
According to Cboe Clear Europe, European SFTs are primarily transacted on a bilateral basis and are not cleared.
However, new regulations including the Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR) and planned Basel IV implementation, have led to market participants managing increased capital demands and additional operational inefficiencies. This has increased the costs of bilateral SFTs, the firm adds, and may lead to a reduced capacity and appetite to borrow or lend.
Through its CCP clearing and settlement service offering for SFTs, Cboe Clear Europe says it will help clients to navigate these new rules, reduce their capital burdens — associated with bilateral SFTs — and achieve operational advantages including greater settlement efficiency, post-trade lifecycle processing and an elimination of agent lender disclosures.
Securing support for the launch of the new service, Cboe Clear Europe has onboarded participant agent lenders BNY Mellon and Citi, in addition to participant borrowers ABN AMRO Clearing Bank, Barclays, Citigroup Global Markets, J.P. Morgan and Goldman Sachs.
President of Cboe Clear Europe Vikesh Patel comments: “We are delighted to bring a CCP clearing service to Europe's SFT market, helping market participants improve their capital and operational efficiencies in relation to these products.
“It is a natural progression for our business, another important step in our mission to become Europe's leading multi-asset class clearing house. It further demonstrates our commitment to developing client-driven solutions. We are excited to be working with leading firms in the SFT market on this important initiative.”
