Securities Financing Transactions (SFT) Clearing
Cboe Clear Europe, the leading pan-European CCP, is introducing a first-of-its-kind central counterparty clearing service for European Securities Financing Transactions (SFTs) in Q3 2024, subject to regulatory approvals. As the only pan-European CCP to offer services for SFTs in European cash equities and ETFs, Cboe Clear Europe will help to bring improved capital efficiencies, enhanced risk management and streamlined operational procedures to this market.
Overview
Cboe Clear Europe’s SFT clearing service will transform the current bilateral process between Lenders and Borrowers into a cleared model whereby the CCP becomes the counterparty in the SFT transaction for both Lender and Borrower.
By removing the bilateral nature of the SFT transactions, the process becomes more efficient, particularly with regards to risk-weighted assets. Given the increased regulatory and operational burdens following the Central Securities Depositories Regulation (CSDR), Securities Financing Transactions Regulation (SFTR) and planned Basel IV implementation, an efficient, cleared solution for SFTs will help Participants manage their costs associated with stock borrowing and lending.
Product Features
- Trade matching and CCP clearing service by interacting with post-trade service providers
- Full end-to-end post-trade lifecycle management service for SFTs
- Management of settlement in securities and cash with CSDs, Settlement Agents and Tri-Party Collateral Agents
- Covers SFTs in equities and ETFs from 19 European countries, with settlement taking place in 19 European Central Securities Depositaries (CSDs)
- Daily reconciliation and provision of mark-to-markets, including reporting to clients, post-trade services providers and SFTR reporting
Benefits
- Reduce capital burdens associated with bilateral SFTs through introduction of cleared model
- Remove bilateral counterparty risk and achieve higher or no concentration limits
- Eliminate or reduce indemnification costs due to savings afforded to Agent Lenders
- Achieve significant operational efficiencies associated with settlement, fees management, corporate action, and post-trade lifecycle processing
- Eliminate need for agent leader disclosures as all parties face Cboe Clear Europe
- The Cboe Clear Europe SFT clearing services offers cross-product margining positions in cash equities, derivatives and SFT trades, starting with 19 European Markets
Participants
Cboe Clear Europe has secured the support of a broad range of key market participants, including banks, clearing firms, asset managers and custodians, who are expected to support the launch of this service.
SFT Fees for Early Adopters
If a party wishes to become an Early Adopter of Cboe Clear’s SFT clearing services as a Clearing Participant or Agent Lender, the party will have to agree to the commitments and enter into a contractual arrangement with Cboe Clear (the Term Sheet to be provided by Cboe Clear) on or before 1st June 2024. The SFT clearing fees for Early Adopters will be applicable to such parties for the two year period commencing on go-live date of Cboe’s SFT clearing services.
Jan Treuren
Phone: +31 6 31 95 85 84
E-mail: [email protected]