Eurex Clearing published today its written response to an initial report on "A Central Counterparty in the European Equity Securities Lending Market" released recently by The International Securities Lending Association (ISLA) CCP Working Group.
The response can be found here: eurexclearing.com/documents/publications/flyer_en.html.
Eurex Clearing recognizes the challenges of implementing a successful central counterparty (CCP) service for the securities lending market and outlines the characteristics and objectives of a CCP busi-ness model.
A CCP acts as legal counterparty between lenders and borrowers and takes responsibility for all the obligations related to the securities lending transactions. Therefore, the CCP mitigates the counterparty risk and the credit exposures for the individual market participant as well as significantly reduces the systemic risk for the market as a whole. Eurex Clearing's CCP service for the securities lending market will offer considerable advantages for counterparties by providing comprehensive risk management, enhanced collateral management capabilities, and significant reductions in regulatory capital requirements. It will also increase operational efficiency through the automated flows be-tween the trading, clearing and settlement platforms that the CCP service includes.
"The market participants seek ways to reduce the counterparty risks and improve the operational efficiency in the post-trade environment", said Thomas Book, member of the Eurex Executive Board and responsible for clearing. "Eurex Clearing will offer a solution that addresses these challenges and will fulfill the requirements of the securities lending market as set out in the ISLA report."
Europe's largest clearing house will introduce its first CCP service for Quadriserv's AQS platform for European equities in the beginning of 2010.