Cboe Global Markets, Inc. (Cboe: CBOE), the derivatives and securities exchange network, announced that Cboe Clear Europe, its pan-European clearing house, has reached a key step in the development of its Securities Financing Transactions (SFT) clearing service, with BNY (NYSE: BK), a financial services company, acting as the service’s first Agent Lender. This milestone was achieved with BNY clearing SFTs on “behalf of UCITS clients, expanding the service to a key new client segment.”
Cboe Clear Europe and BNY have worked to launch “a title transfer model with a pledge-back feature, tailored specifically for UCITS clients.”
This structure enables UCITS – alongside other beneficial owner lenders, such as sovereign wealth funds, pension funds, and central banks – to “access the benefits of centrally cleared SFTs without posting margin or contributing to the CCP’s default fund when acting as lenders.”
As a result, UCITS become appealing counterparties for borrowers using Cboe Clear Europe’s service, increasing “the amounts of assets on loan, boosting market liquidity and supporting balance sheet efficiency for borrowers in the securities lending space.”
Vikesh Patel, President, Cboe Clear Europe said that they are pleased to welcome BNY as the first Agent Lender of their transformative SFT clearing service and extend the model to UCITS clients.
This update within their SFT cleared offering “reinforces their commitment to driving market innovation, transparency, and resilience in financial markets.”
By leveraging BNY’s expertise and Cboe Clear Europe’s clearing capabilities, they have created a “solution that is designed to enhance market confidence, optimise collateral efficiency, and empower UCITS participants to engage in securities finance with unparalleled levels of security and transparency.”
Laide Majiyagbe, Global Head of Liquidity, Financing and Collateral at BNY said that working cooperatively with Cboe Clear Europe on this solution underscores BNY’s commitment to driving product development and “client-centricity in the financing and collateral ecosystem.”
As the world’s agent lender and the “first” to go live with a centrally cleared triparty model supporting UCITS-compliant clearing, they are pleased to deliver enhanced “collateral efficiency and liquidity through their integrated Global Collateral Platform.”
This milestone builds on Cboe Clear Europe’s launch of its SFT clearing service in March, “with BNY as Tri-Party Collateral Agent, which is transforming the traditional bilateral process for SFTs in European equities and ETFs into a centrally cleared model.”
From a capital perspective, the introduction of central clearing to SFTs offers potential “substantial capital optimisation opportunities including meaningful reductions in Risk-Weighted Assets (RWA) for certain clearing participants.”
Additionally, Cboe Clear Europe is leveraging its “position as the largest CCP for cash equities to offer cross-product margin offsets between cash equities and SFT trades, unlocking potentially powerful capital efficiencies.”
BNY serves as one of the Tri-Party Collateral Agents and the “service is integrated with Pirum for trade instruction and lifecycle event processing.”
With a scalable tech platform, Cboe Clear Europe is positioned to expand its SFT clearing service to “cover other lendable securities and new jurisdictions in the next year.”
Jan Treuren, Senior Director Product at Cboe Clear Europe, said that the ability for UCITS clients to use their SFT service is “a key development for both participants and the securities finance market as a whole.”
They look forward to welcoming more Agent Lenders and their UCITS clients to benefit from the “increased utilisation rates this structure will bring.”
By combining operational automation, “potential for capital efficiency, cross-product margining, and risk management, they are empowering participants and strengthening the securities lending market infrastructure for the future.”
As covered, Cboe Global Markets, the derivatives and securities exchange network, provides trading, clearing, and investment solutions.
Cboe currently offers trading solutions and products in various asset classes, such as equities, derivatives, and FX across North America, Europe, Asia Pacific.
