Cboe Clear Europe has garnered additional support from key players to launch its Central Counterparty (CCP) clearing service for securities financing transactions (SFTs).
Vikesh Patel
With Bank of America and State Street onboard, the total number of launch participants now stands at nine, encompassing banks, clearing firms, asset managers and custodians.
Vikesh Patel, president, Cboe Clear Europe, said: “We are delighted to have added two major participants in the European securities lending industry to the group of firms supporting the launch of the SFT service and benefit from their collective expertise as we finalise our offering.”
The participants include borrowers such as ABN AMRO Clearing Bank, Bank of America, Barclays, Citibank, Goldman Sachs, and JP Morgan, as well as agent lenders like BNY Mellon, Citibank, and State Street.
Patel said: “Their recent commitment – and the calibre of the group of early adopters we have assembled as a whole – clearly demonstrates the growing need to introduce central clearing to the European SFT market and help reduce risk in this key activity.”
The Amsterdam-based CCP aims to introduce matching, CCP clearing, settlement, and post-trade lifecycle management for SFT transactions in European cash equities and ETFs.
Alessandro Cozzani, managing director, Bank of America, said: “We are excited to embark on this journey with Cboe Clear Europe. Developing a cleared product for securities lending is a natural evolution in our secured financing market, which should allow for greater risk optimisation with counterparties.”
Pending regulatory approval, the service will be available to principal lenders, special participant lenders (UCITS and non-UCITS), and borrowers, with settlement occurring in 19 European Central Securities Depositories (CSDs).
By offering CCP clearing and settlement service for SFTs, Cboe Clear Europe aims to help clients navigate new regulations, reduce risk-weighted asset exposures associated with bilateral SFTs, and foster growth in the market.
The service also aims to enhance operational efficiency, reduce fail fines, eliminate agent lender disclosures, and improve practices around fees management, corporate actions, and post-trade lifecycle processing.
Jan Treuren, SFT product lead, Cboe Clear Europe, said: “We are working closely with all of our launch participants to help shape the first phase of our SFT service offering through a series of regular working groups and key stakeholder meetings. This includes exploring expansion of the service into other assets classes and jurisdictions. At launch, Cboe Clear Europe will be the only pan-European CCP offering these consolidated services for SFTs in European cash equities and ETFs.”
In Europe, there have been multiple failed attempts to successfully introduce and maintain SFT clearing in the past, with the most recent high-profile cautionary tale coming through Eurex Clearing which announced it was shutting down its Securities Lending CCP service in 2021 as a result of low clearing volumes and a prioritisation of other businesses.