SecFinex Limited, a Nyse Euronext Company and the leading European electronic trading platform for equity finance, and EuroCCP, the London-based subsidiary of The Depository Trust & Clearing Corporation (DTCC), announced today they have signed an agreement to launch central counterparty (CCP) services for stock borrowing and lending across the SecFinex Order Market multilateral trading facility for the UK market.
The launch of this service will enable stock borrowing and lending participants in the UK to take advantage of the services offered by a CCP. The SecFinex venture with EuroCCP follows previous SecFinex announcements on the introduction of CCP for equity finance across all major European markets.
The introduction of a central counterparty to participants in the securities lending market offers numerous benefits including the elimination of capital allocation, balance sheet netting, reduced collateral requirement, cost efficiencies, anonymity, single counterparty and multiple clearing options.
Despite the size and importance of the equity securities borrowing and lending activities in today's markets, many participants see its structure and operation to be inefficient and costly. Furthermore, regulatory changes increasingly focus attention on capital requirements and counterparty risk; a condition exacerbated by recent market conditions. Through the introduction of this CCP service, scheduled for release in the 3rd Quarter of 2009, market professionals dealing in UK equity securities will gain access to a central portal that offers near risk-free access and trade execution benefit to participating borrowers and participating lenders.
Diana Chan, CEO of EuroCCP, said "We are extremely glad to have been selected by SecFinex to provide central counterparty services for securities lending and borrowing in the U.K., which is by far the largest market in Europe for this activity. The current turmoil in the financial services industry highlights the many benefits a central counterparty can bring in securities finance transactions. Besides protection from counterparty default, a central counterparty benefits firms by reducing capital requirement and back office operational work in managing collateral. Providing central counterparty services for securities borrowing and lending is a new, and we hope growing area for EuroCCP."
Peter Fenichel, CEO of SecFinex, said "We are delighted to partner with EuroCCP in this very important market innovation which serves to enhance securities borrowing & lending market efficiency, transparency and transaction activity. The use of a CCP has been widely anticipated for several years in the securities lending industry and the current credit crisis has highlighted the importance and desirability of the central counterparty value proposition. SecFinex wishes to be a force for constructive change and through this initiative is well positioned to play a pivotal role in the further development of the global securities finance market."