Cboe Global Markets Inc has announced that Cboe Clear Europe, its Amsterdam-based clearing house, is planning to introduce a Central Counterparty (CCP) clearing service for securities financing transactions (SFT) in Q3 2024, subject to regulatory approvals.
This new service is expected to introduce matching, CCP clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs, for (agent) lenders and borrowers, with settlement taking place in 19 European Central Securities Depositories (CSDs). The exchange writes that as the only pan-European CCP offering these consolidated services for SFTs in European cash equities and ETFs, Cboe Clear Europe is expected to help to bring improved capital efficiencies, enhanced risk management and streamlined operational procedures to this market.
Vikesh Patel, President, Cboe Clear Europe, says: “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 and further demonstrates our commitment to developing innovative client-driven solutions. We are excited to be working with leading firms in the SFT market on this important initiative.”
European SFTs primarily occur 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, are resulting in market participants having to manage increased capital demands and additional operational inefficiencies that increase the costs of bilateral SFTs and may lead to a reduced capacity and appetite to borrow or lend. By offering access to a CCP clearing and settlement service for SFTs, Cboe Clear Europe writes that it is expected to help clients navigate these new rules, reduce their capital burdens associated with bilateral SFTs and achieve operational advantages. These include greater settlement efficiency, the elimination of agent lender disclosures, and improved practices around fees management, corporate actions, and post-trade lifecycle processing.
Cboe Clear Europe writes that it has secured the support of a broad range of key market participants, including banks, clearing firms, asset managers and custodians, who are expected to support the launch of this service.
Participant Agent Lenders include BNY Mellon and Citi.
Participant Borrowers include ABN AMRO Clearing Bank, Barclays, Citigroup Global Markets Limited, J.P. Morgan and Goldman Sachs.