Cboe Clear Europe has secured regulatory approval to provide clearing services for European Securities Financing Transactions (SFTs). The approval, granted by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM), positions the company to introduce a new central clearing service for transactions in cash equities and exchange-traded funds (ETFs).
The service, a first for European SFTs, includes central clearing, settlement, and post-trade lifecycle management. It is designed for principal lenders, special participant lenders (including UCITS and non-UCITS), and borrowers. Settlements will be conducted across 19 European Central Securities Depositories (CSDs), enhancing the efficiency and reliability of the securities lending market.
Aligning with regulations
Cboe Clear Europe’s SFT clearing service aligns with key regulatory frameworks such as the European Market Infrastructure Regulation (EMIR), the Central Securities Depository Regulation (CSDR), and the Securities Financing Transactions Regulation (SFTR). By addressing these initiatives, the company aims to foster greater transparency, market integrity, and competitiveness in European capital markets.
The move transitions the current bilateral model for securities lending and borrowing to a centrally cleared structure, with Cboe Clear Europe acting as the counterparty for all transactions. This shift is expected to reduce risk-weighted asset exposures, enhance settlement efficiencies, and deliver cost-saving opportunities through cross-margining between cash equities and SFTs, according to Cboe Clear. Additional advantages include streamlined fee management and improved corporate action practices.
Collaboration
Cboe Clear Europe will utilise BNY and J.P. Morgan as tri-party collateral agents, while Pirum will handle trade instructions and post-trade events on behalf of clients. Jan Treuren, senior director of Product at Cboe Clear Europe emphasises the collaborative nature of the initiative: “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.”
