Amsterdam-based clearing house Cboe Clear Europe plans to introduce a central counterparty (CCP) clearing service for securities financing transactions (SFTs) in Q3 2024.
The subsidiary of global derivatives and securities exchange operator Cboe Global Markets will provide agent lenders and borrowers with matching, CCP clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs.
Settlement will take place in 19 European Central Securities Depositories (CSDs), it said.
Cboe Clear Europe is the only pan-European CCP offering consolidated services for SFTs in European cash equities and ETFs and said this development will improve capital and operational efficiencies as well as risk management.
While European SFTs typically occur on a bilateral basis and are not cleared, regulations including the Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR) and upcoming implementation of Basel IV are increasing inefficiencies and capital demands of SFTs which may create lower capacity and demand to borrow and lend among participants.
Cboe Clear Europe said its upcoming service will increase settlement efficiency, eliminate agent lender disclosures and improve fee management, corporate action and post-trade lifecycle processing within bilateral SFTs.
It has secured backing from banks, clearing firms, asset managers and custodians.
Participant agent lenders include BNY Mellon and Citi while participant borrowers range from CitiGroup Global Markets, JP morgan, Goldman Sachs to ABN AMRO Clearing Bank.
Vikesh Patel, president of Cboe Clear Europe, commented: "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.”
Cboe Clear Europe currently offers clearing services to 47 venues in Europe.
In 2021, it diversified into equity derivatives clearing to support the roll-out of the firm’s pan-European equity derivatives exchange, Cboe Europe Derivatives.