Natixis has become the first French bank to join Frankfurt-based Eurex Clearing as a member of its securities lending CCP, in a move reflecting the growing importance of clearing houses in securities financing.
Natixis, the second largest bank in France, has also become a member of EurexOTC Clear, Eurex’s over-the-counter derivatives clearing division.
With the onboarding of Natixis, it takes the total number of clearing members of Eurex Clearing’s Lending CCP to six, after it signed up U.S. investment bank Morgan Stanley last October.
“The CCP model for Natixis will not only help manage the rising burden of balance sheet regulation and costs, we believe it will also prompt new stock lending structures and business opportunities with non-standard profile counterparties,” says Gregoire Froehlich, trader, securities lending and borrowing, Natixis.
While the idea of using central counterparties (CCPs) for securities lending has been around for a long time, their adoption seems to be more welcomed now than ever before, as securities lending participants move past worrying about regulation into the phase of findings solutions.
This is because broker-dealers, that have traditionally provided securities lending, have become increasingly constricted due to tough balance sheet regulatory provisions.
Speaking at the ‘Beneficial Owners’ International Securities Lending & Collateral Management’ conference in San Francisco this week Michael Weaver, global head of Securities Lending and Financing at BlackRock said: “Without a mechanism for removing some of the pressure from broker-dealer balance sheets…there’s serious potential for existing demand to wane in the securities lending market, and that’s something that’s not to the benefit of the beneficial owner community.”
CCPs are now being seen as a key 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.
“This model allows not only for x-margin benefits, but even more important it allows for the highest collateral efficiency across securities lending, repo and derivatives,” adds Matthias Graulich, chief client officer and member of the Eurex Clearing executive board.
Natixis Joins Eurex Clearing Securities Lending CCP
Natixis has become the first French bank to join Frankfurt-based Eurex Clearing as a member of its securities lending CCP, in a move reflecting the growing importance of clearing houses in securities financing.