As Cboe Clear Europe primes for the launch of its CCP clearing service for securities financing transactions in Q3 2024, it is encouraged by support from nine “key market participants”. Bank of America and State Street are the two latest to join the launch roster, the Amsterdam-based CCP reveals in a press release.
The new service is “expected to introduce matching, CCP clearing, settlement and post-trade lifecycle management for SFT transactions in European cash equities and ETFs”. It will be made available to principal lenders, UCITS and non-UCITS special participant lenders, and borrowers. Settlement will take place in 19 European CSDs.
Tackling reforms
A key motivation behind the development of the service is the planned implementation of Basel III reforms in the US this year and the next. The reforms will introduce new capital requirements and credit risk mitigation rules. According to Cboe Clear Europe, these rule changes will be of particular concern for European SFTs, which “primarily occur on a bilateral basis and are not cleared”.
Having a CCP clearing and settlement service for SFTs will thus “help clients address these new rules” and “reduce their risk-weighted assets exposures associated with bilateral SFTs”. In addition, the service might contribute to operational advantages, such as greater settlement efficiency, elimination of agent lender disclosures, and better practices in fees management, corporate actions, and post-trade lifecycle processing.
Besides Bank of America and State Street, other launch participants include Barclays, Goldman Sachs, and Citibank.
Around the announcement of the service in 2023, PostTrade 360° had a talk with Cboe Clear’s Jan Treuren, here.