Eurex Clearing, the clearing house owned by exchange group Deutsche Börse, plans to launch a central counterparty (CCP) service for securities lending transactions in November 2011.
The new service will cover European markets for loans in equities, exchange traded funds and fixed income securities. Phased rollout will begin in November, with the full service due to be available in 2012.
The CCP service for securities lending will feature a specific member licence for lending participants that will enable beneficial owners to participate as clearing members of Eurex Clearing without any margin obligation. Agent lenders can maintain their current role.
By acting as a single counterparty to all trades, Eurex Clearing says it will help to reduce counterparty risk exposures and eliminate the need for multiple credit evaluations, thereby lowering capital allocations.
“Eurex Clearing is the first clearing house to incorporate the special structure of the securities lending market into a CCP model allowing cash and non-cash collateral as well as providing automated trade flow and loan lifecycle management,” said Thomas Book, member of the Eurex executive board, responsible for clearing.
Exchange group NYSE Euronext, currently in merger negotiations with Eurex parent Deutsche Börse, operates a pan-European securities lending platform, SecFinex, which has offered CCP services for stock lending and borrowing since its launch in June 2009. Central clearing on SecFinex is provided by Swiss CCP SIX x-clear and pan-European clearer EuroCCP.
European regulators have been working to push more off-exchange transactions through central clearing, including via the forthcoming European market infrastructure regulation, which mandates CCP clearing of many OTC derivative instruments before the end of 2012.