Plans for two new central counterparties (CCPs) for stock lending have been unveiled amid growing concerns about the credit risk posed by traditional bilateral stock lending arrangements.
On Monday, post-trade providers Eurex Clearing and Clearstream Banking Luxembourg announced a CCP for ASLplus, Clearstream’s securities lending programme. And today, European equity finance trading platform SecFinex and Swiss clearing house SIX x-clear revealed their plans for a stock borrowing and lending CCP. Both initiatives are scheduled to launch in Q2 2009.
Under Eurex and Clearstream’s scheme, Eurex Clearing will provide ASLplus, with anonymous netting, balance sheet relief and mitigation of counterparty risk.
“The introduction of a central counterparty for securities lending transactions will deliver significant efficiencies to lenders and borrowers,” said Thomas Book, member of the Eurex executive board responsible for clearing, in a statement. “Against the backdrop of the financial market crisis, central clearing services have become even more important to help stabilise markets, mitigate counterparty risk and increase market efficiency.”
SecFinex’s and SIX x-clear’s initiative will provide a CCP for the SecFinex Order Market multilateral trading facility. The agreement will cover stock loan transactions in Austria, Denmark, Finland, Germany, Norway, Sweden and Switzerland. Once the initial phase of the project is launched, SecFinex and SIX x-clear intend to extend services to additional European markets.
On 16 September, SecFinex teamed up with European clearing house LCH.Clearnet to provide a stock lending CCP for the Euronext markets (Belgium, France, Holland and Portugal).
“We believe the SecFinex marketplace, linked to SIX x-clear, will provide our clients with significant advantages that will serve to reduce capital requirements, lower risk for borrowers and lenders and broaden participation in current difficult markets,” said Peter Fenichel, CEO of SecFinex, in a statement.