Cboe Global Markets has confirmed that Cboe Clear Europe now clears European SFTs in cash equities and ETFs.
Vikesh Patel
The first-of-its-kind service transforms the bilateral process for SFTs for these asset classes into a centrally cleared model.
Specifically, the service utilises BNY and JP Morgan as tri-party collateral agents, with Pirum serving as the transmitter of new trade instructions and post-trade lifecycle events for clients.
Several entities are already on board, with other banks, asset managers, broker-dealers, and agent lenders having also completed final testing in preparation for clearing.
Move comes as Cboe seeks to make the trading of SFTs more capital efficient, especially as regards risk-weighted assets.
The offering also provides: 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, explained Cboe.
“This launch responds to strong client demand for a clearing solution to help improve the capital efficiencies associated with stock borrowing and lending activities – delivering significant benefits to all participants in this ecosystem, including asset owners which lend out inventory as a way of generating additional income for their members,” said Vikesh Patel, president of Cboe Clear Europe.
“[…] We look forward to building out this new ecosystem and exploring opportunities to expand the service into other asset classes and regions.”
This development from Cboe has been informed in part by the increased regulatory, capital and operational burdens as regards SFTs being imposed by: Central Securities Depositories Regulation, Securities Financing Transactions Regulation, and planned Basel IV implementation.
Among the first to utilise the new offering were JP Morgan and Natixis CIB, confirmed Cboe, acting as borrower and principal lender respectively.
Speaking about the trade, Grégoire Froehlich, GSF trader at Natixis CIB, said: “Clearing SFTs at Cboe Clear Europe enhances our capital efficiencies and reduces operational complexities associated with these products. We’re delighted to be among the first participants to clear this product at Cboe Clear Europe.”