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Cboe Clear Europe has launched a new central clearing service for Securities Financing Transactions (SFTs) in European cash equities and ETFs, with Natixis Corporate & Investment Banking and JP Morgan completing the first trades through the platform.
The service marks an important step in Cboe Clear Europe's strategy to become a leading multi-asset class clearing house in the region. As the largest pan-European clearing house for cash equities, Cboe is leveraging its existing infrastructure to transform the traditionally bilateral process for SFTs into a centrally cleared model.
The new offering utilises BNY and JP Morgan as Tri-Party Collateral Agents, while Pirum serves as the transmitter of trade instructions and post-trade lifecycle events for clients. Several firms, including banks, asset managers, broker-dealers and Agent Lenders, have completed final testing and are preparing to use the service.
Vikesh Patel, President of Cboe Clear Europe, said: "We're delighted to extend our clearing capabilities with this transformative service for European SFTs. This launch responds to strong client demand for a clearing solution to help improve the capital efficiencies associated with stock borrowing and lending activities – delivering significant benefits to all participants in this ecosystem, including asset owners which lend out inventory as a way of generating additional income for their members. It demonstrates our commitment to both investing in and delivering innovative clearing solutions in collaboration with our clients to meet the growing focus of financial institutions on becoming more capital efficient. We look forward to building out this new ecosystem and exploring opportunities to expand the service into other asset classes and regions."
The central clearing service is designed to increase capital efficiencies for activities such as securities lending while supporting growth in this market. It comes as financial institutions face increasing regulatory, capital and operational burdens from frameworks including the Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR), and the planned Basel IV implementation.
Gesa Johannsen, Executive Platform Owner, Global Collateral, at BNY, commented: "Cboe Clear Europe's offering for European SFTs is an important step as the global collateral industry seeks to leverage central clearing solutions that deliver capital efficiency and enhance the safety and resiliency of funding markets. We're excited to provide clients with the option to clear securities lending transactions through Cboe's new service while leveraging BNY's global collateral platform to manage their liquidity and to access cleared and uncleared collateral markets globally."
Grégoire Froehlich, GSF Trader at Natixis Corporate & Investment Banking, added: "Clearing SFTs at Cboe Clear Europe enhances our capital efficiencies and reduces operational complexities associated with these products. We're delighted to be among the first participants to clear this product at Cboe Clear Europe."
The service allows for settlements across 19 European Central Securities Depositories and promises additional benefits including cross-margining between cash equities and SFTs, greater settlement efficiencies, elimination of agent lender disclosures, and improved practices for fees management and corporate actions.
Jan Treuren, SFT Product Lead at Cboe Clear Europe, expects activity to increase in the coming months, noting that active onboarding and testing is already underway with various market participants, including those acting on behalf of UCITS and non-UCITS beneficial owners.
