Cboe Clear Europe to introduce clearing service for securities financing transactions

Initiative to introduce clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs supported by the likes of BNY Mellon, Citi and Goldman Sachs.

By Jonathan Watkins

Exchange and clearing house operator Cboe Global Markets is planning to introduce a central counterparty (CCP) clearing service for securities financing transactions (SFT) in Q3 2024.

Subject to regulatory approvals, the service will come through its Amsterdam-based clearing house and introduce 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).  

Cboe Clear Europe has secured the support of a broad range of key market participants, including banks, clearing firms, asset managers and custodians, who are expected to support the launch of this service.  

Participant Agent Lenders include BNY Mellon and Citi, while borrowers include Barclays, JP Morgan and Goldman Sachs, among others.

Cboe said it is the only pan-European CCP offering these consolidated services for SFTs in European cash equities and ETFs, and subsequently it expects “to help to bring improved capital efficiencies, enhanced risk management and streamlined operational procedures to this market”.  

European SFTs primarily occur on a bilateral basis and are not cleared. However, new regulations are resulting in market participants having to manage increased capital demands and additional operational inefficiencies that increase the costs of bilateral SFTs. This may lead to a reduced capacity and appetite to borrow or lend.  

Cboe’s aim is to help clients navigate the new rules, reduce their capital burdens associated with bilateral SFTs and achieve operational advantages. These include greater settlement efficiency, the elimination of agent lender disclosures, and improved practices around fees management, corporate actions, and post-trade lifecycle processing. 

Vikesh Patel, president, Cboe Clear Europe, said: “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. We are excited to be working with leading firms in the SFT market on this important initiative.”