SL-x Temporarily Suspends Adding New Clients as CCP Structure Struggles

SL-x has confirmed that it has “temporarily suspended the operational introduction of new clients” after voluntarily applying to cancel its Financial Conduct Authoirty (FCA) approval last week.

Last week, the securities finance trading platform said it planned to “redeploy capital resources,” and today the firm issued a statement saying that it “is reviewing its corporate strategy and restructuring its operations in light of the slower than anticipated pace of the transition of the U.S. and European stock lending marketplace from its current OTC (over the counter) structure to a CCP (centrally-cleared) structure.

“We believe that the CCP structure is a critical component for SL-x, and thus there will be no change to our existing contractual relationships. We further believe that our patented and innovative trading platform will assist greatly in this market’s transition, which will result in greater capital and operational efficiency for all participants.”

Last year, SL-x engaged the Promontory Financial Group to conduct a study to determine the benefits of clearing securities lending trades through a CCP, which found that doing so could reduce the capital required against agent lender guarantees by 97%.

Agent lenders at the IMN’s European Beneficial Owners’ Securities Lending Conference largely agreed that a roadblock has been the comfort level, as most are used to and understand the bilateral model but are less sure about how/if the CCP model will work for them.