Cboe Clear Europe secures regulatory approval to launch SFT clearing
25 November 2024 Europe
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Cboe Clear Europe has received regulatory approval to clear European securities financing transactions (SFTs).
The approval was granted by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM).
With this approval, the pan-European clearing house is set to introduce a “first-of-its-kind” service for European SFT transactions in cash equities and ETFs, which includes central clearing, settlement and post-trade lifecycle management, the firm says.
It is available to principal lenders, special participant lenders (UCITS and non-UCITS) and borrowers, with settlements conducted across 19 European Central Securities Depositories (CSDs).
The service supports key regulatory initiatives such as the European Market Infrastructure Regulation (EMIR), Central Securities Depositary Regime (CSDR) and the Securities Financing Transactions Regulation (SFTR).
According to Cboe Clear Europe, this will promote transparency, market integrity and the competitiveness of European capital markets.
The service aims to help transform the current bilateral process between securities lenders and borrowers into a centrally cleared model, with Cboe Clear Europe acting as the counterparty to both sides of each transaction.
It is designed to reduce risk-weighted asset exposures associated with SFTs and supports the growth of this market.
Additionally, the firm expects it to bring various capital and operational advantages, including savings from cross-margining between cash equities and SFTs, greater settlement efficiencies, elimination of agent lender disclosures, and improved practices around fees management and corporate actions.
The service will use BNY and J.P. Morgan as triparty collateral agents, while Pirum will serve as the transmitter of new trade instructions and post-trade lifecycle events on behalf of clients.
Commenting on the milestone, Vikesh Patel, president of Cboe Clear Europe, says: “We are delighted to have received regulatory approval to expand into European SFT clearing, marking a significant milestone in our goal to introduce innovative, robust, and comprehensive clearing solutions across multiple asset classes in Europe.
“This achievement underscores our dedication to supporting our clients’ evolving needs and contributing to the resilience of financial markets. We greatly appreciate the support of our regulators as we deliver on our commitment to launch innovative services which we believe enhance efficiencies for European market participants and help foster the growth of the region’s capital markets.”
Jan Treuren, senior director of product at Cboe Clear Europe, adds: “We are excited to build out this new clearing eco-system in collaboration with market participants and are already in advanced discussions with a wide variety of firms, including banks, asset managers, broker-dealers, and agent lenders — who represent beneficial owners like pension funds and UCITS — to help ensure a smooth launch in the coming weeks and months.
“This service is supported by our risk management framework, offering clients the advantage of Cboe Clear Europe’s settlement experience and broad direct connectivity to 19 European CSDs. Initially, the service will cover key European markets, with plans to expand the offering based on client demand and market developments.”
The approval was granted by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM).
With this approval, the pan-European clearing house is set to introduce a “first-of-its-kind” service for European SFT transactions in cash equities and ETFs, which includes central clearing, settlement and post-trade lifecycle management, the firm says.
It is available to principal lenders, special participant lenders (UCITS and non-UCITS) and borrowers, with settlements conducted across 19 European Central Securities Depositories (CSDs).
The service supports key regulatory initiatives such as the European Market Infrastructure Regulation (EMIR), Central Securities Depositary Regime (CSDR) and the Securities Financing Transactions Regulation (SFTR).
According to Cboe Clear Europe, this will promote transparency, market integrity and the competitiveness of European capital markets.
The service aims to help transform the current bilateral process between securities lenders and borrowers into a centrally cleared model, with Cboe Clear Europe acting as the counterparty to both sides of each transaction.
It is designed to reduce risk-weighted asset exposures associated with SFTs and supports the growth of this market.
Additionally, the firm expects it to bring various capital and operational advantages, including savings from cross-margining between cash equities and SFTs, greater settlement efficiencies, elimination of agent lender disclosures, and improved practices around fees management and corporate actions.
The service will use BNY and J.P. Morgan as triparty collateral agents, while Pirum will serve as the transmitter of new trade instructions and post-trade lifecycle events on behalf of clients.
Commenting on the milestone, Vikesh Patel, president of Cboe Clear Europe, says: “We are delighted to have received regulatory approval to expand into European SFT clearing, marking a significant milestone in our goal to introduce innovative, robust, and comprehensive clearing solutions across multiple asset classes in Europe.
“This achievement underscores our dedication to supporting our clients’ evolving needs and contributing to the resilience of financial markets. We greatly appreciate the support of our regulators as we deliver on our commitment to launch innovative services which we believe enhance efficiencies for European market participants and help foster the growth of the region’s capital markets.”
Jan Treuren, senior director of product at Cboe Clear Europe, adds: “We are excited to build out this new clearing eco-system in collaboration with market participants and are already in advanced discussions with a wide variety of firms, including banks, asset managers, broker-dealers, and agent lenders — who represent beneficial owners like pension funds and UCITS — to help ensure a smooth launch in the coming weeks and months.
“This service is supported by our risk management framework, offering clients the advantage of Cboe Clear Europe’s settlement experience and broad direct connectivity to 19 European CSDs. Initially, the service will cover key European markets, with plans to expand the offering based on client demand and market developments.”
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