Eurex Clearing See U.S. Expansion with BNY Mellon and State Street

Eurex Clearing has won the backing of two of the world’s largest global custodians, BNY Mellon and State Street, to explore ways to expand its securities lending services in the U.S.
By Joe Parsons(2147488729)
Eurex Clearing has won the backing of two of the world’s largest global custodians, BNY Mellon and State Street, to explore ways to expand its securities lending services in the U.S.

BNY Mellon and State Street intend to work with the Frankfurt-based clearing house to provide their clients access to Eurex Clearing’s Securities Lending CCP, and to enhance the Eurex Clearing model for agent lenders and beneficial owners.

The partnership is a decisive win for Eurex, which most recently signed up Natixis, France’s second-largest bank, as a clearing member of its securities lending services.

“We are continually monitoring the regulatory and structural changes taking place in this market and view central clearing as a key additional distribution method that will help to support market demand for our clients’ securities,” says James Slater, executive vice president and global head of Securities Finance, BNY Mellon.

“We see benefits for our clients in a service that is tailored to the specific needs of the securities financing space, preserving the relationship driven business structure and at the same time delivering the capital efficiency and safety associated with central clearing,” adds Lou Maiuri, executive vice president and head of Securities Finance, State Street.

If successful, Eurex Clearing will become the first CCP to provide securities lending in both Europe and the U.S.

The partnership highlights a fundamental shift from broker-dealers to central counterparties (CCPs) in the securities financing market.

This is because broker-dealers, which have traditionally provided securities lending services, have become increasingly constricted due to tough balance sheet regulatory provisions. This has led to CCPs increasingly being seen as the solution, offering ways to significantly reduce capital costs and potentially reduce counterparty risk, while still allowing for certain relationship aspects built into the securities lending market to continue.

As well as Eurex Clearing, the U.S. Options Clearing Corporation (OCC) is also planning to implement a program enabling it to carry out repos and securities lending to non-bank firms such as pension funds and insurance companies.

Furthermore last week Greece’s clearing house, AthexClear, was authorized under the European Market Infrastructure Regime (EMIR) to provide securities lending services.

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