Cboe Clear Europe to launch CCP clearing service for securities financing transactions in 2024

Rick Steves

The new service addresses challenges caused by regulatory changes that 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.

Cboe Clear Europe, the Amsterdam-based clearing house and subsidiary of the world’s leading derivatives and securities exchange network Cboe Global Markets, has announced plans to introduce a Central Counterparty (CCP) clearing service for securities financing transactions (SFT).

The launch of the CCP clearing service for securities financing transactions is only expected to go live in Q3 2024, but is part of Cboe Clear Europe’s efforts to improve capital efficiencies, enhanced risk management, and streamlined operational procedures to this market.

BNY Mellon, Citi, ABN AMRO, Barclays, Citi, JP Morgan, Goldman Sachs want in

Cboe Clear Europe’s upcoming CCP clearing service for SFTs 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).

For this product, the company secured the support of a broad range of key market participants, including banks, clearing firms, asset managers, and custodians, having signed BNY Mellon and Citi as agent lenders. On the participant borrowers’ side are ABN AMRO Clearing Bank, Barclays, Citigroup Global Markets Limited, J.P. Morgan, and Goldman Sachs.

Vikesh Patel , President, Cboe Clear Europe, said: “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.”

CCP clearing service for SFTs addresses regulatory changes in Europe

The upcoming launch of the CCP clearing service for SFTs follows new European regulations, including the Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR), and the planned Basel IV implementation.

Until now, European SFTs primarily occur on a bilateral basis and are not cleared. Regulatory changes, however, 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 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.

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