Cboe Clear Europe, a leading pan-European clearing house, announced that it has received regulatory approval to clear European Securities Financing Transactions (SFTs). This was granted by De Nederlandsche Bank (DNB) and the Autoriteit Financiële Markten (AFM).

With this approval, Cboe Clear Europe 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. 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), thereby promoting transparency, market integrity and the competitiveness of European capital markets.

“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,” said Vikesh Patel, President of Cboe Clear 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.”

This service will help to 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. We believe this enables participants to reduce their risk-weighted asset exposures associated with SFTs and supports the growth of this key market. Additionally, it is expected 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 utilise The Bank of New York Mellon Corporation and J.P. Morgan as Tri-Party Collateral Agents, while Pirum will serve as the transmitter of new trade instructions and post-trade lifecycle events on behalf of clients.

Jan Treuren, Senior Director, Product, Cboe Clear Europe, said: “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 – representing 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 best-in-class risk management framework, offering clients the advantage of Cboe Clear Europe’s extensive 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.”

As a leading pan-European cash equities clearing house, Cboe Clear Europe currently provides its services for 47 trading venues, achieving a record cash equity market share of 37.2%* in Q3 2024. The company enables Clearing Participants to manage their counterparty credit risk and also to maximise operational efficiencies through automated processing and the provision of netting opportunities. It diversified into equity derivatives clearing in 2021 to support the launch of Cboe Europe Derivatives (CEDX), Cboe’s pan-European equity derivatives exchange, which includes equity index and single stock derivatives.

Source: Cboe