SecFinex, an electronic trading platform for securities lending owned by exchange group NYSE Euronext, has teamed up with EuroCCP, a European post-trade service provider owned by US clearing house DTCC, to launch central counterparty (CCP) services for stock borrowing and lending across SecFinex’s UK Order Market.
The proposed service will enable stock borrowing and lending participants in the UK to take advantage of standard central clearing house functionality such as elimination of capital allocation, balance sheet netting, reduced collateral requirement, cost efficiencies, anonymity, single counterparty and multiple clearing options.
According to the two firms, market participants view the current structure and operation of equity securities borrowing and lending to be inefficient and costly. They claim the introduction of a CCP will offer near risk-free access for lenders and borrowers of equities. The service is expected to be up and running by Q3 2009.
“The current turmoil in the financial services industry highlights the many benefits a central counterparty can bring in securities finance transactions,” said Diana Chan, CEO of EuroCCP. “Besides protection from counterparty default, a central counterparty benefits firms by reducing capital requirement and back office operational work in managing collateral.
Providing central counterparty services for securities borrowing and lending is a new, and we hope growing area for EuroCCP."